Greetings from Oklahoma, where I am wrapping up a busy week of travel that has included speaking engagements both at the Iowa Vendor Conference and The Indian Country Business Summit.
While I’ve been on the road, it has also been a noteworthy week in government contracting news. This week, SmallGovCon Week In Review takes a look at stories about the year end spending frenzy, the Freedom of Information Act may undergo major changes, DoD is barely exceeding 50% when it comes to meaningful competitions, and much more.
The projected federal contract spending is on a decidedly upward slant with two issues affecting the year-end spending frenzy. [American City & County]
What impact will the outcome of the presidential election have on the government contracting landscape? [GovBizConnect]
Federal agencies could soon face a new governmentwide guidance on how they respond to Freedom of Information Act requests, following an upcoming meeting in September. [Federal news Radio]
The Office of Federal Procurement Policy has launched a dashboard to hold agencies accountable to meet the goals in the category management memos. [Federal News Radio]
With worry that only 56.5 percent of the DoD’s contracted dollars involved a meaningful competition between two or more vendors, they have issued a series of corrective actions to reverse a downward slide that has been ongoing for nearly a decade. [Federal News Radio]
Several speculative conclusions can be made based on fiscal 2015 government contracting data and, according to one commentator, the outlook is not positive. [Federal News Radio]
The FAR Council published the final rule regarding the Fair Pay and Safe Workplaces Executive Order, which imposes a host of new obligations on government contractors, including an obligation to report various labor law violations during the bid and proposal process. [The Hill]
A former MCC Construction Company officer and owner pleads guilty to conspiring to defraud the government. [The United States Department of Justice]
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A protester’s failure to be specific enough in an SDVOSB status protest will result in dismissal of the protest.
The decision of the SBA Office of Hearings and Appeals in Jamaica Bearings Company, SBA No. VET-257 (Aug. 9, 2016), reinforces the SBA’s rule concerning specificity in filing a service disabled veteran-owned status protest. The rule provides, “[p]rotests must be in writing and must specify all the grounds upon which the protest is based. A protest merely asserting that the protested concern is not an eligible SDVO SBC, without setting forth specific facts or allegations is insufficient.”
Jamaica Bearings involved a solicitation issued as an SDVOSB set-aside by the Defense Logistics Agency for 77 Parts Kits, Linear AC. Jamaica Bearings Company (JBC) was awarded the contract. JBL System Solutions, Inc. (JBL), an unsuccessful offeror, submitted a timely protest stating, “‘while [JBC] may or may not be owned and operated by a qualified Service Disabled Veteran, they do not meet the qualifications of the SBA to be a Small Business.’ (Protest, at 1),” and added that due to Jamaica Bearing Company’s size, the company should not pretend to be an SDVOSB.
Although the protester offered no evidence to support its claim that JBC “may” not be an eligible SDVOSB, the SBA’s Director of Government Contracting (D/GC) initiated a full investigation of JBC’s SDVOSB eligibility. JBC (for reasons unexplained in OHA’s decision) did not respond to the D/GC’s inquiries. Thus, the D/GC apparently applied an “adverse inference” and assumed that JBC’s response would demonstrate that it was not an eligible SDVOSB. The D/GC issued a decision finding JBC to be ineligible for the DLA contract.
JBC appealed the decision to OHA. JBC argued that it was an eligible SDVOSB and that another SBA office had previously confirmed JBC’s SDVOSB status. The SBA’s legal counsel filed a response to the appeal, supporting the D/GC’s decision.
Although neither party had raised it in its initial filings, OHA–on its own initiative–asked the parties to address “whether the D/GC should have dismissed the initial status protest by JBL as nonspecific.” Unsurprisingly, JBC responded by stating that the protest was not specific and should have been dismissed; the SBA claimed that the protest was specific.
OHA wrote that, under its regulations, a viable SDVOSB protest must provide specific reasons why the protested SDVOSB is alleged to be ineligible. Insufficient protests must be dismissed. Further, OHA noted, the regulations provide the following example:
A protester submits a protest stating that the awardee’s owner is not a service-disabled veteran. The protest does not state any basis for this assertion. The protest allegation is insufficient.
In this case, OHA wrote, “the protest does not even rise to this level, as the protest simply states that [JBC] ‘may or may not’ be controlled by a service-disabled veteran.” The protest “does not directly allege that [JBC] is not owned and controlled by a service-disabled veteran, and gives no reason which would support such an assertion.”
OHA wrote that “the D/GC was required to dismiss JBL’s protest because it simply failed to be specific enough as to challenge [JBC’s] service-disabled status.” OHA granted JBC’s SDVOSB appeal and reversed the D/GC’s status determination.
As highlighted in Jamaica Bearings, SDVOSB status protest must be “specific.” However, the exact level specificity required under the regulations remains a bit fuzzy (although other OHA decision offer some guidance). Regardless of where the line is drawn in a particular case, Jamaica Bearings confirms that it is not enough for the protester to make an unsupported blanket allegation that an awardee is ineligible.
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I am back in Lawrence after a great Midwestern driving trip last week, where I spoke at two fantastic government contracting events.
On Tuesday, I was in Des Moines for the Iowa Vendor Conference. My presentation focused on debunking common myths surrounding the SBA’s size and socioeconomic programs (think that VetBiz verification applies to all agencies? Think again!) Many thanks to the Iowa State University Center for Industrial Research and Service for organizing this great event and inviting me to speak. Special thanks to Pam Russenberger and Jodi Essex for all their work planning and coordinating the event, and a big “thank you” to the featured keynoter–the one and only Guy Timberlake–for everything he did to make the conference such a great success.
After I spoke at the Iowa Vendor Conference, I hit the road for Norman, Oklahoma for the annual Indian Country Business Summit. My talk at the ICBS touched on several recent, major changes to the small business contracting regulations, including the new rules for the limitations on subcontracting and universal mentor-protege program. The ICBS has always been a great event, but it seems to get bigger and better each year. A big “thank you” to Victoria Armstrong for her amazing work planning the event, as well as the Oklahoma Bid Assistance Network and Tribal Government Institute for hosting.
I’ll be sticking around home for a few weeks, but more travel is on the agenda–I’m excited to be speaking at the Redstone Edge conference in Huntsville, Alabama on September 22. Hope to see you there!
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A former 8(a) protege was not automatically entitled to take advantage of the past performance it obtained as part of a mentor-protege joint venture, in a case where the former mentor would not be involved in the new contract.
In a recent bid protest decision, the GAO held that a procuring agency erred by crediting the protege with the joint venture’s past performance without considering the extent to which that past performance relied on the mentor–and the extent to which the mentor’s absence under the new solicitation might impact the relevance of the past performance as applied to the new work.
The case, Veterans Evaluation Servs. Inc., B-412940 et al. (July 13, 2016), involved a solicitation by the VA to acquire medical disability examination services. The VA issued the RFP seeking to award several large IDIQ contracts. Each contract carried a minimum value of $3.7 million and a top value of $6.8 billion. (That’s billion-with-a-b for those scoring at home.)
The RFP split the services area to seven districts throughout the United States and abroad. The VA intended to award two contracts per district 1 through 6, and required the contractors to propose to locate, subcontract with, and train a network of healthcare professionals to perform the examinations.
VetFed Resources, Inc. had been performing the incumbent contract as part of an 8(a) mentor-protege joint venture with QTC Medical Services, Inc. The mentor-protege arrangement apparently had expired by the time that proposals were due under the RFP. VetFed independently submitted proposals for districts 1, 2, and 5. In districts 1 and 5, VetFed proposed to use QTC as its major subcontractor, making available QTC’s provider network and infrastructure. But for district 2, VetFed did not propose to use QTC as its subcontractor.
After evaluating competitive proposals, the VA awarded contracts to VetFed for districts 1, 2, and 5. In its evaluation of all three districts, the VA rated VetFed’s past performance as good.
Three unsuccessful competitors filed GAO protests challenging the results of the VA’s evaluation. All three protesters argued that in district 2, VetFed would not be able to take advantage of QTC’s provider network and infrastructure. The protesters argued that VetFed’s good past performance rating was a result of VetFed’s having access to the resources of its former mentor, and that without that access, VetFed did not deserve a good rating.
GAO wrote that “[a]n agency may attribute the experience or past performance of a parent or affiliated company to an offeror where the firm’s proposal demonstrates that the resources of the parent or affiliate with affect the performance of the offeror.” In this regard, “the relevant consideration is whether the resources of the parent or affiliated company–its workforce, management, facilities, or other resources–will be provided or relied upon for contract performance . . ..” For this reason, “it is inappropriate to consider an affiliate’s record where that record does not bear on the likelihood of successful performance by the offeror.”
In this case, GAO wrote that “VetFed’s relevant past performance example is a contract it performed in close cooperation with QTC; the firms performed using a mentor-protégé arrangement, and there is no dispute that QTC’s provider network and IT infrastructure played a material part in VetFed’s successful performance of the predecessor contract. . . . Since the record here does not show that the agency gave consideration to this question, we conclude that its assignment of a good rating to VetFed for its past performance in district 2 was unreasonable.” GAO sustained this part of the protest.
Given SBA’s strong interest in how mentor-protege joint ventures are treated, it is somewhat surprising that GAO didn’t seek SBA’s input on this aspect of its decision–especially since the decision is troubling from the perspective of 8(a) proteges like VetFed. While GAO’s decision is a logical outgrowth of GAO’s longstanding case law regarding the past performance of affiliates, the particular context is unique, and the SBA’s comments might have been instructive.
In sum, GAO essentially said that a protégé might not get full past performance credit for work it performed in a mentor-protégé arrangement unless the mentor sticks around (in this case as a subcontractor). This is bad news for the protégés of the world, who presumably enter into these relationships in large part for the purpose of gaining experience and knowledge so that they can perform larger contracts on their own in the future. Especially with the new universal mentor-protege program coming online on October 1, it will be important for everyone–mentors, proteges, and contracting officers alike–to fully understand exactly how past performance of mentor-protege joint ventures is to be treated.
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An unsuccessful offeror lacked the ability to file a valid SBA size appeal involving the size status of a competitor, because the unsuccessful offeror was eliminated from the competitive range–and its elimination had been upheld in a GAO bid protest decision.
In a recent size appeal decision, the SBA Office of Hearings and Appeals confirmed that an offeror that cannot possibly be awarded the contract ordinarily lacks standing to file a size appeal.
OHA’s decision in Size Appeal of Straughan Environmental, Inc., SBA No. SIZ-5767 (2016) involved a NASA solicitation for environmental consulting services. The solicitation was set aside for small businesses under NAICS code 541620.
Straughan Environmental, Inc. submitted a proposal. After evaluating initial proposals, NASA established a competitive range, which did not include Straughan. Straughan filed a GAO bid protest challenging its exclusion from the competitive range. The GAO denied Straughan’s bid protest.
NASA subsequently announced that Integrated Mission Support Services, LLC, an SBA 8(a) mentor-protege joint venture, was the apparent successful offeror. After learning of the award to IMSS, Straughan filed an SBA size protest. The SBA Area Office ultimately found IMSS to be an eligible small business.
Straughan then filed a size appeal with SBA OHA. In response, IMSS filed a motion to dismiss. IMSS argued that, because Straughan had been eliminated from the competitive range, it was ineligible for the contract. Accordingly, IMSS contended, Straughan was not adversely affected by the size determination finding IMSS to be a small business, and lacked standing to file a valid size appeal.
OHA agreed with IMSS. OHA wrote that under its regulations, “any person adversely affected by a size determination” may file a size appeal. In previous cases interpreting this regulation, OHA has held that an appellant ordinarily must be “an otherwise eligible small business offeror on the procurement.” OHA explained:
The rationale behind this policy is that, if an otherwise eligible small business offeror were to prevail on its appeal, there is a chance it could ultimately be awarded the contract. This possibility is what causes an unsuccessful offeror to be adversely affected by a size determination favorable to a rival.
In this case, Straughan “is not an otherwise eligible small business offeror on this procurement because NASA excluded [Straughan’s] proposal from the competitive range, and GAO affirmed this result by denying [Straughan’s] bid protest challenging its elimination from the procurement.” Straughan “cannot be awarded the contract, regardless of whether it prevails on appeal at OHA.” Therefore, Straughan “is not adversely affected by the instant size determination and lacks standing to bring this appeal.”
OHA dismissed Straughan’s size appeal.
An unsuccessful offeror’s standing to file a size protest or size appeal is relatively broad; unlike in some GAO bid protests, the protester or appellant need not demonstrate that it was next in line for award. But, as the Straughan Environmental size appeal demonstrates, standing to file a size appeal is not unlimited. Where, as in Straughan Environmental, the putative appellant was excluded from the competitive range, the appellant ordinarily will lack standing to file a size appeal.
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We have been hard a work all week long here at Koprince Law and are ready to take advantage of the Labor Day weekend. Not only is it a long weekend, but it is also the start of the college football season. There is nothing better than football, tailgating and cooler weather to get you in the mood for fall (although our local Kansas Jayhawks haven’t exactly been tearing up the gridiron in recent years).
Before you head out the door to enjoy the holiday weekend, it’s time for the SmallGovCon Week In Review. This week’s edition includes articles on the recent implementation of the Fair Pay and Safe Workplaces final rule, a look at the large amount of money spent of professional services and how that spending is (or isn’t) tracked, a proposed rule for streamlining awards for innovative technology projects and much more.
Business in government-wide acquisition contracts is booming, with agency buyers turning to the large-scale vehicles for price breaks and convenience. [Washington Technology]
Bloomberg BNA has an interesting Q&A session involving the recently released Fair Pay and Safe Workplaces regulations. [Bloomberg BNA]
According to one commentator, government contracting is being hurt by the lack of transparency and secrecy with the amount of money flowing through all the contract vehicles across government. [Washington Technology]
The Obama administration has finalized plans to bring more scrutiny to potential federal contractors’ histories of violating labor laws, releasing twin final regulations that will implement a 2014 executive order. [Government Executive]
A government contractor is required to pay $142,500 to settle civil fraud allegations that their employees engaged in labor mischarging. [Department of Justice]
Agencies spend almost $63 billion a year on professional services and there is a new plan to help the government improve how it buys and manages these contracts. [Federal News Radio]
A proposed rule has been issued to amend the DFARS to implement a section of the National Defense Authorization Act for Fiscal Year 2016 that provides exceptions from the certified cost and pricing data requirements and from the records examination requirement for certain awards to small businesses or nontraditional defense contractors. [Federal Register]
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An SDVOSB set-aside contract was void–and unenforceable against the government–because the prime contractor had entered into an illegal “pass-through” arrangement with a non-SDVOSB subcontractor.
In a recent decision, the Civilian Board of Contract Appeals held that a SDVOSB set-aside contract obtained by misrepresenting the concern’s SDVOSB status was invalid from its inception; therefore, the prime contractor had no recourse against the government when the contract was later terminated for default.
Bryan Concrete & Excavation, Inc., CBCA 2882, 2016 WL 4533096 involved a U.S Marine Corps veteran with a 100% disability rating, Jerry Bryan. Mr. Bryan owned and operated a construction company, Bryan Concrete & Excavation, Inc., which he started in 1999. In 2006, BCE was hired as a subcontractor on a number of projects overseen by Arthur Wayne Singleton.
After learning of Mr. Bryan’s service disabled status, Mr. Singleton urged BCE to start bidding on SDVOSB set-aside contracts. Mr. Singleton offered to assist BCE in getting qualified as an SDVOSB, bidding on federal projects, and managing those projects. During this time, Mr. Bryan and Mr. Singleton entered into a teaming agreement, which stipulated Mr. Singleton would perform all of work on the set-aside contracts for BCE and BCE would pay Singleton for the direct costs and overhead plus 90 percent of the anticipated gross profit. Despite the impermissible pass-through arrangement, BCE self-certified in the VA’s SDVOSB database (this was before the formal verification process required today).
In 2010, the VA issued an SDVOSB set-aside solicitation for chiller and air handling equipment upgrades. BCE submitted a bid, which was alleged to contain a forgery of Mr. Bryan’s signature by Mr. Singleton. Further complicating matters, Mr. Singleton misrepresented himself to the VA as Mr. Bryan, during discussions of the proposal. BCE was the awarded the contract.
A number of performance issues hampered the of the contract and the VA ultimately terminated the contract default. BCE filed an appeal with the CBCA, seeking to overturn the termination.
During the course of the appeal, the VA learned for the first time that the teaming agreement between Mr. Singleton and Mr. Bryan compromised BCE’s eligibility as an SDVOSB. The VA subsequently moved for the CBCA to grant summary relief for the VA on the ground that BCE’s contract was void from the start and therefore unenforceable because it was obtained by misrepresenting BCE’s SDVOSB eligibility status to the VA.
As the CBCA explained, for the VA to prevail on its motion, it had to demonstrate that BCE had obtained the contract by knowingly making a false statement. The CBCA concluded the VA had met its burden because BCE had received a VA contract by misrepresenting its SDVOSB status. Since the misrepresentation occurred before the contract was awarded, the entire award was tainted from the beginning and thus void ab initio—from the beginning.
BCE countered that even if the contract was void from the start, subsequent dealings with the VA had created implied contracts that BCE had rights under. The CBCA was not impressed by these arguments and concluded:
While BCE may believe that it has the right to enforce a new agreement that ‘adopts the terms of the agreement that has been deemed void,’ whether through equitable estoppel, promissory estoppel, or other legal theories, the law does not work that way. ‘No tribunal of law will lend its assistance to carry out the terms of an illegally obtained contract.’
BCE’s case highlights just how little tolerance there is for concerns who misrepresent themselves to gain SDVOSB set-aside contracts. Not only can the government impose fines, jail terms, and other penalties, but the underlying contract can be considered void from the outset.
Oh, and speaking of jail time–Mr. Singleton was sentenced to two years in prison back in 2013.
Ian Patterson, a law clerk with Koprince Law LLC, was the primary author of this post.
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A contractor successfully challenged an adverse size determination that found affiliation under the newly organized concern rule, by establishing that its president and chief executive officer was not a former key employee of its supposed affiliate.
In a recent size appeal decision, the SBA Office of Hearings and Appeals clarified the definition of “key employee” under the newly organized concern rule, by noting that such a former employee’s title was not conclusive—instead, to be a key employee, that person had to have influence or control over the operations of the business as a whole.
Size Appeal of Human Learning Systems, LLC, SBA No. SIZ-5769 (2016) involved an appeal challenging a size determination that found the contract awardee—Human Learning Systems (“HLS”)—to be “other than small” under the operative NAICS code. The underlying solicitation was issued by the Department of Labor, seeking the administration of a Jobs Corps Center in Tucson, Arizona. Serrato Corporation filed a size protest challenging HLS’s award, claiming that HLS was affiliated with various large businesses, including ResCare, Inc.
In response to Serrato’s protest, the SBA Area Office found HLS and ResCare to be affiliated under the newly organized concern rule. In essence, that rule is designed to prevent a large business from avoiding size standards by creating a spin-off firm to perform as a small business. To find affiliation based on the newly organized concern rule, four conditions need to be met:
Former key employees of one concern organize the new concern;
The individuals who formed the new concern will serve as its key employees;
The new concern is in the same or a related industry as the other concern; and
The new concern will be provided with contracts, financial or technical assistance, indemnification or bonding assistance, or facilities, by the other concern.
HLS’s president and chief executive officer—Benjie Williams—formerly worked as a Jobs Corps Center Director for ResCare. His résumé, moreover, said that he was responsible for oversight of four Jobs Corps Centers, and provided support to other Center Directors across the country. He also provided technical assistance and training to Center Directors, and participated in annual reviews for all centers. According to the Area Office, this work made Mr. Williams a key ResCare employee: “he obviously had significant influence and control of a Jobs Corps Center and later of Jobs Corps Operations.” Given Mr. Williams’ prior work for ResCare, and considering that the companies had worked together on previous procurements, the Area Office said that HLS and ResCare were affiliated by the newly organized concern rule.
HLS appealed the size determination, specifically challenging the Area Office’s determination that Mr. Williams was a key employee of ResCare. A key employee, the OHA noted, “is one who, because of his position in the concern, has a critical influence or substantive control over the operations or management of the concern.” Such influence or control must be over the operations of a concern as a whole—supervision over a relatively small portion of the company is not sufficient. “A key employee, then, is not merely an employee with a responsible position or a particular title. A key employee is one who actually has influence or control over the operations of the concern as a whole.”
Mr. Williams was not a key ResCare employee, according to HLS. Despite his “Vice President” title, Mr. Williams was not higher than the fifth tier of authority at ResCare. Mr. Williams was not in charge of any department at ResCare, nor did he supervise any employees. He had no authority to bind ResCare to any contracts, control its revenue, or make any substantive decisions.
OHA agreed that Mr. Williams was not a key ResCare employee. It noted that the segment of ResCare’s business relating to Jobs Corps Centers (under which Mr. Williams worked) amounted to roughly 8% of ResCare’s receipts. This small amount meant that Mr. Williams could not have influenced or controlled ResCare as a whole. And even within that business segment, Mr. Williams’ role was not controlling: though he “provided support” to Center Directors, he did not supervise them. Providing support “is not supervision,” according to OHA. Neither was Mr. Williams’ status as a Vice President evidence of control—“As a Vice President, Mr. Williams was outranked by at least six Senior Vice Presidents, four Executive Vice Presidents, the COO and eight other C-level officers, and the CEO.” Mr. Williams simply did not influence or control ResCare as a whole in a manner sufficient to find him a key employee.
The OHA held the Area Office clearly erred when it found HLS and ResCare to be affiliated under the newly organized concern rule.
As Human Learning Systems makes clear, the question of whether an employee is a “key employee” for affiliation purposes is fact-intensive. SBA will look beyond titles and examine the employee’s role in the organization, to determine whether that person had influence or control over the whole company’s operations.
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Happy Friday! Here at Koprince Law, we’ve been busy posing for pictures for our new firm website (coming soon) and enjoying our annual trip to the Taste of Lawrence event last night, where we were able to enjoy food from local restaurants, hear live music and interact with the community.
Even with all that fun we have managed to bring you this edition (albeit a little later in the day) of SmallGovCon Week In Review. In this week’s edition, we bring you the latest on the ENCORE III bid protest, a look at the how a continuing resolution will affect contractors, underfunding of efforts to investigate whistleblower claims, and more.
A $5 billion, ten-year agreement with a subsidiary of Lockheed Martin was rescinded due to concerns over the sale of the subsidiary to Leidos. [Defense News]
The Government Accountability Office detailed its rationale in the ENCORE III bid protest, saying that the reason for the “sustain” decision wasn’t that the Defense Information Systems Agency wanted to award spots on the ten-year contract on a lowest-price technically acceptable basis. [Federal News Radio]
Federal contracting companies have come to terms with the fact that the new fiscal year will begin next month with a congressional stopgap budget measure. [Washington Business Journal]
A memorandum entitled Commercial Items and the Determination of Reasonableness of Price for Commercial items has been rescinded and new guidelines have been issued in its place. [Office of the Under Secretary of Defense]
The Pentagon’s acting inspector general told Congress this week a chronic underfunding of his office played a major role in the extensive delays surrounding its investigations into whistleblower reprisal claims. [Federal News Radio]
The GSA has issued a proposed regulation to incorporate Other Direct Costs into the Multiple Award Schedule program. [GSA]
Intelligence agencies are increasingly turning to contractors for talented information specialists and scientists as the in-house talent pool wanes. [Federal News Radio]
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The 8(a) Program has survived a major challenge to its constitutionality–but the legal battle over the 8(a) Program’s future may well continue.
On Friday, a two-judge majority of the U.S. Court of Appeals for the D.C. Circuit held that the statute that creates the 8(a) Program is not unconstitutional. While the D.C. Circuit’s decision is a big win for proponents of the 8(a) Program, the limited scope of the ruling–and a sharp dissent from that ruling–signal that the fight over the future of the 8(a) Program may not be over.
Rothe Development, Inc. v. U.S. Department of Defense, No. 1:12-cv-00744 (D.C. Cir. Sept. 9, 2016), involved the question of whether the Department of Defense could set aside certain procurements exclusively for 8(a) Program participants. Rothe Development, Inc., which is not an 8(a) participant, brought suit against the DoD, arguing that it had been improperly precluded from competing for these contracts.
Rothe challenged the constitutionality of the 8(a) Program itself. Rothe attacked the statutory provisions establishing the 8(a) Program, claiming that the underlying 8(a) Program statute “contains a racial classification that presumes that certain racial minorities are eligible for the program,” while denying such a presumption to those who are not members of those groups. Rothe argued that this classification system violated its right to equal protection under the Due Process Clause of the Fifth Amendment.
When a court reviews an equal protection challenge, the court will apply a certain “standard of review.” The standard of review sets forth the burden that the government must meet in order to demonstrate that the challenged law is constitutional. For equal protection purposes, the Supreme Court has established three standards of review: rational basis, intermediate scrutiny and strict scrutiny. Think of these as low, medium, and high scrutiny (or tall, grande, and venti, if you prefer Starbucks terminology).
Rational basis is the lowest threshold, and applies to the review of most laws. To survive a rational basis review, a statute merely must be bear some reasonable relation to some legitimate government interest.
Strict scrutiny, on the other hand, is the highest level of review. A court must apply strict scrutiny in certain circumstances, such as where a statute, on its face, is not race-neutral. To pass strict scrutiny, the government must show the statute is narrowly tailored to meet a compelling government interest. That, of course, can be a very difficult burden for the government to meet; when strict scrutiny is applied, the court often rules against the government.
Turning back to the case at hand, the two-judge majority, after closely reviewing the 8(a) Program’s underlying statute, determined that “the provisions of the Small Business Act that Rothe challenges do not on their face classify individuals by race.” The majority continued:
Section 8(a) uses facially race-neutral terms of eligibility to identify individual victims of discrimination, prejudice, or bias, without presuming that members of certain racial, ethnic, or cultural groups qualify as such. That makes it different from other statutes that either expressly limit participation in contracting programs to racial or ethnic minorities or specifically direct third parties to presume that members of certain racial or ethnic groups, or minorities generally, are eligible. Congress intentionally took a different tack with section 8(a), opting for inclusive terms of eligibility that focus on an individual’s experience of bias and aim to promote equal opportunity for entrepreneurs of all racial backgrounds.
The majority noted that “in contrast to the statute, the SBA’s regulation implementing the 8(a) program does contain a racial classification in the form of a presumption that an individual who is a member of one of five designated racial groups (and within them, 37 subgroups, is socially disadvantaged.” Importantly, however, Rothe “elected to challenge only the statute,” not the regulation. Therefore, the court determined, “[t]his case does not permit us to decide whether the race-based regulatory presumption is constitutionally sound.”
Having determined that the statute was race-neutral on its face, the D.C. Circuit majority applied the rational basis test, not strict scrutiny. The majority found that “[c]ounteracting discrimination is a legitimate interest,” and that “the statutory scheme is rationally related to that end.” The D.C. Circuit held that the 8(a) Program’s statutory provisions did not violate the Fifth Amendment.
Judge Karen Lecraft Henderson dissented in part from the majority’s ruling. Judge Henderson pointed out that just about everyone who had looked at the issue previously–Rothe, the government’s counsel, and the lower court–had concluded that the statute did, in fact, contain a racial classification.
Judge Henderson wrote that that “section 8(a) contains a paradigmatic racial classification,” and that the court “should apply strict scrutiny in determining whether the section 8(a) program violates Rothe’s right to equal protection of the laws.” Judge Henderson did not say, however, whether she would find the 8(a) Program to be unconstitutional under a strict scrutiny test.
There is no doubt that the D.C. Circuit’s decision is a big win for proponents of the 8(a) Program. Not only was the 8(a) program found to pass constitutional muster, the applicable standard of review was determined to be rational basis—the easiest test for a statute to pass.
But some of the coverage I’ve seen of the D.C. Circuit’s decision makes it sound like the issue of the 8(a) Program’s constitutionality has been fully and finally resolved. I’m not so sure.
As the majority noted, Rothe specifically disclaimed any challenge to 13 C.F.R. 124.103, the SBA regulation establishing who is–and is not–deemed “socially disadvantaged” for 8(a) Program purposes. The majority was very clear that it believes that the regulations themselves are not race-neutral, meaning that any future challenge to the regulations would likely be decided under the much-higher strict scrutiny standard.
Additionally, there is no guarantee that the Rothe case itself is over and done. While the Supreme Court doesn’t take many government contracting cases, the recent Kingdomware decision demonstrates that the Court is willing to take on an important contracting case. And in Rothe, the D.C. Circuit’s internal disagreement over what level of scrutiny to apply, coupled with the Court’s willingness to tackle cases involving alleged race-based classifications>, might mean that Rothe ends up on the Supreme Court’s docket.
For 8(a) Program proponents, there is good reason to cheer the D.C. Circuit’s Rothe decision, but don’t break out the champagne just yet.
Ian Patterson, a law clerk with Koprince Law LLC, was this post’s primary author.
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When the SBA evaluates a size protest, it is not required to investigate issues outside of those raised in the size protest itself.
A recent decision of the SBA Office of Hearings and Appeals demonstrates the importance of submitting a thorough initial size protest–and confirms that the SBA need not investigate issues outside of the allegations raised in the protest.
OHA’s decision in Size Appeal of K4 Solutions, Inc., SBA No. SIZ-5775 (2016) involved a TSA procurement. The TSA acquisition in question contemplated the award of a single BPA to a business holding a GSA Schedule 70 contract. The RFQ was issued as a total small business set-aside.
After evaluating quotations, the TSA announced that Systems Integration, Inc. was the apparent successful offeror. K4 Solutions, Inc., an unsuccessful competitor, then filed a size protest. K4 alleged that SII had been acquired by Rimhub Holdings, Inc. in 2014, and thus was affiliated with Rimhub. The size protest did not address the question of whether SII had been required to recertify its size under its Schedule 70 contract upon the acquisition by Rimhub.
The SBA Area Office dismissed the size protest as untimely. The Area Office stated that, for a long-term contract like Schedule 70, a size protest may be challenged at three points in time: (1) when the long-term contract itself is initially awarded; (2) when an option is exercised; or (3) upon the award of an order, if the Contracting Officer specifically requests size recertification in conjunction with the order. (OHA has held in an earlier case that merely bidding on a set-aside order does not constitute a recertification under this rule).
In this case, the TSA had not requested a recertification in connection with the order, and there was no option at issue. Therefore, the Area Office determined, “size was determined from the date of SII’s self-certification for the GSA Schedule Contract,” and there was “no available mechanism for [K4] to challenge SII’s size in connection with” the TSA RFQ.
K4 filed a size appeal with OHA. K4 argued that, under 13 C.F.R. 124.404(g)(2), SII had been required to recertify its size within 30 days of being acquired by Rimhub. K4 argued that its protest was timely because it was filed within five business days of when K4 learned that SII had continued to represent itself as a small business following the acquisition.
OHA wrote that an Area Office “has no obligation to investigate issues beyond those raised in the protest.” In this case, the recertification issue raised by K4 on appeal “was not raised in [K4’s] underlying size protest.” Accordingly, “given that [K4’s] protest did not allege that SII was required to recertify its size . . . the Area Office could reasonably choose not to explore this issue n the size determination, and [K4] has not demonstrated that the Area Office committed any error in its review.”
OHA denied K4’s size appeal.
An unsuccessful offeror doesn’t have much time to file a size protest–just five business days from receiving notice of the prospective awardee, in most cases. But even with such a short time frame, a size protester must submit the most thorough protest possible. As the K4 Solutions case demonstrates, the SBA has no obligation to investigate an issue that the protester didn’t raise.
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To be timely, a GAO bid protest challenging the terms of the solicitation must be filed no later than the proposal submission deadline.
A recent GAO decision affirmed that, at least in some cases, this deadline applies to an offeror’s elimination from competition based on an organizational conflict of interest. Because the offeror knew of its potential conflict and the agency’s position on its eligibility before its proposal was submitted, its post-evaluation protest was untimely. GAO dismissed its protest.
The facts in A Squared Joint Venture, B-413139 et al. (Aug. 23, 2016) are relatively straightforward. A Squared Joint Venture (“A2JV”) was a joint venture formed by two companies, including Al-Razaq Computing Services. Al-Razaq was the incumbent contractor under a contract for acquisition and business support services at NASA’s Marshall Space Flight Center (“MSFC”).
Al-Razaq’s contract allowed it access to MSFC’s procurement-related information and, in some cases, required it to be involved with MSFC’s acquisition efforts. So its contract included a limitation on future contracting that, among other things, prohibited Al-Razaq and any of its subcontractors from performing or assisting with the performance of any other contract issued by MSFC during the performance of the incumbent contract.
In February 2016, NASA issued the follow-on solicitation to Al-Razaq’s incumbent contract. The solicitation sought many of the same acquisition support functions that Al-Razaq was currently performing, and also included an identical limitation on future contracting clause.
Later in February, Al-Razaq’s Acquisition Team Lead met with the contracting officer to discuss whether Al-Razaq personnel performing the incumbent contract could assist with the preparation of the offeror’s proposal. The contracting officer told Al-Razaq that it needed to implement a firewall to separate both the information and personnel associated with its incumbent performance from those personnel preparing the proposal.
A2JV submitted its offer on March 18. But contrary to the contracting officer’s instruction, its proposal was hand-delivered to the MSFC contracting activity by (then-) current and former Al-Razaq program managers under the incumbent effort. In fact, Al-Razaq’s program manager “informed agency officials that he had been involved in the preparation of the A2JV proposal, and had spent 10-12 hours a day for the last two weeks working on the proposal.”
NASA eliminated A2JV’s proposal from competition on May 9, citing its organizational conflict of interest—specifically, its unequal access to information. Explained by GAO, “an unequal access to information OCI exists where a firm has access to nonpublic information as part of its performance of a government contract, and where that information may provide a firm a competitive advantage in a later competition for a government contract.”
Justifying A2JV’s exclusion, the contracting officer explained that Al-Razaq’s incumbent performance includes its support of MSFC procurement activities, and allows Al-Razaq “access to the full breadth of sensitive contractual and financial information necessary for the administration of MSFC contracts.” Al-Razaq was required to screen new business opportunities to avoid a conflict of interest, yet failed to do so. Its use of the existing program manager created an impermissible OCI.
A2JV protested its elimination, challenging the determination that it had unequal access to information and was required to firewall its employees. NASA, in its response, argued that the protest was untimely because it was not filed before the deadline to submit proposals.
GAO agreed with NASA. It explained that “Al-Razaq (and A2JV) was fully aware prior to closing of the fundamental ground rules by which the  competition was being conducted.” To this point, it said “prior to the closing time for the receipt of proposals, A2JV was aware of the operative facts regarding the existence of an actual or potential OCI involving itself, as well as the agency’s position on the offeror’s eligibility to compete[.]” If A2JV believed that a firewall was not necessary, it should have protested that requirement prior to the RFP’s closing date.
A2JV’s untimely protest was dismissed.
Knowing the deadline to file a bid protest can be tricky. If a protest challenges the ground rules of a solicitation, it must be filed by the time proposals are due. As A Squared Joint Venture confirms, GAO will dismiss any protest that does not meet the filing deadline–including, potentially, one involving the government’s position on an alleged OCI.
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For many sports fans, it’s now football season, but I’m still focused on baseball, with my Chicago Cubs clinching the Central Division title last night. There are still more regular season games to be played, but I’m looking forward to the start of the playoffs, where the Cubs will try to end a 108-year World Series drought.
Of course, baseball isn’t the only thing on my mind these days–especially this close to the end of the government’s fiscal year. As always, I’ve been keeping a close eye on government contracting news. This week, SmallGovCon Week In Review includes stories on the latest developments in the Alliant 2 procurement process, insightful commentary by Guy Timberlake on a terrible new proposal for small business goaling, a major bid protest filed by Delta Air Lines, and much more.
According to Deltek’s Angie Petty, the pending change in administrations seems unlikely to affect federal IT contract spending. [ExecutiveBiz]
At the end of the fiscal year, lots of companies get the good news: “you’ve won!” One commentator offers a list of five things to do after winning a federal contract. [Washington Technology]
Guy Timberlake hits back at a recent proposal to count subcontracting dollars toward the government’s 23% small business goal–a move Timberlake says would “put the screws to America’s small businesses.” He’s right. [GovConChannel]
The U.S. Government Accountability Office announced it will create a Center for Advanced Analytics to bring a more data-driven approach into its work. [govfresh]
Delta Air Lines is protesting a contract that it says undermines the “Fly America Act” that requires taxpayer-funded travel to take place on domestic carriers. [Reuters]
The General Services Administration is sprinting to launch four new categories of specialized cybersecurity offerings for agency purchase October 1 on the government’s largest IT services acquisition vehicle. [fedscoop]
Alliant 2 Unrestricted and Alliant 2 Small Business extended the due date again without the GSA giving a reason as to why. [Aronson Fed Point]
Contractors are urging the next President to mandate a change to improve the services acquisition process. [Government Executive]
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The Department of Labor has announced a new “preassessment” initiative, under which a government contract can voluntarily ask the DOL for an assessment of the contractor’s record of labor law compliance.
The preassessment program is designed to help contractors discover if they may have any trouble with their mandatory disclosures under the new Fair Pay and Safe Workplaces Executive Order, which will take effect beginning on October 25. Voluntary use of the preassessment program may be a good idea for any contractor with a history of labor issues, but I wonder what will be more likely–contractors choosing to use it on their own, or being pushed to use it by prospective teammates?
In August, the FAR Council released its final rule implementing the Fair Pay Executive Order. Under the final rule, contractors bidding on contracts over $500,000 must certify as to whether they have been subject to any judgments or determinations within the preceding three-year period under a variety of labor and employment laws, including the Davis-Bacon Act, Service Contract Act, and many others. The information provided is to be used by the Contracting Officer as part of the overall responsibility determination. For subcontracts over $500,000, subcontractors are required to provide similar information directly to the DOL.
Effective September 12, contractors can now apply for preassessment. The DOL explains the preassessment program as follows:
Independent of a specific acquisition, any current or prospective government contractor may voluntarily contact the Department of Labor to request an assessment of their record of labor law compliance. Using DOL Guidance, the Department will assess whether any of the prospective contractor’s violations are serious, repeated, willful, or pervasive; and whether a labor compliance agreement may be warranted. If a contractor that has been assessed by the Department of Labor subsequently submits a bid, and the contracting officer initiates a responsibility determination of the contractor, the contracting officer and the Agency Labor Compliance Advisor (ALCA) may use the Department’s assessment that the contractor has a satisfactory record of labor law compliance unless additional labor law violations have been disclosed.
To participate in the preassessment program, a contractor must fill out a short intake form on the DOL’s website, and wait for contact from the DOL. Even though the program is beginning now, DOL confirms that it is an ongoing initiative, and “does not end when the FAR Rule takes effect on October 25, 2016.”
The effectiveness of the preassessment program will depend on how it is implemented, but if it is done well, it could prove useful for contractors willing to voluntarily go through it. But as someone who works every day with teaming agreements and joint ventures, I wonder what is more likely: contractors voluntarily agreeing to go through the program, or being pushed to do so by prospective teammates?
If nothing else, it wouldn’t surprise me to see teaming agreements and joint venture agreements begin to require certifications related to the Fair Pay Executive Order. For prospective teammates who cannot certify to a “clean” record, the next step may be obvious: “if you want to team with us, go through preassessment.” We’ll see.
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When multiple unsuccessful offerors protest a solicitation, the GAO ordinarily will dismiss any and all bid protests associated with the procurement in the event one unsuccessful offeror takes its case to federal court–even if some protesters would prefer to remain at the GAO.
As one federal contractor recently learned in Colleague Consulting, LLC—Reconsideration, B-413156.18 (Sept. 12, 2016), the GAO’s jurisdictional rules prevent it from deciding protests when the outcome of the protest could be affected by a pending federal court decision.
Colleague Consulting involved a competition for a GSA contract. Colleague Consulting, LLC was eliminated from the pool of successful offerors because its proposal was deemed technically unacceptable. After learning of its exclusion, CCL filed protest with the GAO.
Separately, another unsuccessful offeror under the same solicitation filed a bid protest before the GAO challenging the GSA’s decision not to conduct discussions. After a time, that second unsuccessful offeror withdrew its protest from the GAO and refiled it before the U.S. Court of Federal Claims.
One of the goals of the GAO protest process is to give government contractors an administrative alternative to pursuing their bid protests in federal court. The GAO process, by design, is typically faster and less expensive than pursuing a protest in court (though not always). Despite this option, contractors also are afforded the opportunity to pursue bid protests at the Court of Federal Claims.
Because both the GAO and the Court of Federal Claims are authorized to decide bid protests, there is the possibility that different adjudicators will come to differing—and potentially contradictory—conclusions. To prevent such an outcome, the GAO’s jurisdictional regulations, at 4 C.F.R. § 21.11(b), state that “GAO will dismiss any case where the matter involved is the subject of litigation before, or has been decided on the merits by, a court of competent jurisdiction.”
Returning to Colleague Consulting, after the GAO received notice of the Court of Federal Claims protest, determined that “disposition of the COFC case could render a decision by our Office on CCL’s protest academic.” The GAO dismissed CCL’s protest, citing 4 C.F.R. § 21.11(b).
CCL filed a motion for reconsideration, urging the GAO to reverse its decision and continue hearing its protest. CCL argued that the word “matter” within 4 C.F.R. § 21.11(b) should be construed narrowly to mean that the GAO must dismiss a protest only where the arguments before the GAO and Court are similar. In this case, CCL argued, the arguments were entirely dissimilar: CCL was protesting its technical evaluation whereas the other unsuccessful offeror was protesting the GSA’s decision not to hold discussions.
The GAO disagreed. It wrote:
While the word ‘matter’ is not defined, there is nothing in the language of the regulation, or elsewhere, to suggest that it is meant to apply to the exact narrow issue involved in the protest before our Office. Instead, the matter before the court can properly be characterized as a dispute over which companies should have remained in the competition under the GSA solicitation. While that matter remains before the [federal court], GAO will not also decide the question.
GAO denied CCL’s request for reconsideration.
In today’s contracting environment, it is not uncommon for more than one offeror to pursue a protest over the same procurement. With each offeror being able to choose where it wants to file (i.e. GAO or the Court of Federal Claims), an offeror wishing to use the GAO’s administrative processes may nonetheless be out of luck if a competitor chooses the Court.
Ian Patterson, a law clerk with Koprince Law LLC, was this post’s primary author.
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Before deciding whether to set-aside a solicitation for small businesses under FAR 19.502-2, should the contracting officer first determine whether those small business will be able to provide the needed services while, at the same time, complying with the limitation on subcontracting?
No, according to a recent GAO bid protest decision. Instead, an agency’s determination whether a small business will comply with the limitation on subcontracting should be made as part of its award decision (following the evaluation of proposals), not during its initial set-aside determination.
Under FAR 19.502-2(b), a procurement with an anticipated dollar amount greater than $150,000 must be set-aside for small businesses where there is a reasonable expectation that offers will be received from at least two responsible small businesses and that award will be made at fair market prices. Though orders under FSS contracts (issued under FAR part 8.4) are exempt from these small business programs, a contracting officer nonetheless has discretion to set-aside FSS orders for small businesses.
In InfoReliance Corporation, B-413298 (Sept. 19, 2016), GAO considered a protest challenging the Federal Bureau of Prisons’ decision to set aside an FSS order for cloud computing services to small businesses. The contracting officer’s market research identified at least eight small businesses that were authorized re-sellers of the Amazon Web Services sought under the order.
InfoReliance, a large businesses, challenged the set-aside decision, arguing that no small businesses would be able to perform the solicited services while complying with the limitation on subcontracting. According to InfoReliance, the small businesses were thus not responsible, and the set-aside decision was unreasonable.
GAO disagreed with InfoReliance. It noted that contracting officers have discretion to set-aside FSS orders for small business concerns, and that InfoReliance did not show BOP violated any law or regulation in exercising its discretion under this solicitation.
GAO also denied InfoReliance’s argument that BOP was required to verify each small business’s responsibility before deciding to set-aside the solicitation. Before setting-aside a solicitation, an agency “need only make an informed business judgment that there are small businesses expected to submit offers that are capable of performing.” An agency need not conduct a formal responsibility analysis before setting-aside a procurement.
Neither was BOP required to analyze the offerors’ potential compliance with the limitation on subcontracting before setting-aside the solicitation. GAO bluntly said:
This argument, however, puts the cart before the proverbial horse: an agency’s determination whether a small business concern will comply with a solicitation’s subcontracting limitation is to be made as part of the award decision, and based on the particular quotation submitted.
GAO denied InfoReliance’s protest.
InfoReliance serves as a reminder that, in deciding whether to issue a solicitation as a small business set-aside, an agency is not required to prospectively evaluate offerors’ potential proposals. This makes sense: because the rule of two analysis is conducted before a solicitation is issued, an agency cannot evaluate yet-to-be-submitted proposals for compliance with subcontracting limits. To do so would, in GAO’s words, put the cart before the horse.
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I am wrapping up a great trip to Huntsville, Alabama, where I gave a presentation yesterday the Redstone Edge conference. As I make my way back home, it’s time for our weekly roundup of government contracting news and notes.
In this week’s SmallGovCon Week In Review, fourth quarter spending is actually down this year, Congress takes aim at the “Fair Pay and Safe Workplaces” executive order, and much more.
The federal equivalent of Black Friday isn’t what it used to be: a new analysis of federal contracting data shows that Q4 spending is declining after years of elevated levels, with more agencies spending earlier in the year. [Government Executive]
Supporters of President Obama’s “Fair Pay and Safe Workplaces” order are now fighting a tough new obstacle–a Congressional proposal to severely curtail the order’s scope. [Forbes]
The Defense Department spending on research and development has suffered historic declines during the budget drawdown that has been in progress since 2009. [Federal News Radio]
The General Services Administration is trying to ease industry concerns about its new transactional data requirement. [Federal News Radio]
A VA Inspector General audit has discovered flaws in the way the VA awarded its major PC3 contracts. [VA OIG]
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The SBA’s new “all small” mentor-protege program will begin accepting applications on October 1, 2016–but applicants will have to contact the SBA for an application form.
After November 1, 2016, the SBA will be processing electronic applications through its certify.sba.gov website.
Earlier this fall, the SBA announced that it would begin processing mentor-protege applications on October 1. The SBA’s official website for its all small mentor-protege program now provides the following instructions:
The SBA will begin accepting applications for the All Small Mentor Protégé Program on October 1, 2016.
If you would like to apply during the month of October, please send your request for an application to firstname.lastname@example.org. An application and instructions will be emailed to you. In November, 2016, you will be required to finalize the administrative process by adding your profile to certify.sba.gov and uploading your application and documents into that repository.
After November 1, applicants will be instructed to go directly to certify.sba.gov to begin and complete the application process. Watch this site for updates.
It sounds to me like the SBA won’t really be “accepting” applications on October 1, so much as providing applicants the forms to complete and be submitted in November. For those intending to apply to the program, it would make a lot of sense to email the SBA in early October, use the next several weeks to negotiate and complete the mentor-protege paperwork, and be one of the first to submit electronically in November.
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The Department of Defense is proposing a major overhaul of the regulations governing its “pilot” mentor-protege program for small businesses.
The proposed rule, which was published in the Federal Register on September 23, 2016, makes a number of important changes, including adding new eligibility criteria, placing limits on the amount of time a protege can participate in the program, adding new required elements to mentor-protege agreements, and much more.
The DoD’s proposed rule responds to the 2016 National Defense Authorization Act, which called for the DoD to amend its mentor-protege program. The proposed rule makes the following important changes:
Purpose. The current DoD mentor-protege program regulations (which are found in an appendix to the DFARS), describe the primary purpose of the program as being to “provide incentives to major DoD contractors . . . to assist protege firms.” The proposed rule switches the focus, stating that the primary purpose of the program is to “[e]nhance the capabilities of eligible small business concerns to perform as subcontractors under DoD contracts and other contracts and subcontracts . . ..”
Mentor Eligibility Expansion. The proposed rule would expands the universe of potential mentors. The current definition primarily covers large businesses operating under at least one approved subcontracting plan negotiated with DoD or another federal agency. In contrast, the proposed rule would allow any eligible large business to serve as a mentor, regardless of whether the large business is operating under a subcontracting plan. The proposed rule would also allow small businesses to serve as mentors, if approved by the DoD’s Small Business Programs office.
Protege Eligibility Expansion. The proposed rule also expands the universe of potential proteges. The current rule requires that a protege be a small disadvantaged business (SDB), a WOSB, a HUBZone, an SDVOSB, or an eligible entity employing the severely disabled. The proposed rule adds: (1) an entity controlled an owned by an Indian tribe; (2) an entity controlled by a Native Hawaiian organization; (3) an entity owned and controlled by socially and economically disadvantaged individuals (which sounds a lot like an SDB to me); (4) a so-called “non-traditional defense contractor,” which is defined as “an entity that is not currently performing and has not performed any contract or subcontract for DoD that is subject to full covereage under the cost accounting standards . . . for at least the 1-year period preceding the solicitation of sources by DoD for the procurement or transaction”; and (5) an entity that currently provides goods or services in the private section that are critical to enhancing the capabilities of the defense supplier base and fulfilling key DoD needs.
Protege Eligibility Limitations. It isn’t all good news for prospective proteges, however. The proposed rule adds two new restrictions on protege eligibility. First, a protege must be less than half of the size standard under its primary NAICS code. In my view, this is a poor policy choice; small is small, and I don’t like the thought of restricting eligibility in this manner. Second, a protege must be “not owned or managed by individuals or entities that directly or indirectly have stock options or convertible securities in the mentor firm.”
Protege Term Limitations. In addition to limiting the universe of potential proteges, the proposed rule limits the length of time a protege can participate in the mentor-protege program. The proposed rule specifies that “a protege firm may not be a party to more than one DoD mentor-protege agreement at a time, and may only participate in the Program during the 5-year period beginning on the date the protege firm enters into its first mentor-protege agreement.”
Affiliation and Control. The proposed rule would require the mentor-protege agreement to contain seven separate “assurances” regarding affiliation and control, such as a statement that “the mentor firm does not share, directly or indirectly, with the protege firm ownership or management of the protege firm” and that “the mentor firm does not have an agreement, at the time the mentor firm enters into a mentor-protege agreement, to merge with the protege firm.” Some of these requirements, however, appear to go too far and/or misunderstand the SBA’s rules. For example, the DoD requires the parties to certify that they have not been parties to a joint venture during the 2-year period before entering the mentor-protege agreement “unless such joint venture was approved by SBA prior to making an offer on a contract.” However, the SBA only approves joint ventures for 8(a) contracts; joint ventures for all other contracts (including small business, SDVOSB, HUBZone, and WOSB set-asides) are not pre-approved by SBA. The DoD’s proposal, as written, would appear to exclude parties who have joint ventured for these types of contracts, even under the SBA’s new “all small” mentor-protege program. Further, even under the 8(a) Program, the SBA doesn’t approve joint ventures “prior to making an offer on a contract,” but rather need only approve the joint venture before award of the 8(a) contract. Here’s hoping DoD takes a closer look at these portions of its proposal before they become final.
Joint Ventures. The new rule doesn’t prevent DoD mentors and proteges from forming joint ventures (although it doesn’t provide an exception from affiliation to allow them to do so; a large mentor would only be able to joint venture with its protege for set-aside contracts under the SBA’s all small mentor-protege program or 8(a) mentor-protege program). However, the proposed rule specifies that “DoD may not reimburse any fee to the mentor firm for services provided to the protege firm . . . or for business development expenses incurred by the mentor firm under a contract award to the mentor firm while participating in a joint venture with the protege.”
Progress Reports. The proposed rule expands on the current requirements for the mentor’s semiannual progress report. For example, the new rule requires the mentor to specify whether there were any loans to the protege or any joint ventures between the mentor and protege.
Name. The proposed rule doesn’t eliminate the term “Pilot” from the DoD Pilot Mentor-Protege Program. This “Pilot” program was created by the 1991 NDAA, so perhaps it’s time for Congress to drop that particular word from the program’s name.
The SBA’s new all small mentor-protege program has been getting all of the press recently, including on this blog. But even when that program is up and running over the next few months, the DoD mentor-protege program will continue to offer a separate and viable way for mentors and proteges to come together–and may be of special benefit to small businesses who are more interested in serving as DoD subcontractors than as small prime contractors themselves.
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After September 30, 2016, unsuccessful offerors will lose the ability to challenge some task order awards issued by civilian agencies.
With the House of Representatives and Senate at odds over the extent to which task orders should be subject to bid protests in the first place, it’s unclear whether that protest right will be restored.
Under the Competition in Contracting Act, a protest challenging a task order award issued by a civilian agency is not permitted unless it falls under either of the following exceptions:
(A) the protest alleges that the order increases the scope, period, or maximum value of the contract under which the order was issued; or
(B) the protest challenges an order valued in excess of $10 million.
41 U.S.C. § 4106(f)(1).
The statute, however, provides that the second exception—allowing protests challenging orders valued at greater than $10 million—expires on September 30, 2016. After that date, an offeror’s ability to protest a task order issued by a civilian agency will be limited to only those protests alleging that the order increases the scope, period, or maximum value of the underlying contract.
It is important to note that this expiration applies only to task orders issued by civilian agencies; offerors can still challenge task orders issued by the Department of Defense, so long as the awards meet the same $10 million minimum. See 10 U.S.C. § 2304c(3)(1).
Congress has started discussing how to address this issue. But the House and Senate remain worlds apart: the House proposes to allow civilian task order protests again, while the Senate wants to do away with task and delivery protests at GAO altogether and instead require the task and delivery order ombudsman to resolve any complaints. H.R. Rep. No. 114-537, § 1862 (p. 348); S. 2943, 114th Cong. § 819.
In fiscal year 2015 (the last year for which statistics are available), GAO closed 2,647 cases; only 335 of them arose from GAO’s special task order jurisdiction. And as we have reported, 45% of protests resulted in a favorable outcome for the protester, either through a formal “sustain” decision or by way of voluntary corrective action. It would be unfortunate to permanently eliminate GAO’s ability to decide protests regarding larger task orders when the statistics indicate that such protests aren’t pervasive and are often meritorious.
So what’s the bottom line? Unless Congress acts, unsuccessful offerors in civilian task order competitions will be able to protest only in very limited circumstances; these offerors must instead bring their complaints before the agency’s task order ombudsman. In the meantime, affected offerors might consider discussing the issue with their elected representatives.
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An offeror’s failure to provide the type of past performance information mandated by a solicitation led to the offeror’s elimination from consideration for a major GSA contract.
A recent GAO bid protest decision highlights the importance of fully reading and adhering to a solicitation’s requirements–including those involving the type of past performance or experience information required.
GAO’s decision in Dougherty & Associates, Inc., B-413155.9 (Sept. 1, 2016) involved the GSA “HCaTS” solicitation, which contemplated the award of multiple IDIQ contracts to provide Human Capital and Training Solutions across the federal government. The solicitation was divided into two Pools based on the offeror’s small business size status. The GSA established a target of 40 awards for each Pool.
The solicitation provided for award based on best-value, and included a requirement for past experience, which stated:
For an Offeror to be eligible for consideration under a given Pool, the Offeror shall have performed six Relevant Experience Projects [REP], with four of those Relevant Experience Projects under a NAICS Code that corresponds directly to a NAICS Code in the Pool being applied for… Each Relevant Experience Project shall meet the minimum requirements prescribed in Section L.5.2.2.
The solicitation also warned potential offerors that their experience “must be substantiated by ‘evidence within a verifiable contractual document,’ adding that an offeror ‘shall only receive credit…if the Government can validate the information,’” and that failure to meet the experience requirements “may result in the proposal being rejected.” Under the terms of the solicitation, an offeror could meet the experience requirements by “submitting for each relevant experience project: a single contract; a single task or purchase order, or a ‘collection of task orders’ that had been placed under a ‘master contract vehicle.” Finally, the solicitation required for each project that an offeror submit either a single contract/task order/purchase order, or a combination of task orders, “but not both.” The solicitation stated that “if the Offeror submits the single contract and the task order(s)/purchase order(s) awarded against it, the single contract and the task order(s)/purchase order(s) shall not be considered.”
The GSA received 115 proposals. Dougherty & Associates, Inc. was one of the offerors; it submitted a proposal for both Pools. In supporting one of its required experience projects, DAI reference a subcontract between DAI and a prime contractor under an Office of Personnel Management contract. DAI also submitted three purchase orders that had been issued under the subcontract.
The GSA sought clarification from DAI regarding this experience project. The GSA noted that the project contained three separate purchase orders and “was not identified as a ‘collection of task orders’ … It’s unclear how these 3 orders are linked.”
DAI responded by stating that “[w]e did not submit this relevant project as a collection of task orders.” DAI explained that the prime contractor had used purchase orders throughout the period of the subcontract and that “[t]he purchase orders were submitted, as required by the RFP proposal submission instructions, as contractual documents to substantiate … DAI’s scope of work, [key service areas], relevancy, period of performance and project value.”
The GSA subsequently notified DAI that its proposal had been eliminated from consideration. GSA explained that the experience project in question “contains three separate purchase orders and was not identified as a ‘collection of task orders.'”
DAI filed a GAO bid protest. DAI argued that the GSA had improperly eliminated DAI based on an unreasonable reading of DAI’s proposal.
GAO explained that the solicitation required that for each of the six relevant projects “an offeror must submit either a single contract/task order/purchase order, or a collection of task orders–but not both.” GAO continued:
Here, notwithstanding these provisions, DAI submitted its OPM subcontract–along with purchase orders issued under that subcontract. Further, DAI acknowledges that the subcontract, itself, does not substantiate the various experience requirements . . .. Finally, DAI declined to comply with the solicitation requirements regarding a collection of task orders/purchase orders–despite the agency’s notification that it was unclear that the purchase orders DAI submitted were sufficiently related.
GAO denied DAI’s protest.
Dougherty & Associates, Inc. serves as a reminder to fully read and follow the specific requirements of a solicitation to a T–including those involving experience or past performance. While this is true in any solicitation, it is especially so in the case of a large multiple-award IDIQ like HCaTS with dozens (or hundreds) of offerors. In these cases, agencies may be trying to more easily whittle down the playing field, and may be all the more inclined to reject proposals for what seem like minor variances from the terms of the solicitation.
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Fall is officially here, and that means that the leaves are turning color, it’s apple-picking season, and football is a big part of my typical weekend (both on TV, and chasing around my three-year-old son as he scores touchdown after touchdown in our living room).
But for those of us involved in federal government contracts, it’s hard to think of the fall without also thinking of the end of the government’s fiscal year, and all that it entails. In this, the final SmallGovCon Week in Review of the 2016 Fiscal Year, we have stories on a large software vendor pulling out of the GSA schedule, Guy Timberlake’s unvarnished–and very important–commentary on a terrible change being proposed to small business goaling, and more.
One of the largest software vendors in the world is telling the General Services Administration, thanks, but we can live without you. [Federal News Radio]
An Army procurement initiative is pursuing a strategy of “ruthless prioritization.” [Federal News Radio]
The General Services Administration gave the go-ahead to 109 vendors who won spots on the Human Capital and Training Solutions unrestricted and small business contracts to begin promoting and selling against the governmentwide acquisition contract. [Federal News Radio]
The SBA seeks comments on a proposed amendment to its regulations governing the small business timber set-aside program so that appraisals on small business set-aside sales be made to the nearest small business mill. [Federal Register]
Guy Timberlake takes a look at rule changes that are being implemented that he feels will kill small business participation in federal contracting. [GovConChannel]
A commentator offers a warning about “one size fits all” procurement solutions. [Washington Technology]
Six industry associations are asking the government to delay the implementation of new rules around safe workplaces and fair pay for at least a year. [Federal News Radio]
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If you’ve been reading SmallGovCon regularly (and I certainly hope that you have!), the name Ian Patterson may ring a bell. Ian has been a law clerk at Koprince Law LLC since May 2015, and has been credited as the primary author of many SmallGovCon blog posts during that time, including an important recent post on the Rothe Development 8(a) case.
I am pleased to announce that Ian has been admitted to the Bar and is now an Associate Attorney at Koprince Law. Please feel free to browse Ian’s biography for more information about the latest addition to our growing team, and check back here soon for more of Ian’s writings on government contracts law.
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The SBA has released a sample template mentor-protege agreement, and accompanying application information, for its new “all small” mentor-protege program.
The template calls for the parties to select from up to six categories of assistance that the mentor may provide, and requires the parties to set forth specific details about the nature of the planned assistance, the timeline for providing it, and milestones for measuring success. The application form, in turn, requires the protege to have a written business plan, and will require mentors and proteges to complete an online training module if they apply after November 1, 2016.
The template provides six categories of assistance that the mentor may provide the protege: (1) Management and Technical Assistance; (2) Financial Assistance; (3) Contracting; (4) Trade Education; (5) Business Development; and (6) General Administrative. The protege may select “any or all that apply to your situation.”
Once the appropriate assistance is identified, the protege must then specify its needs within each selected area, what the mentor will do to support those needs, the timeline for meeting the needs, and how to measure whether each of the needs have been successfully met “in accordance with your business plan . . ..” The SBA’s accompanying instructions confirm that the protege must have a written business plan–and that the business plan must be submitted to the SBA as part of the mentor-protege application.
The template requires the protege to identify any other federal mentor-protege programs in which it is currently participating, and sets forth a variety of other standard terms, such as those involving reports to the SBA, termination of the mentor-protege agreement, and so on. The template mentor-protege agreement also includes a provision in which the mentor acknowledges that it may be penalized if it fails to provide the promised assistance.
The sample template agreement has been posted on the SBA’s all small mentor-protege program website, but two other documents–the application form itself, and the instructions for applying, have been made available only to those who requested them. (A contact sent me both documents, which I’ve linked in this paragraph, but those interested in applying should not rely on my copies of the documents, which could become outdated at any time. Instead, visit the SBA’s website for up-to-date instructions on applying.)
The application is largely straightforward, and repeats much of the substance of the mentor-protege template agreement, including the types of assistance sought. The application, and the SBA’s online guidance, specify that prospective mentors and proteges will be required to complete an online training module as part of the application process. However, “this requirement will be waived for October applications only, and until November 1.” Those applying on or after November 1 will have to provide proof of completion of the online training module.
In October, the SBA will accept emailed electronic applications. But those who apply in October will have to “finalize the administrative process” in November by creating a profile on certify.sba.gov and uploading the application documents to that website. Beginning in November, it appears that all applications will be submitted using the certify.sba.gov website.
The SBA’s all small mentor-protege program is now “live.” For contractors who hope to take advantage of this powerful new program, it may be time to get started.
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While we are diving into fall weather here in Kansas, my colleagues and I are thinking of everyone on the East Coast dealing with Hurricane Matthew. We hope that everyone makes it through the storm safe and sound.
Hurricane Matthew is at the top of the news headlines this week, but there’s still plenty happening in the world of government contracting. In this edition of SmallGovCon Week In Review, we bring you articles final FAR rule restricting awards to companies with unpaid tax liabilities, two separate cases regarding alleged discrimination by government contractors, a new beta version of a Freedom of Information Act Wiki was launched, a major expansion of the HUBZone program, and much more.
The FAR Council has adopted, without changes, an interim rule I reported on last year, which restricts most contract awards to companies with unpaid federal tax obligations. [Government Publishing Office]
The United States Department of Labor is suing a Silicon Valley firm, which handles $340 million of federal contracts, for allegedly discriminating against Asian job applicants. [Parent Herald]
Using a category management approach to optimize spending, the GSA’s Human Capital and Training Solutions Unrestricted contract is intended to increase access to 77 qualified vendors offering, efficient, cost-effective management and training support. [Federal Times]
The Small Business Administration is correcting a final rule that described the limitations on subcontracting that apply to set aside contracts. [Federal Register]
A Freedom of Information Act Wiki was launched that acts as a free and collaborative resource and allows a rapid account of new developments so everyone has the most up-to-date information about the law in a useful, online format. [CJR]
A global technology manufacturing company has been sued by the U.S. Department of Labor for compensation discrimination against female assembly workers who were found to be making less than their male counterparts. [The Salem News]
President Obama is being urged to issue a directive against anti-gay bias in federal contracting. [The Washington Post]
Oracle’s decision to abandon the GSA Schedules as a channel to sell its products might just be the tip of the iceberg of problems in the government market. [Washington Technology]
A new report shows that women-owned firms are 21 percent less likely to win government contracts. [Biz Journals]
In an important change that’s flown beneath the radar, the SBA removed what it said was an unnecessary requirement in the HUBZone program, allowing for a major expansion of the program. [Set-Aside Alert]
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