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Koprince Law LLC

The year is flying by.  Believe it or not, Thanksgiving is next week.  While my colleagues and I prepare to overdose on turkey and stuffing (and my personal Thanksgiving favorite–copious amounts of pie), our focus today is on the top stories that made government contracting headlines this week.

In this edition of SmallGovCon Week In Review, all nine bid protests filed against the TRICARE award were denied, the FAR Council proposes a rule to clarify how Contracting Officers are to award 8(a) sole source contracts in excess of $22 million, Set-Aside ALERT offers an in depth look at HUBZone set-asides in 2016, the Obama Administration’s government contracting Executive Orders may be reversed by President-Elect Trump, and much more.

  • All nine bid protests filed by health insurers who came out on the losing end of the Defense Department’s TRICARE awards have been denied. [Federal News Radio]
  • The General Services Administration will launch a cloud-based shared service contract-writing system that will offer federal agencies a turnkey, comprehensive contract writing and administrative solution beginning next year. [Nextgov]
  • The FAR Council has issued a proposed rule to clarify the guidance for sole-source 8(a) contract awards exceeding $22 million. [Federal Register]
  • Writing in Bloomberg Government, Tom Skypek offers four steps on how to turn around a failing contract. [Bloomberg Government]
  • As 2016 draws to a close, Set-Aside ALERT provides an in-depth look at where things stand with the SBA’s HUBZone program. [Set-Aside ALERT]
  • Federal IT executives and industry experts say between the election, expected slow or non-existent budget growth and uncertainty in leadership, most of the change will happen below the surface. [Federal News Radio]
  • According to one commentator, Donald Trump’s election is likely to provide federal contractors with one of the biggest items on their wish list: the reversal of most if not all of the Executive Orders President Barack Obama has directed at them over the past eight years. [Bloomberg BNA]
  • Federal CIOs are asking Congress for the authority to stop major IT procurements if they have concerns about cyber security. [fedscoop]
  • The VA has issued a solicitation notice for a 10 year, $25 billion, professional services contract known as VECTOR, which will be set aside for service-disabled veteran-owned small businesses. [Bloomberg Government]

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Koprince Law LLC

Businesses controlled by brothers were presumed affiliated under the SBA’s affiliation rules.

In a recent size determination, the SBA Office of Hearings and Appeals held that a contractor was affiliated with companies controlled by its largest owners’ brother, even though the companies had only minimal business dealings.  OHA’s decision highlights the “familial relationships” affiliation rule, which can often trip up even sophisticated contractors–but the decision, which was based on a March 2016 size determination request, did not take into account changes to that regulation that went into effect a few months later.

OHA’s decision in Size Appeal of Quigg Bros., Inc., SBA No. SIZ-5786 (2016) arose from a HUBZone Program application submitted by Quigg Bros., Inc..  On March 30, 2016, the HUBZone Program office asked that the SBA Area Office conduct a size determination on Quigg Bros. to determine whether the company was a small business in its primary NAICS code, 237310 (Highway, Street, and Bridge Construction).

The SBA Area Office determined that Quigg Bros. was owned by six related individuals. The two largest shareholders were John Quigg and Patrick Quigg.  The SBA Area Office determined that all six of the owners, including John Quigg and Patrick Quigg, controlled Quigg Bros.

The SBA Area Office then proceeded to examine potential affiliation with various other entities.  As is relevant to this post, William Quigg–the brother of John Quigg and Patrick Quigg–controlled three companies: Root Construction Inc. (RC), Barrier West, Inc. (BW), and Cottonwood, Inc.  These companies were identified as “related parties” in Quigg Bros.’ financial statements.  When the SBA asked for an explanation, Quigg Bros. stated that “ecause we have loaned money to these entities our CPAs feel they are related.” However, Quigg Bros. pointed out, William Quigg was not an owner or officer of Quigg Bros., nor were John Quigg or Patrick Quigg involved as owners or officers of RC, BW, or Cottonwood.

The SBA Area Office issued a size determination finding Quigg Bros. to be affiliated with various other entities, including RC, BW and Cottonwood.  The SBA Area Office stated that companies controlled by close family members are presumed to be affiliated.  Although the presumption of affiliation may be rebutted, the SBA Area Office apparently found that the loans between Quigg Bros. and the other three companies (as well as other business dealings between the brothers) precluded Quigg Bros. from rebutting the presumption.  As a result of its affiliations, Quigg Bros. was found ineligible for admission to the HUBZone Program.

Quigg Bros. filed a size appeal with OHA.  Quigg Bros. highlighted the fact that none of its owners had any ownership interest in RC, BW or Cottonwood.  Quigg Bros. also pointed out that William Quigg was not an owner or officer of Quigg Bros.  Additionally, Quigg Bros. stated, the business dealings between the companies were minimal, and the companies did not share any officers, employees, facilities, or equipment.

OHA wrote that “SBA regulations create a rebuttable presumption that close family members have identical interests and must be treated as one person.”  The challenged firm “may rebut this presumption by demonstrating a clear line of fracture between family members.”

In this case, “the Area Office correctly presumed that William Quigg shares an identity of interest with his brothers, and afforded [Quigg Bros.] several opportunities to rebut this presumption.”  However, “the record reflects various business dealings between the brothers and their respective companies, including both contracts and loans, as well as join investments” in two other companies.  These circumstances “undermine [Quigg Bros.’] claim of clear fracture, as OHA has recognized that ‘where there is financial assistance, loans, or significant subcontracting between the firms,’ and ‘whether the family members participate in multiple businesses together’ are among the criteria to be considered in determining whether clear fracture exists.”

OHA also found that the SBA Area Office did not err by failing to undertake a company-by-company analysis to determine whether Quigg Bros. was affiliated with each of the individual companies controlled by William Quigg. Citing prior decisions, OHA wrote that “if a challenged firm does not rebut the presumption of identity of interest between family members, all of the family members’ investments are aggregated.” OHA upheld the SBA Area Office’s size determination, and denied the size appeal.

In Quigg Brothers, the size determination request came in March 2016, so OHA applied the SBA’s then-existing rules on family relationships.  It’s worth noting, however, that the SBA adjusted those rules in a rulemaking effective on June 30, 2016.  The SBA’s affiliation rule now states:

Firms owned or controlled by married couples, parties to a civil union, parents, children, and siblings are presumed to be affiliated with each other if they conduct business with each other, such as subcontracts or joint ventures or share or provide loans, resources, equipment, locations or employees with one another. This presumption may be overcome by showing a clear line of fracture between the concerns. Other types of familial relationships are not grounds for affiliation on family relationships. 

The plain text of the new rule suggests that–unlike in Quigg Bros. and prior OHA cases–the primary focus of the regulation may be on the businesses, not the family members.  In other words, the company-by-company analysis OHA rejected in Quigg Bros. might be required moving forward.  Additionally, unlike in prior cases, the new regulation suggests that the presumption doesn’t arise in the first place unless there is a close family relationship and the companies in question conduct business with one another.

Make no mistake: family relationships are still a viable basis of affiliation under the SBA’s revised regulations.  But it remains to be seen how the new regulation will affect OHA’s analysis in future cases.

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Koprince Law LLC

Affiliation under the ostensible subcontractor rule is determined at the time of proposal submission–and can’t be “fixed” by later changes.

In a recent size appeal decision, the SBA Office of Hearing and Appeals confirmed that a contractor’s affiliation with its proposed subcontractor could not be mitigated by changes in subcontracting relationships after final proposals were submitted.

In Greener Construction Services, Inc., SBA No. SIZ-5782 (Oct. 12, 2016), the U.S. Army Contracting Command sought solid waste disposal and recycling services at its Blossom Point Research Facility. The solicitation was set aside for 8(a) Program participants under NAICS code 562111, Solid Waste Collection, with a size standard of $38.5 million.

Greener Construction, Inc. submitted its final proposal on September 15, 2015. The proposal included one subcontractor, EnviroSolutions, Inc. No other subcontractors were mentioned.

Under the teaming agreement between the parties, EnviroSolutions was to provide the solid waste collection bins, trucks, and drivers for the project. In addition, EnviroSolutions’ supervisory staff were to be on site during the first month of contract performance to assist with personnel training. In fact, of the five key employees identified in Greener Construction’s proposal, four were employed by EnviroSolutions. Greener Construction was also prohibited from adding another subcontractor without EnviroSolutions’ written consent.

Greener Construction was awarded the contract on September 25, 2015. An unsuccessful offeror challenged the award alleging that Greener Construction was other than small because it was affiliated with EnviroSolutions and its subsidiaries under the ostensible subcontractor affiliation rule.

On July 29, 2016, the SBA Area Office issued its size determination, which found Greener Construction to be “other than small.” The Area Office concluded Greener Construction and EnviroSolutions were affiliated under the ostensible subcontractor rule because EnviroSolutions was responsible for the primary and vital aspects of the solicitation—the collection and transportation of solid waste.

Greener Construction appealed the decision to OHA. Greener Construction argued EnviroSolutions would not be solely responsible for performing the primary and vital tasks because, after submitting its final proposal, Greener Construction had made arrangements with other companies to perform these functions. Greener Construction further argued it was actually going to provide the onsite waste receptacles, not EnviroSolutions.

OHA was not  convinced. OHA wrote that under the SBA’s size regulations, “compliance with the ostensible subcontractor rule is determined as of the date of final proposal revisions.” For that reason, “changes of approach occurring after the date of final proposals do not affect a firm’s compliance with the ostensible subcontractor rule . . ..”

In this case, Greener Construction submitted its initial proposal on September 15, 2015, “and there were no subsequent proposal revisions.” Greener Construction’s proposal “made no mention” of any other subcontractors but EnviroSolutions, and required EnviroSolutions’ consent to add any other subcontractors. Moreover, the proposal stated that EnviroSolutions “will provide front load containers as specified in the solicitation.” Therefore, the arguments advanced by Greener Construction on appeal “are inconsistent with, and contradicted by [Greener Construction’s] proposal and Teaming Agreement.” OHA denied Greener Construction’s size appeal.

Greener Construction demonstrates the importance of carefully considering ostensible subcontractor affiliation before submitting proposals. Because ostensible subcontractor affiliation is determined at the time final proposals are submitted, contractors must be mindful of the rule and make sure that the proposal, teaming agreement, and any other contemporaneous documentation reflects an absence of affiliation.

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Koprince Law LLC

A contractor did not file a proper certified claim because the purported “signature” on the mandatory certification was typewritten in Lucinda Handwriting font.

A recent decision of the Armed Services Board of Contract Appeals highlights the importance of providing a fully-compliant certification in connection with all claims over $100,000–which includes, according to the ASBCA, the requirement for a verifiable signature.

The ASBCA’s decision in ABS Development Corporation, ASBCA Nos. 60022 et al. (2016) involved a contract between the government and ABS Development Corporation, Inc. for construction work at a shipyard in Haifa, Israel.  During the course of performance, ABS presented seven claims to the Contracting Officer, five of which are at issue here.

In each of the five claims in question, ABS sought compensation of more than $100,000.  Each of the five claims contained a certification using the correct language from the Contract Disputes Act and FAR 52.233-1.  The “Name and Signature” line of each claim was written “in what appears to be Times New Roman font.”  Above the “Name and Signature” line of each claim the name “Yossi Carmely” was typed “in Lucinda Handwriting font, or something similar.”  Yossi Carmely was listed on the certifications as a Project Manager.

The government did not act on these claims.  A few months after the claims were filed, ABS appealed to the ASBCA, treating the government’s lack of response as “deemed denials” of the claims.

The government moved to dismiss the appeals for lack of jurisdiction.  The government argued that the certifications “were not signed by anyone, because electronically typed ‘signatures’ of Yossi Carmely are not signatures at all.”

The ASBCA noted that “[a] claim of more than $100,000 must be accompanied b y a signed certification by an individual authorized to bind the contractor with respect to the claim . . ..”  Further, “[t]he Board cannot entertain an appeal involving a claim of more than $100,000 unless the claim was the subject of a signed certification.”  An unsigned certification “is a defect that cannot be corrected.”

The Board explained that a signature “is a discrete, verifiable symbol that is sufficiently distinguishable to authenticate that the certification was issued with the purported author’s knowledge and consent or to establish his intent to certify, and therefore, cannot be easily disavowed by the purported author.”  The ASBCA continued:

Here, we are not confronted with an issue of “electronic signatures”; rather, we are confronted with several typewritings of a name (presumably typewritten by electronic means), purporting to be signatures.  However, a typewritten name, even one typewritten in Lucinda Handwriting font, cannot be authenticated, and therefore, it is not a signature.  That is, anyone can type a person’s name; there is no way to tell who did so from the typewriting itself.

The ASBCA granted the government’s motion to dismiss for lack of jurisdiction.

The FAR’s claim certification requirement appears to be simple and straightforward, but the ASBCA’s case law (and that of other Boards) is littered with examples of cases dismissed because the contractor omitted the certification or didn’t get it right.  As the ABS Development Corporation case demonstrates, even in our electronic age, a purely typewritten signature doesn’t suffice, notwithstanding the font selected.

One final, and rather ironic, note: the last page of the ASBCA’s decision contains a certification from the Board’s Recorder, attesting that the decision is a true copy.  The Recorder’s signature line is blank.

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Koprince Law LLC

I hope that all of our readers had a happy Thanksgiving.  The holiday season is in full swing here at Koprince Law LLC, where we have a festive tree in our lobby and holiday cookies in the kitchen.

But between holiday shopping and snacking, there is still plenty happening in the world of federal government contracts.  Today, we have a special SmallGovCon “Weeks” in Review, beginning with stories from November 21.  The latest news and commentary includes two different cases in which business owners were convicted procurement fraud, a potential end to the Fair Pay and Safe Workplaces regulations, and much more.

  • DBE fraud: an Illinois contractor pleaded guilty to conspiring to commit wire fraud after allegedly acting as a disadvantaged business for another company, resulting in fines over $200,000. [Construction Dive]
  • President Obama’s “Fair Pay and Safe Workplaces” rule for federal contractors appears to be headed for the chopping block once President-elect Trump takes office. [Government Executive]
  • A proposed rule by the FAR Council would amend the FAR to implement a section of the NDAA that will clarify that agency personnel are permitted and encouraged to engage in responsible constructive exchanges with industry. [Federal Register]
  • The GSA’s SAM database is under fire for the accuracy of its data and Members of Congress are questioning how GSA ensures tax delinquent vendors do not win federal contracts or grants. [Committee on Oversight and Government Reform]
  • The owner of a sham “veteran-owned” company has been ordered to forfeit $6.7 million for his part in recruiting veterans as figurehead owners of  a construction company in order to receive specialized government contracts. [The United States Attorney’s Office District of Massachusetts]
  • Court documents show that a former employee with the U.S. Department of State was guilty of steering sole-sourcing contracts worth $2 million to a company in which his son was a 50 percent interest. [KTVH]
  • The election of Donald Trump had a surprise impact on the November House-Senate conference meetings on the fiscal 2017 National Defense Authorization Act. [Government Executive]
  • Bloomberg Government data shows that federal information technology spending on government-wide acquisition contracts, or GWACs, topped $10 billion for the first time in fiscal 2016. [Bloomberg Government]

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Koprince Law LLC

The 2017 National Defense Authorization Act will essentially prevent the VA from developing its own regulations to determine whether a company is a veteran-owned small business.

Yes, you heard me right.  If the President signs the current version of the 2017 NDAA into law, the VA will be prohibited from issuing regulations regarding the ownership, control, and size status of an SDVOSB or VOSB–which are, of course, the key components of SDVOSB and VOSB status.  Instead, the VA will be required to use regulations developed by the SBA, which will apply to both federal SDVOSB programs: the SBA’s self-certification program and the VA’s verification program.


In my experience, the typical SDVOSB believes that VA verification applies government-wide, and relies on that VetBiz “seal” as proof of SDVOSB eligibility for all agencies’ SDVOSB procurements.  But contrary to this common misconception, there are two separate and distinct SDVOSB programs.  The SBA’s self-certification program (which is the “original” SDVOSB set-aside program) is authorized by the Small Business Act, which is codified in Title 15 of the U.S. Code and implemented by the SBA in its regulations in Title 13 of the Code of Federal Regulations.  The VA’s separate program is codified in Title 38 of the U.S. Code and implemented by the VA in its regulations in Title 38 of the Code of Federal Regulations.

There are some important differences between the two programs.  For example, the VA requires that the service-disabled veteran holding the highest officer position manage the company on a full-time basis; the SBA’s regulations do not.  Following a 2013 Court of Federal Claims decision, the VA allows certain restrictions of a veteran’s ability to transfer his or her ownership, but that decision doesn’t necessarily apply to the SBA, which has held that “unconditional means unconditional,” as applied to transfer restrictions.  And of course, the VA’s regulations require formal verification; the SBA’s call for self-certification.

Despite these important differences, the two programs are largely similar in terms of their requirements.  However, last year, the VA proposed a major overhaul to its SDVOSB and VOSB regulations.  The VA’s proposed changes would, among other things, allow non-veteran minority owners to exercise “veto” power over certain extraordinary corporate decisions, like the decision to dissolve the company.  The SBA has not proposed corresponding changes.  In other words, were the VA to finalize its proposed regulations, the substantive differences between the two SDVOSB programs would significantly increase, likely leading to many more cases in which VA-verified SDVOSBs were found ineligible for non-VA contracts.

That brings us back to the 2017 NDAA.  Instead of allowing the VA and SBA to separately define who is (and is not) an SDVOSB, the 2017 NDAA establishes a consolidated definition, which will be set forth in the Small Business Act, not the VA’s governing statutes.  (The new statutory definition itself contains some important changes, which I will be blogging about separately).

The 2017 NDAA then amends the VA’s statutory authority to specify that “[t]he term ‘small business concern owned and controlled by veterans’ has the meaning given that term under . . . the Small Business Act.”  A similar provision applies to the term “small business concern owned and controlled by veterans with service-connected disabilities.”

Congress doesn’t stop there.  The 2017 NDAA further amends the VA’s statute to specify that companies included in the VA’s VetBiz database must be “verified, using regulations issued by the Administrator of the Small Business Administration with respect to the status of the concern as a small business concern and the ownership and control of such concern.”  At present, the relevant statutory section merely says that companies included in the database must be “verified.”  Finally, the 2017 NDAA states that “The Secretary [of the VA] may not issue regulations related to the status of a concern as a small business concern and the ownership and control of such small business concern.”

So there you have it: the 2017 NDAA consolidates the statutory definitions of veteran-owned companies, and calls for the SBA–not the VA–to issue regulations implementing the statutory definition.  The 2017 NDAA requires the VA to use the SBA’s regulations, and expressly prohibits the VA from adopting regulations governing the ownership and control of SDVOSBs.  These prohibitions, presumably, will ultimately wipe out the two regulations with which many SDVOSBs and VOSBs are very familiar–38 C.F.R. 74.3 (the VA’s ownership regulation) and 38 C.F.R. 74.4 (the VA’s control regulation).

Because both agencies will be using the SBA’s rules, the SBA Office of Hearings and Appeals will have authority to hear appeals from any small business denied verification by the VA.  This is an important development: under current VA rules and practice, there is no option to appeal to an impartial administrative forum like OHA.  Intriguingly, the 2017 NDAA also mentions that OHA will have jurisdiction “of an interested party challenges the inclusion in the database” of an SDVOSB or VOSB.  It’s not clear whether this authority will be limited to appeals of SDVOSB protests filed in connection with specific procurements, or whether competitors will be granted a broader right to protest the mere verification of a veteran-owned company.

So when will these major changes occur?  Not immediately.  The 2017 NDAA states that these rules will take effect “on the date on which the Administrator of the Small Business Administration and the Secretary of Veterans Affairs jointly issue regulations implementing such sections.”  But Congress hasn’t left the effective date entirely open-ended.  The 2017 NDAA provides that the SBA and VA “shall issue guidance” pertaining to these matters within 180 days of the enactment of the 2017 NDAA.  From there, public comment will be accepted and final rules eventually announced.  Given the speed at which things like these ordinarily play out, my best guess is that these changes will take effect sometime in 2018, or perhaps even the following year.

The House approved the 2017 NDAA on December 2.  It now goes to the Senate, which is also expected to approve the measure, then send it to the President.  In a matter of weeks, the 180-day clock for the joint SBA and VA proposal may start ticking–and the curtain may start to close on the VA’s authority to determine who owns or controls a veteran-owned company.


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Koprince Law LLC

As previously foreshadowed and discussed in depth, October 1, 2016, marked the date in which unsuccessful offerors lost the ability to challenge most task order awards issued by civilian agencies.

Although the GAO remains able to hear protests relating to DoD task orders exceeding $10 million, two recent GAO decisions impose an important limitation: GAO does not have jurisdiction to consider awards issued by DoD under a multiple-award contract operated by a civilian agency.

By way of background, for several years, a GAO protest challenging a task order award issued by a civilian agency was not permitted unless it fell under either of the following exceptions:

  1. The protest alleged that the order increases the scope, period, or maximum value of the contract under which the order was issued; or
  2. The protest challenged an order valued in excess of $10 million.

However, the statute included a sunset provision whereby the second basis of jurisdiction–protests involving task orders in excess of $10 milion–was no longer effective after September 30, 2016. Thus, after this date, an unsuccessful offeror’s ability to protest a task order issued by a civilian agency became limited to only protests alleging the order increased the scope, period, or maximum value of the contract. GAO’s recent decision in Ryan Consulting Group, Inc., B-414014 (Nov. 7, 2016), confirmed its lack of jurisdiction over task and delivery orders valued above $10 million issued under civilian agency multiple-award IDIQ contracts.

While unsuccessful offerors can still challenge task orders issued by the Department of Defense if the order exceeds the $10 million value, see 10 U.S.C. §2304c(3)(1), two recent GAO decisions limit its jurisdiction in this area by holding that when DoD places an order against a civilian IDIQ vehicle, the task order cannot be protested.

In Analytic Strategies LLC, B-413758.2 (Nov. 28, 2016), the DoD issued a solicitation under the GSA’s OASIS vehicle. The solicitation contemplated the award of a task order valued in excess of $125 million. After evaluating initial proposals, the DoD excluded the proposals of Analytic Strategies LLC and Gemini Industries, Inc. from the competitive range. Analytic Strategies filed a GAO bid protest on October 3, 2016; Gemini filed a protest on October 28.

The GAO dismissed both protests, finding that it lacked jurisdiction. The GAO held that because OASIS is a civilian IDIQ, orders issued under OASIS fall under the civilian provisions of 41 U.S.C., and cannot be protested unless the protest alleges that the order exceeds the scope, period, or maximum value of the IDIQ contract.  While the protesters contended that GAO had jurisdiction over its protest under 10 U.S.C., GAO found this argument misplaced. GAO stated that it saw “nothing in the relevant provisions of Titles 10 or 41 that authorize a different result because the agency that will benefit from the task order, fund the task order, or place the task order, is an agency covered by Title 10.”

GAO solidified this position shortly thereafter in HP Enterprise Services, LLC, B-413382.2 (Nov. 30, 2016), again finding it was without jurisdiction to hear a protest in connection with a  task order valued above $10 million issued under a civilian agency multiple-award IDIQ. In HP Enterprise Services, the GSA issued a solicitation to holders of the GSA ALLIANT IDIQ, seeking a contractor to provide various IT support services for the DoD. After receiving notice that it had not been selected, HP Enterprise Services, LLC filed a GAO bid protest challenging the award decision. HPES contended that GAO had jurisdiction over its protest pursuant to 10 U.S.C. § 2304c(e), rather than 41 U.S.C. § 4106(f), because the procurement was conducted “on behalf” of the DoD, that it was subject to DoD Regulations, and the performance was funded by the DoD. GAO, however, hung its proverbial hat on the fact that a civilian agency issued the IDIQ, writing that “there can be no doubt that the protested task order has been, or will be, issued under a civilian agency IDIQ contract.”

Interestingly, GAO’s recent decisions depart from its previous practice of citing 10 U.S.C.–the DoD statute, not the civilian statute–in cases like these. For example, in Odyssey Systems Consulting Group, Ltd., B-412519, B-412519.2 (Mar. 11, 2016), the Air Force issued a solicitation under the OASIS contract, and an unsuccessful offeror challenged the resulting award decision. In a footnote explaining why it had jurisdiction to hear the protest, the GAO said:

The awarded value of the task order exceeds $10 million. Accordingly, the procurement is within our jurisdiction to hear protests related to the issuance of orders under multiple-award indefinite-delivery, indefinite-quantity contracts. 10 U.S.C. § 2304c(e)(1)(B). 

Interestingly, even though the Odyssey Systems case involved the same IDIQ at issue in Analytic Strategies, the GAO did not explain its apparent shift in position.

These jurisdictional matters are very important, but the effect of these cases is likely to be short-lived. The U.S. House of Representatives has recently approved a conference version of the 2017 National Defense Authorization Act, and the Senate is expected to approve the same conference bill as early as this week. The conference version of the 2017 NDAA strikes the sunset provision of 41 U.S.C. § 4106(f), thereby reinstating GAO’s jurisdiction to hear task order awards valued above $10 million issued by civilian agencies. Thus, assuming the President signs the bill into law in its current form, unsuccessful offerors once again will be free to protest civilian task orders valued above $10 million. We will keep you posted.

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Koprince Law LLC

The 2017 NDAA is full of important changes that will affect federal contracting going forward. As Steve wrote about earlier this week, some of these changes relate to government contracting programs (like the SDVOSB program). Still others relate to how the government actually procures goods and services.

One of these important changes severely limits the use of lowest-price technically-acceptable (“LPTA”) evaluations in Department of Defense procurements. Following the change, “best value” tradeoffs will be prioritized for DoD acquisitions. This post will briefly examine when LPTA procurements will and won’t be allowed under the 2017 NDAA.

The 2017 NDAA sets a new DoD policy: to avoid using LPTA evaluations when doing so would deny DoD with the benefits of cost and technical tradeoffs. As a result, the 2017 NDAA limits the use of LPTA procurements to instances when the following six conditions are met:

  1. DoD is able to comprehensively and clearly describe the minimum requirements expressed in terms of performance objectives, measures, and standards that will be used to determine the acceptability of offers;
  2. DoD would recognize no (or only minimal) value from a proposal that exceeded the minimum technical or performance requirements set forth in the solicitation;
  3. The proposed technical approaches will not require any (or much) subjective judgment by the source selection authority as to their respective desirability versus competitors;
  4. The source selection authority is confident that reviewing the bids from the non-lowest price offeror(s) would not result in the identification of factors that could provide value or benefit to the Government;
  5. The Contracting Officer includes written justification for use of the LPTA scheme in the contract file; and
  6. DoD determines that the lowest price reflects full life-cycle costs, including costs for maintenance and support.

By limiting DoD’s use of LPTA to procurements to instances in which these six criteria are met, the 2017 NDAA effectively mandates that for a majority of procurements, the DoD should use best value selection procedures.

But in addition to codifying a presumption against LPTA procurements, the NDAA goes so far as to caution DoD to not use LPTA procurements under three specific types of contracts:

  1. Contracts that predominately seek knowledge-based professional services (like information technology services, cybersecurity services, systems engineering and technical assistance services, advanced electronic testing, and audit or audit readiness services);
  2. Contracts seeking personal protective equipment; and
  3. Contracts for knowledge-based training or logistics services in contingency operations or other operations outside the United States (including Iraq and Afghanistan).

Finally, to verify compliance with this new requirement, the NDAA requires DoD to issue annual reports over the next four years that describe the instances in which LPTA procedures were used for a contract exceeding $10 million.

The 2017 NDAA makes clear Congress’s intent to rework DoD’s contracting programs and procedures. Going forward, Congress wants DoD to utilize best value source selection procedures as much as possible, by severely restricting use of LPTA procedures for DoD contracts.

The House approved the 2017 NDAA on December 2.  It now goes to the Senate, which is also expected to approve the measure, then send it to the President. We will keep you posted.

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Koprince Law LLC

Coming as welcome news for collaborative R&D, the 2017 NDAA will extend the life of the Small Business Innovation Research and Small Business Technology Transfer programs.

The conference version of the bill, which seems likely to be on the President’s desk in short order, contains provisions extending both programs for five years.

SBIR and STTR are unique research, development, and commercialization programs overseen by the SBA. Each program calls for a three-phase process. In the first two phases, R&D is funded by the government; the third phase of each program involves commercialization. Although the programs have many similarities, there are also important differences. For example, in the SBIR program, a small business may collaborate with a non-profit research institution; in the SBIR program, such collaboration is required.

Both programs were scheduled to expire on September 30, 2017. The 2017 NDAA extends the lifespan of the programs through September 30, 2022. This extension will allow small businesses to continue their collaboration with research institutions to develop new technologies for a variety of applications—good news for businesses and universities doing research in cutting edge fields.

2017 NDAA: The National Defense Authorization Act for Fiscal Year 2017 appears poised beneath the President’s pen for signing. It includes some massive changes as well as some small but nevertheless significant tweaks sure to impact Federal procurements in the coming year. For the next several days, SmallGovCon will delve into the minutia to provide context and analysis so that you do not have to. Visit smallgovcon.com for the latest on the government contracting provisions of the 2017 NDAA.

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Koprince Law LLC

Good news for small business looking to break into Department of Defense contracting: the 2017 NDAA establishes a new prototyping pilot program for small businesses and nontraditional defense contractors to develop new and innovative technologies.

The DoD is putting its money where its mouth is: the new pilot program is funded with $250 million from the rapid prototyping fund established by last year’s NDAA.

The new pilot program is officially called the “Nontraditional and Small Contractor Innovation Prototyping Program.” Under the program, the authorized funds are to be used to “design, develop, and demonstrate innovative prototype military platforms of significant scope for the purpose of demonstrating new capabilities that could provide alternatives to existing acquisition programs and assets.”

Congress is relying on the DoD to develop many of the program’s parameters. The 2017 NDAA calls for the Secretary of Defense to submit, with its budget request for Fiscal Year 2018, “a plan to fund and carry out the pilot program in future years.”

In the meantime, Congress has authorized $50 million to be made available for the following projects in FY 2017:

(1) Swarming of multiple unmanned air vehicles.

(2) Unmanned, modular fixed-wing aircraft that can be rapidly adapted to multiple missions and serve as a fifth generation weapons augmentation platform.

(3) Vertical takeoff and landing tiltrotor aircraft.

(4) Integration of a directed energy weapon on an air, sea, or ground platform.

(5) Swarming of multiple unmanned underwater vehicles.

(6) Commercial small synthetic aperture radar (SAR) satellites with on-board machine learning for automated, real-time feature extraction and predictive analytics.

(7) Active protection system to defend against rocket-propelled grenades and anti-tank missiles.

(8) Defense against hypersonic weapons, including sensors.

(9) Other systems as designated by the Secretary.

In addition to sounding like something out of a science fiction movie, these categories provide insight into some of Congress’s (and DoD’s) prototyping priorities–particularly those in which small and nontraditional contractors are expected to be able to play an important role.

The 2017 NDAA authorizes the prototyping program through September 30, 2026. As the Secretary of Defense will not submit its implementation plan for the pilot program until its next budget request, it may take some time before the program hits full stride. In the interim, interested contractors can start positioning themselves to take advantage of this new opportunity.

2017 NDAA: The National Defense Authorization Act for Fiscal Year 2017 appears poised beneath the president’s pen for signing. It includes some massive changes as well as some small but nevertheless significant tweaks sure to impact Federal procurements in the coming year. For the next few days, SmallGovCon will delve into the minutia to provide context and analysis so that you do not have to. Visit smallgovcon.com for the latest on the government contracting provisions of the 2017 NDAA. 

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The 2017 National Defense Authorization Act will increase the DoD’s micro-purchase threshold to $5,000.

Under the conference bill recently approved by both House and Senate, the DoD’s micro-purchase threshold will be $1,500 greater than the standard micro-purchase threshold applicable to civilian agencies.

A micro-purchase is an acquisition by the government of supplies or services that, because the aggregate is below a certain price, allows the government to use simplified acquisition procedures without having to hold a competition, conduct market research, or set aside the procurement for small businesses. In other words, if the price is low enough, the agency can buy it at Wal-Mart using a government credit card, without running afoul of the law.

Although there are many different thresholds, the FAR puts the general micro-purchase threshold at $3,500. But Section 821 of the proposed 2017 NDAA will add a new section to chapter 137 of title 10 of the United States Code giving the DoD its own micro-purchase threshold of $5,000.

It may not sound like much, but that’s nearly a 43% increase from the current micro-purchase threshold (and the threshold that will remain applicable to most agencies). Although DoD procurement officials will undoubtedly enjoy their new flexibility, some small contractors may not be so pleased–after all, once the micro-purchase threshold applies, there is no mandate that the government use (or even consider) small businesses.

2017 NDAA: The National Defense Authorization Act for Fiscal Year 2017 has been approved by both House and Senate, and will likely be signed into law soon. It includes some massive changes as well as some small but nevertheless significant tweaks sure to impact Federal procurements in the coming year. For the next few days, SmallGovCon will delve into the minutia to provide context and analysis so that you do not have to. Visit smallgovcon.com for the latest on the government contracting provisions of the 2017 NDAA. 

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I don’t know about your part of the country, but here in Lawrence, the temperatures have plunged and it has finally felt like winter for the first time.  When temps get cold, I prefer to stay inside with a hot beverage, but I have to hand it to all of the die hard Chiefs fans who scoffed at the single-digit temperatures and spent the evening watching their team defeat the Raiders at Arrowhead Stadium last night.

As we continue our wintry approach to the holidays, it’s been a big week in government contracting. Here on SmallGovCon, we’ve been focusing on the government contracting provisions of the 2017 NDAA, and this week’s SmallGovCon Week In Review has an additional update on the bill’s progress.  But that’s not all: our weekly roundup of government contracting news also includes a change to the FAR to reflect SBA regulations regarding multiple-award contracts, previews of contracting under President-elect Trump, and much more.

  • The 2017 NDAA conference bill has been approved by House and Senate, and is now on President Obama’s desk.  Will he sign it? [ExecutiveGov]
  • Speaking of the 2017 NDAA, it includes provisions restoring the GAO’s ability to hear protests of civilian task and delivery orders in excess of $10 million. [FCW]
  • Two men who executed “the largest disadvantaged business enterprise fraud in the nation’s history” will not have their sentences adjusted after a court denied a request for leniency. [Central Penn Business Journal]
  • Washington Technology takes a look at the incoming Trump administration and what is next for contractors. [Washington Technology]
  • Federal contracts played a factor in United Technologies’ decision to keep a Carrier plant in Indianapolis open at the request of President-elect Trump. [The Washington Post]
  • A bill protecting whistleblowers who expose what they think is wrongdoing in government contracts has been passed by the U.S. House of Representatives and is expected to be signed by President Obama. [St. Louis Post-Dispatch]
  • What will be the new administration’s acquisition priorities? Speculation opaquely says increased outsourcing of government activity, but what does that mean? Federal Times tries to answer these and other questions. [Federal Times]
  • President-elect Trump has nominated Linda McMahon, of World Wrestling Entertainment fame, to head the SBA. [ExecutiveGov]
  • The FAR Council has proposed important changes to implement regulatory changes made by the SBA, which provide Government-wide policy for partial set-asides and reserves, and set-aside orders for small business concerns under multiple-award contracts. [Federal Register]
  • The GSA has inked a government-wide deal for Adobe’s “data-centric” security and electronic signature software which the GSA believes could save American taxpayers $350 million. [fedscoop]
  • A commentator opines that improving government contracting should begin with “dumping the DUNS.” [The Hill]

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The 2017 National Defense Authorization Act makes some important adjustments to the criteria for ownership and control of a service-disabled veteran-owned small business.

The 2017 NDAA modifies how the ownership criteria are applied in the case of an ESOP, specifies that a veteran with a permanent and severe disability need not personally manage the company on a day-to-day basis, and, under limited circumstances, permits a surviving spouse to continue to operate the company as an SDVOSB.

As I discussed in a separate blog post last week, the SBA and VA currently operate separate SDVOSB programs, and each agency has its own definition of who qualifies as an SDVOSB.  The 2017 NDAA consolidates these definitions by requiring the VA to use the SBA’s criteria for ownership and control.

In addition to consolidating the statutory definitions, the 2017 NDAA makes three important changes to the ownership and control criteria themselves.

First, the 2017 NDAA specifies that stock owned by an employee stock ownership plan, or ESOP, is not considered when the SBA or VA determines whether service-connected veterans own at least 51 percent of the company’s stock.  This portion of the 2017 NDAA essentially overturns a 2015 decision by the SBA Office of Hearings and Appeals, which held that a company was not an eligible SDVOSB because the service-disabled veteran did not own at least 51% of the company’s ESOP class of stock. (The Court of Federal Claims ultimately upheld OHA’s decision later that year).

Second, the 2017 NDAA continues to provide that “the management and daily business operations” of an eligible SDVOSB ordinarily must be controlled by service-disabled veterans.  However, the 2017 NDAA states that if a veteran has a “permanent and severe disability,” the “spouse or permanent caregiver of such veteran” may run the company.  This provision is very similar to the one currently used by the SBA in its regulations; the VA does not currently have a provision whereby a spouse or permanent caregiver may operate an SDVOSB.

But Congress goes a step beyond the SBA’s current regulations.  In a separate paragraph, the 2017 NDAA states that a company may qualify as an SDVOSB if it is owned by a veteran “with a disability that is rated by the Secretary of Veterans Affairs as a permanent and total disability” and who is “unable to manage the daily business operations” of the company.  In such a case, the statute does not specify that the company must be run by the spouse or permanent caregiver.  In other words, for veterans with permanent and total disabilities, the statute appears to allow control by others, such as (perhaps) non-veteran minority owners.  Historically, the SBA and VA have been very skeptical of undue control by non-veteran minority owners, so it will be interesting to see how the agencies interpret and apply this new statutory provision.

Third, the 2017 NDAA states that a surviving spouse may continue to operate a company as an SDVOSB when a veteran dies, provided that: (1) the surviving spouse acquires the veteran’s ownership interest; (2) the veteran had a service connected disability “rated as 100 percent disabling” by the VA, or “died as a result of a service-connected disability” and (3) immediately prior to the veteran’s death, the company was verified in the VA’s VetBiz database.  When the three conditions apply, the surviving spouse may continue to operate the company as an SDVOSB for up to ten years, although SDVOSB status will be lost earlier if the surviving spouse remarries or relinquishes ownership in the company.

This provision is very similar to the one currently found in the VA’s regulations.  At present, the SBA does not have any provisions whereby a surviving spouse can continue to operate an SDVOSB.

That said, the statutory provision–just like the current VA regulation–is quite narrow.  In my experience, there is a common misconception that a surviving spouse is always entitled to continue running a company as an SDVOSB.  In fact, a surviving spouse is only able to do so when certain strict conditions are met.  In many cases, the veteran in question was not 100 percent disabled and didn’t die as a result of a service-connected disability (or the surviving spouse is unable to prove that the service-connected disability caused the veteran’s death).  And in those cases, the surviving spouse is unable to continue claiming SDVOSB status, both under the VA’s current rules and the 2017 NDAA.

2017 NDAA: The National Defense Authorization Act for Fiscal Year 2017 has been approved by both House and Senate, and will likely be signed into law soon. It includes some massive changes as well as some small but nevertheless significant tweaks sure to impact Federal procurements in the coming year. For the next few days, SmallGovCon will delve into the minutia to provide context and analysis so that you do not have to. Visit smallgovcon.com for the latest on the government contracting provisions of the 2017 NDAA.  

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The Armed Services Board of Contract Appeals can order an agency to “speed up” its decision on a certified claim if the contracting officer’s anticipated time frame is unreasonably slow.

In a recent case, the ASBCA ordered a contracting officer to issue a decision approximately eight weeks earlier than the contracting officer planned to do so. The ASBCA’s decision highlights a little-known provision of the Contract Disputes Act, which entitles a contractor to request that an appropriate tribunal order an agency to hasten its decision on a claim.

In Volmar Construction, Inc., ASBCA No. 60710 (2016), the U.S. Army Corps of Engineers awarded Volmar a contract to renovate and repair buildings on Joint Base McGuire-Dix-Lakehurst in New Jersey. Volmar submitted eight certified claims to the  contracting officer via letter dated May 19, 2016, seeking money and extensions of time. The substance of the claims had all been previously submitted to the contracting officer in earlier written demands, the earliest of which dated back to January 29, 2016.

In July 2016, the contracting officer sent Volmar granting the relief sought in one of the certified claims. In a separate letter, the agency stated that final decisions on the remaining claims would be issued on or before March 31, 2017 – roughly 13 months after Volmar’s original claim submission.

Shortly after receiving the government’s notice, Volmar filed a petition with the ASBCA. Volmar sought an order compelling the contracting officer to issue a quicker decision on Volmar’s remaining certified claims.

The ASBCA noted that, under the Contract Disputes Act, when the agency receives a claim, the contracting officer must either issue a decision on the claim within 60 days or “notify the contractor of the time within which a decision will be issued.” Although there is no hard rule as to how far beyond 60 days the decision may be issued, the contracting officer’s decision “shall be issued within a reasonable time . . . taking into account the size and complexity of the claim and the adequacy of the information in support of the claim provided by the contractor.” Whether a contracting officer’s time frame is reasonable is determined on a case-by-case basis.

The Board stated that a contractor isn’t without recourse if the agency intends to unreasonably delay its decision. Instead, the CDA provides that “a contractor may request the tribunal concerned to direct a contracting officer to issue a decision in a specified period of time, as determined by the tribunal concerned . . ..”

In this case, Volmar argued that the March 31, 2017 date was unreasonable. The ASBCA agreed. It wrote that “[t]he government has had Volmar’s original submissions for well over seven months and has had Volmar’s claims for well over four months.” Although becoming familiar with Volmar’s claims could be time consuming for the assigned contracting officer, the ASBCA noted that “internal staffing matters are not one of the factors used to determine a reasonable time under the CDA.” The ASBCA ordered the contracting officer to issue a decision no later than January 13, 2017–approximately eight weeks earlier than the contracting officer had anticipated.

As Volmar Construction demonstrates, a contractor is not completely without recourse when an agency intends an unreasonable delay in its decision on a claim. Instead, as Volmar did here, the contractor can petition the appropriate tribunal for an order requiring the contracting officer to speed up his or her decision.

Justine Koehle, a law clerk with Koprince Law LLC, was the primary author of this post.

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The 2017 National Defense Authorization Act, if signed into law, includes a few changes designed to help small business subcontractors. Among those changes, the bill, which has recently been approved by both the House and Senate, includes language designed to help ensure that large prime contractors comply with the Small Business Act’s “good faith” requirement to meet their small business subcontracting goals.

Section 1821 of the 2017 NDAA is called “Good Faith in Subcontracting,” and is another Congressional effort to put teeth into the subcontracting goals required of large prime contractors (Congress took a crack at this same subject in the 2013 NDAA). The 2017 NDAA makes a handful of additional changes to the law, all of which should help ensure small business subcontracting goals are met.

The 2017 NDAA strengthens the current statutory language by specifying that a large prime contractor is in breach of its prime contract is it fails to provide adequate assurances of its intent to comply with a subcontracting plan (including, as requested, by providing periodic reports and other documents). The statute also provides that agency Offices of Small and Disadvantaged Business Utilization (OSDBUs) will review each subcontracting plan “to ensure that the plan provides maximum practicable opportunity for small business concerns to participate in the performance of the contract to which the plan applies.”

Perhaps most important, the 2017 NDAA requires the SBA to provide a list of examples of failures to make good faith efforts to utilize subcontractors. Such a list should provide guidance to large primes to know specifically what sort of activities would run afoul of the good faith requirement of the Small Business Act. What’s more, such guidance should prevent large primes from pleading ignorance, at least with regards to the provided list of specific examples. The guidance, however, may not come for awhile. The 2017 NDAA gives the SBA 270 days from enactment to put the list of examples together.

The provisions of Section 1821 should be welcomed by small businesses subcontractors, some of whom have complained about a perceived lack of government emphasis on ensuring that primes make good faith efforts to achieve their subcontracting goals. And given the recent Congressional interest in subcontracting plans, it wouldn’t be surprising if additional enforcement mechanisms were proposed in the near future.

2017 NDAA: The National Defense Authorization Act for Fiscal Year 2017 has been approved by both House and Senate, and will likely be signed into law soon. It includes some massive changes as well as some small but nevertheless significant tweaks sure to impact Federal procurements in the coming year. For the next few days, SmallGovCon will delve into the minutia to provide context and analysis so that you do not have to. Visit smallgovcon.com for the latest on the government contracting provisions of the 2017 NDAA. 

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The 2017 National Defense Authorization Act will require the GAO to issue a report about the number and types of contracts the Department of Defense awarded to minority-owned and women-owned businesses during fiscal years 2010 to 2015.

If the 2017 NDAA is signed into law, the GAO would be required to submit its report within one year of the statute’s enactment.

The 2017 NDAA requires the GAO to identify minority-owned and women-owned businesses using the categories identified in the Federal Procurement Database System. While this study will not look exclusively at minority-owned and women-owned small businesses, it is worth noting that the Small Business Act establishes a goal that federal executive agencies, including the DoD, award 5 percent of the total value of its prime contracts to women-owned small business, and 5 percent to Small Disadvantaged Businesses, which include many minority-owned firms. The results of GAO’s study under the 2017 NDAA may have the potential of impacting these set-aside goals as well.

If the President signs the NDAA in the coming weeks, the GAO’s report may be issued around this time next year. It will be interesting to see what changes, if any, await minority-owned and women-owned businesses based on the GAO’s findings.

2017 NDAA: The National Defense Authorization Act for Fiscal Year 2017 has been approved by both House and Senate, and will likely be signed into law soon. It includes some massive changes as well as some small but nevertheless significant tweaks sure to impact Federal procurements in the coming year. For the next few days, SmallGovCon will delve into the minutia to provide context and analysis so that you do not have to. Visit smallgovcon.com for the latest on the government contracting provisions of the 2017 NDAA.

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We’ve been covering many of the important changes to federal contracting promised as a result of the 2017 National Defense Authorization Act. But among the most consequential might be a provision that requires DoD to compile a report that analyzes the impacts of the current bid protest system on DoD acquistions. This report could ultimately form the basis for potential significant changes to the protest system in future years.

As it was originally working through Congress, some versions of the 2017 NDAA included significant revisions to the bid protest system. Among these revisions were attempts to limit protests filed by incumbent contractors. But rather than adopting these significant changes now, Congress has taken a more measured approach: it is instead requiring DoD to study the bid protest system to determine its efficacy going forward.

Section 885 of the 2017 NDAA requires DoD to contract with a not-for-profit entity or a federally funded research and development center “to carry out a comprehensive study on the prevalence and impact of bid protests on Department of Defense acquisitions, including protests filed with contracting agencies, the Government Accountability Office, and the Court of Federal Claims.” This report, moreover, is to be detailed—the 2017 NDAA includes fourteen elements that must be included, ranging from DoD’s perceptions of the bid protest system and its effects on the structure of solicitations, to impacts on a potential offeror’s thought processes when it comes to bidding on a solicitation.

Rather than transcribing all fourteen elements in detail (they’re available here, just search for “Sec. 885”), this post will briefly discuss two of note.

First, the report must analyze bid protests filed by incumbent contractors, to include “the rate at which such protesters are awarded bridge contracts or contract extensions over the period that the protest remains unresolved,” and an assessment on the cost and schedule of acquisitions caused by protests filed by incumbent contractors. Congress apparently is concerned that incumbent contractors may be filing protests as a means to obtain extensions on their performance and, in doing so, needlessly delaying the acquisition process. Much like early versions of the 2017 NDAA, this provision clearly hints that limitations on protests by incumbent contractors may be coming in the near future.

Second, the report must address “the effect of the quantity and quality of debriefings on the frequency of bid protests.” This provision makes sense. In an effort to avoid providing unsuccessful offerors with ammunition for protests, agencies can sometimes limit the information disclosed in an unsuccessful offeror’s debriefing so as to make the debriefing itself almost useless. But this can backfire: in response, frustrated offerors can resort to the protest process primarily as a means to learn more about the evaluation. By more thoroughly explaining their evaluations in debriefings, agencies might actually limit the number of protests filed. Perhaps this report will spur Congress to augment the requirements for agency debriefings.

The report is due no later than one year within the enactment of the 2017 NDAA. It promises to be a fascinating look at the impact of the bid protest process on DoD procurements. And because DoD is the single largest procuring agency, any recommendations that follow from this report are likely to impact bid protest procedures across every agency.

2017 NDAA: The National Defense Authorization Act for Fiscal Year 2017 has been approved by both House and Senate, and will likely be signed into law soon. It includes some massive changes as well as some small but nevertheless significant tweaks sure to impact Federal procurements in the coming year. For the next few days, SmallGovCon will delve into the minutia to provide context and analysis so that you don’t have to. Visit smallgovcon.com for the latest on the government contracting provisions of the 2017 NDAA. 

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The 2017 National Defense Authorization Act restores the GAO’s recently-expired jurisdiction to hear protests of civilian task and delivery orders valued in excess of $10 million.

The 2017 NDAA also continues to allow the GAO to hear protests of DoD task and delivery orders–but raises the jurisdictional threshold to $25 million.

As we blogged about in November, the GAO’s authority to hear bid protests in connection with civilian task and delivery orders expired on September 30, 2016. Even though DoD task and delivery orders weren’t directly impacted by the expiration, the GAO held, in two recent cases, that it lacked jurisdiction to consider protests of orders issued by DoD under civilian GWACs.

Specifically, in Analytic Strategies, LLC, B-413758.2 (Nov. 28, 2016), the GAO held that it did not have jurisdiction to consider a protest of a task order issued by the DoD under the GSA’s OASIS vehicle; in HP Enterprise Services, LLC, B-413382.2 (Nov. 30, 2016), the GAO made a similar finding with respect to a DoD order under the GSA ALLIANT IDIQ. The GAO held that it was the civilian nature of the underlying IDIQ vehicle that determined jurisdiction, not the identity of the ordering agency.

That’s where the 2017 NDAA comes in. The 2017 NDAA permanently restores the GAO’s ability to hear civilian task and delivery order protests valued in excess of $10 million. The statute maintains the GAO’s jurisdiction over DoD task and delivery order protests, but only for those in excess of $25 million. Ironically, the GAO’s decisions in Analytic Strategies and HP Enterprise Services may come back to haunt the DoD. Now that the GAO has found that DoD orders under civilian IDIQ vehicles are considered “civilian” for jurisdictional purposes, it seems clear that the $10 million threshold–not the new $25 million threshold–will govern protests of such orders once the 2017 NDAA takes effect.

It wasn’t a given that the GAO’s task and delivery order jurisdiction would be restored. Before adopting the conference bill, both House and Senate toyed with the idea of eliminating protests of task and delivery orders entirely. Bid protests serve an important function in the procurement process, as evidenced by the fact that 45% of protests in Fiscal Year 2015 resulted in relief for the protester (either a “sustain” decision or voluntary agency corrective action). Congress made the right call by restoring GAO’s jurisdiction to hear protests of large task and delivery orders.

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An offeror with a “relatively weak proposal” can nonetheless file a size protest challenging the small business eligibility of the prospective awardee, provided that the protester was not found technically unacceptable or otherwise incapable of being selected for award.

In a recent size appeal decision, the SBA Office of Hearings and Appeals held that the mere fact that the protester was evaluated as “less than satisfactory” on four out of five non-price factors did not justify dismissing the protester’s size protest for lack of standing.

OHA’s decision in Size Appeal of TMC Global Professional Services, SBA No. SIZ-5792 (2016) involved a DOE NNSA solicitation for the Design, Integration, Construction, Communication, and Engineering 2 (DICCE2) procurement in support of DOE’s nuclear smuggling detection and deterrence efforts.  The solicitation was issued as a small business set-aside under NAICS code 237990 (Other Heavy and Civil Engineering Construction), with a corresponding $36.5 million size standard.

The solicitation called for a “best value” trade-off, under which DOE would consider cost and five non-cost factors.  For four of the non-cost factors, DOE was to assign an adjectival rating of Excellent, Good, Satisfactory, or Less than Satisfactory.  The fifth non-price factor, Past Performance, was to be assigned an adjectival rating of Exceptional, Very Good, Marginal, Unsatisfactory, or Neutral.  In addition to setting forth this ratings system, the solicitation stated that “[a] proposal will be eliminated from further consideration if the proposal is so grossly deficient as to be totally unacceptable on its face or the Offeror does not meet any Pass/Fail criteria.”

TMC Global Professional Services submitted a proposal.  In its evaluation, DOE assigned TMC’s proposal “Less Than Satisfactory” ratings for the first four non-cost factors and a “Neutral” rating for past performance.  However, DOE did not rate TMC as unacceptable or exclude TMC from the competition.  DOE named two competitors as the apparent awardees.

After receiving a pre-award notification, TMC filed a size protest challenging the small business eligibility of one of the awardees.  TMC asserted that the awardee, Tech 2 Solutions, was ineligible because of various alleged affiliations.

The SBA Area Office asked the DOE Contracting Officer to clarify whether TMC “has a reasonable chance to be selected for award” if its size protest were successful.  The Contracting Officer responded that, because TMC was found “Less Than Satisfactory” in four criteria, TMC was not considered for award “when compared to the other offerors’ superior proposals.”

After receiving this response, the SBA Area Office dismissed TMC’s protest for lack of standing.  The Area Office wrote that, according to the Contracting Officer, TMC would not have a reasonable chance of receiving the award if it prevailed in its size protest.  The SBA Area Office reasoned that the purpose of the SBA’s size protest system is to “give standing to those concerns whose successful challenge would enable them to compete for award.”

TMC appealed to OHA.  TMC argued that the SBA erred by dismissing the size protest, and asked OHA to remand the matter for a full size determination of the awardee.

OHA wrote that under the SBA’s regulations, a size protest may be filed by “any offeror that the contracting officer has not eliminated from consideration for any procurement-related reason, such as non-responsiveness, technical unacceptability, or outside the competitive range.”

In this case, “although DOE rated [TMC’s] proposal ‘Less than Satisfactory’ for four of the evaluation factors, such a rating does not necessarily connote that the proposal was technically unacceptable.”  Rather, under the solicitation’s evaluation scheme, “a ‘Less than Satisfactory’ rating indicated that the proposal contained ‘weaknesses that outweigh strengths,’ as opposed to ‘strengths and weaknesses that are generally offsetting,’ which would be needed in order for the proposal to achieve a ‘Satisfactory’ rating.”  And although the solicitation provided that DOE could eliminate an offeror from consideration, DOE “did not eliminate [TMC’s] proposal from the competition and did not discontinue its evaluation of [TMC’s] proposal.”

OHA continued:

The CO’s remark that [TMC] ‘would not have a reasonable chance’ to be selected for award does not compel a contrary result.  Read in context, the CO merely opined that [TMC’s] proposal was unlikely to be chosen ‘when compared to the other offerors’ superior proposals.’  In other words, DOE evaluated proposals and selected the offerors that, in DOE’s judgment, had the strongest proposals.  It does not follow, though, that [TMC] was excluded from the competition or was ineligible for award, simply because [TMC] ultimately was unsuccessful.  Indeed, OHA has recognized that an unsuccessful offeror with a relatively weak proposal still does have standing to protest, if the offeror was not excluded from the competition and could be selected for award if the apparent awardee were disqualified as a result of a size protest.

OHA granted TMC’s size appeal and remanded the case to the SBA Area Office for a full size determination.

There is a common misconception that, in order to file a viable size protest, the protester must be “next in line” for award, or at least–as the SBA Area Office in this case seemed to believe–likely to win the contract if the size protest is successful.  But as the TMC Global Professional Services size appeal demonstrates, the SBA’s size protest regulations don’t impose such requirements.  So long as a company submitted a proposal and was not eliminated from consideration, the company likely will have standing to file a size protest, even if the company’s proposal was “relatively weak.”

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The GAO sustained 22.56% of protests decided on the merits in Fiscal Year 2016–nearly double the 12% sustain rate reported in FY 2015.

According to the GAO’s FY 2016 Bid Protest Annual Report, the GAO sustained 139 of the 616 protests decided on the merits (that is, cases where GAO actually reached a “sustain” or “deny” decision).  The overall effectiveness rate for protesters–a combination of “sustain” decisions, plus the many cases in which agencies took corrective action in response to protests–was 46%, a slight increase over the prior fiscal year.

The GAO’s annual report shows that 2,789 protests were filed in FY 2016, up 6% over the prior fiscal year.  Of these protests, only 616 were ultimately decided on the merits.  The remaining protests were closed for other reasons, such as corrective action, dismissals for reasons such as untimeliness, and cases resolved after GAO-mediated alternative dispute resolution.

GAO sustained 139 of the 616 protests.  In contrast, in FY 2015, the GAO issued only 68 “sustain” decisions–or slightly less than half the total number of “sustains” issued in FY 2016.  However, the overall protest effectiveness rate of 46% was little different than in FY 2015, where protesters realized a 45% effectiveness rate.  Effectiveness rates have slowly ticked upwards over the last five fiscal years, from 42% in FY 2012 to 46% most recently.

The GAO’s trend away from oral hearings continued.  In FY 2016, the GAO held oral hearings in only 27 cases.  Back in FY 2012, the GAO held 56 oral hearings.  Last year, the GAO held 31. Most protests are decided based solely on written filings.

The bid protest process frequently comes under attack, with some “sky is falling” commentators making it sound like nearly every federal procurement is challenged by frivolous protesters–and urging drastic rollbacks of contractors’ protest rights to combat this supposed threat.  The GAO’s annual report is a refreshing return to actual facts.

As the report demonstrates, protests are filed on only a tiny fraction of federal procurements, and nearly half of protests result in relief for the protester.  While there will always be the occasional protest that shouldn’t have been filed, the GAO has ways of dealing with those who abuse the protest process.  The raw numbers make clear that protests remain an important way of ensuring that procurements are conducted fairly.

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This winter’s first polar vortex is upon us, and although much of the country has been getting hit with snow, Kansas has managed to stay mostly snow free with temperatures centered around a balmy 30 degrees. As the vortex sweeps its way out, we are looking to get our first dose of really cold weather with lows in the teens this weekend. Weekends like this are perfect to spend time with family and daydream about being on a beach–or anyplace that does not require 10+ minutes of preparation just to leave the driveway.

While much of the nation prepares to dig itself out from a winter snowstorm, there is still plenty happening in the world of government contracts. In this week’s SmallGovCon Week In Review, the FAR Council issues a rule responding to a judge’s injunction of much of the Fair Pay and Safe Workplaces Executive Order, a Virginia contractor will cough up $1 million to settle bid rigging and kickback allegations, and much more.

  • A Virginia contractor has agreed to pay $1 million to resolve claims of bid rigging and kickbacks. [Department of Justice]
  • The FAR Council issues a final rule responding to a federal judge’s injunction of portions of the Fair Pay and Safe Workplaces Executive Order. (It’s nice to see the FAR Council offering guidance, but if I were a betting man, I’d wager that this E.O. will be repealed by the incoming Administration). [Federal Register]
  • Speaking of Executive Orders that may be on the chopping block, the FAR Council has issued an interim rule implementing the “mandatory sick leave” E.O. [Federal Register]
  • Some business groups are celebrating President-elect Trump’s choice of Linda McMahon to lead the SBA. [Forbes]
  • It is getting increasingly more difficult for individuals and companies alike to stay on top of new technology and devices, but GAO is making some progress, it seems. [GovFresh]
  • Big thanks and congratulations to Guy Timberlake and The American Small Business Coalition on the success of their 2016 Holiday Charity Bash™, which took place last week and raised a lot of money for a great cause. (Koprince Law LLC was a proud sponsor). [GovConChannel]
  • President-elect Trump has called for a lifetime ban on certain federal employees later going to work for defense contractors. [The Fiscal Times]
  • ChallengeHER took place this week in Washington, offering encouragement and words of advice to WOSBs. [Federal News Radio]
  • NASA has adopted an interim final rule amending the NFS to implement revisions to the voucher submittal and payment process. [Federal Register]

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GAO’s jurisdiction to hear protests of certain civilian task and delivery orders has been restored.

On December 15, 2016, the President signed the 2016 GAO Civilian Task and Delivery Order Protest Authority Act (the “ 2016 Act”) into law.  The 2016 Act restores GAO’s recently-expired jurisdiction to hear protests of civilian task and delivery orders valued in excess of $10 million.

As we recently blogged about here at SmallGovCon, the 2017 National Defense Authorization Act also restores GAO’s jurisdiction over task and delivery orders. But even while the 2017 NDAA awaits the President’s signature (or potential veto), Congress and the President have enacted separate legislation to permit GAO to resume hearing bid protests of civilian task and delivery orders.

This Act makes permanent the GAO’s authority to hear protests on civilian task or delivery contracts valued in excess of $10 million. It does so by deleting the sunset provision relating to the authorized protest of a task or delivery order under 41 U.S.C. § 4106(f).

While the 2016 Act permanently restores GAO’s jurisdiction over protests involving civilian task and delivery orders valued above $10 million, as noted in a prior blog, the 2017 NDAA will increase the threshold for challenging DoD task and delivery orders to $25 million. For now, however, DoD orders meeting the $10 million threshold, including those issued under civilian contract vehicles, are once again subject to GAO oversight.

The enactment of the 2016 Act reinforces the importance of bid protests in the procurement process, as evidenced by the fact that 46% of protests in Fiscal Year 2016 resulted in relief for the protester (either a “sustain” decision or voluntary agency corrective action). Congress made the right call in restoring GAO’s jurisdiction, and did so even faster than the 2017 NDAA would have allowed.

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A small but interesting change in the 2017 National Defense Authorization Act will require the DoD to obtain an appropriate justification and approval (“J&A”) before restricting any competition to a particular brand name, or imposing similar restrictions.

In adopting this change, Congress doesn’t mince words, using the term “Anti-competitive Specifications” to refer to instances in which competitions are restricted to particular brand names without appropriate justification.

Section 888 of the 2017 NDAA states that the Secretary of Defense “shall ensure that competition in Department of Defense contracts is  not limited through the use of specifying brand names or brand-name or equivalent specifications, or proprietary specifications or standards, in solicitations unless a justification for such specification is provided and approved” in accordance with statutory authority.

FAR 11.105 already imposes restrictions regarding “brand name only” requirements, but the 2017 NDAA seems to go a step beyond FAR 11.105 by including “brand-name or equivalent descriptions” and “proprietary specifications or standards” in its scope. The 2017 NDAA would, however, retain certain exceptions to the justification requirement set forth in the DoD’s acquisition statutes at 10 U.S.C. 2304(f).

In addition to imposing the J&A requirement, the 2017 NDAA provides that within 180 days of enactment, the DoD “shall conduct a review of the policy, guidance, regulations and training related to specifications included in information technology acquisitions to ensure current policies eliminate the unjustified use of potentially anti-competitive specifications.”  The DoD is to brief Congress on its review within 270 days of enactment. Within one year, the DoD is to “revise policies, guidance and training” to reflect any recommendations stemming from its review.

It seems clear from Section 888 that Congress is concerned about the potential overuse of brand name (and similar) requirements. We’ll be keeping our eyes peeled around this time next year to see how DoD adjusts its acquisition policies in response.

2017 NDAA: The National Defense Authorization Act for Fiscal Year 2017 has been approved by both House and Senate, and will likely be signed into law soon. It includes some massive changes as well as some small but nevertheless significant tweaks sure to impact Federal procurements in the coming year. For the next few days, SmallGovCon will delve into the minutia to provide context and analysis so that you do not have to. Visit smallgovcon.com for the latest on the government contracting provisions of the 2017 NDAA. 

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An agency acted improperly by excluding an offeror from the competitive range simply because the offeror received a “neutral” past performance score.

In a recent bid protest decision, the GAO wrote that the FAR precludes evaluating an offeror unfavorably because of a “neutral” or “unknown” past performance rating–and that the prohibition on unfavorable treatment prevents an agency from excluding an offeror from the competitive range on the basis of a neutral rating.

The GAO’s decision in Xtreme Concepts Inc., B-413711 (Dec. 19, 2016) involved an Army Corps of Engineers solicitation for the installation of transformers at Millers Ferry Powerhouse in Alabama.  The solicitation, which was issued as a small business set-aside, contemplated a best value tradeoff, considering both price and non-price factors.

Past performance was one of the non-price factors the Corps was to consider. The solicitation specified that only the past performance of the prime contractor would be considered.  (The GAO’s decision does not explain why the Corps chose to deviate from FAR 15.305(a)(2)(iii), which provides that the past performance of a major subcontractor “should” be evaluated).

Xtreme Concepts Inc. submitted a proposal. In its proposal, Xtreme submitted five past performance projects–all of which had been performed by Xtreme’s proposed subcontractor.

In its evaluation, the Corps concluded that, consistent with the solicitation’s instructions, it could not evaluate the subcontractor’s past performance.  The Corps assigned Xtreme a “neutral” past performance rating.  Xtreme’s proposal was the lowest-priced, and Xtreme’s non-price scores (other than past performance) were similar to those of the other offerors.

The Corps then established a competitive range.  The Corps excluded Xtreme from the competitive range, reasoning that Xtreme’s proposal was not among the most highly-rated due to its neutral past performance rating.  The offerors included in the competitive range were all rated “satisfactory confidence” or “substantial confidence” for past performance.

Xtreme filed a GAO bid protest challenging its exclusion. Xtreme argued that it was improper for the agency to exclude its proposal based solely on a neutral past performance rating, especially in light of Xtreme’s low price.

The GAO wrote that “the FAR requires that an offeror without a record of relevant past performance, or for whom information on past performance is not available, may not be evaluated favorably or unfavorably on past performance.”  In this regard, “an agency’s exclusion of an offeror from the competitive range based solely on a neutral or ‘unknown’ past performance rating constitutes ‘unfavorable treatment’ and is improper.”

In this case, the GAO held, “the agency was not permitted by either the terms of the solicitation or FAR 15.305(a)(2)(iv) to evaluate offerors favorably or unfavorably when they lack a record of relevant past performance . . ..”  The GAO sustained Xtreme’s protest.

The FAR protects contractors from being evaluated unfavorably based on a lack of relevant past performance.  As the Xtreme Concepts bid protest demonstrates, the FAR’s prohibition on unfavorable treatment extends to an agency’s competitive range determination.

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The 2017 National Defense Authorization Act gives certain small subcontractors a new tool to request past performance ratings from the government,

If the pilot program works as intended, it may ultimately improve those subcontractors’ competitiveness for prime contract bids, for which a documented history of past performance is often critical.

For small contractors looking to break into the federal marketplace, a lack of past performance ratings can be a major problem. Without government past performance ratings, it can be difficult to prevail in a “best value” competition. Sure, FAR 15.305 provides that the government can consider past projects performed for non-governmental entities, and the same FAR section states than an offeror without a record of relevant past performance should receive a “neutral” rating. But ask most contractors, and they’ll tell you that their perception–for better or for worse–is that an offeror without government past performance references can be at a significant competitive disadvantage.

Perhaps Congress agrees. Section 1822 of the 2017 NDAA creates a pilot program that will allow a “first tier” subcontractor performing on a government contract, which required the prime contractor to develop a subcontracting plan, to submit an application to the appropriate official (agencies will designate a recipient) requesting a past performance rating. Interestingly, the subcontractor will be able to include a suggested rating, but will have to support the suggestion with written evidence, almost as if the subcontractor will have to plead its case. The application will then go to both the agency Office of Small and Disadvantaged Business Utilization and the prime contractor for review. Each will submit an official response within 30 days.

If the OSDBU and prime contractor agree with the suggested rating, the official simply will enter the rating into the government’s past performance system, and the subcontractor will be able to use the rating “to establish its past performance for a prime contract.”

However, if they disagree with the subcontractor’s suggested rating, the disagreeing party will submit a notice contesting the application, the official will provide the subcontractor with the notice, and the subcontractor will have 14 days to submit comments, rebuttals, and additional information. But, interestingly, the review will stop there. No decider will determine whether the subcontractor’s proposed rating was “right” or “wrong.” Instead, the official with then enter a neutral rating into the system along with the original application and any responses.

This pilot program may turn out to be a valuable tool for companies with excellent performance at the subcontract level but little or no prime contract experience. The program’s timing may be fortuitous, as well: it could dovetail nicely with the SBA’s new “All Small” mentor-protege program, as well as the existing SBA 8(a) and DoD mentor-protege programs. As a part of a mentor-protege agreement, a large mentor could subcontract work to the protege, then help the protege apply for (and hopefully receive) an excellent past performance rating for its work.

However, in practice, there would seem to be a few areas where things may go awry. First, since subcontractors are responsible for suggesting their own ratings, this introduces the obvious potential that a subcontractor could attempt to inflate its score–and put its prime contractor in the difficult position of disagreeing with its teaming partner. Also, on the flip side, the procedure allows for the prime contractor to potentially derail a future competitor by disagreeing with a reasonable suggested rating, and thereby ensure through simple disagreement, at best, a neutral rating. Because there is no adjudicative procedure, the subcontractor seems to have no recourse if the prime contractor doesn’t provide a fair response.

Then there is the question of why OSDBUs are expected to weigh in on the specific past performance scores assigned to small subcontractors. Agency OSDBUs are advocates for small businesses, and are involved in various ways throughout the acquisition cycle. That said, it seems unlikely that an OSDBU will, in the typical case, have sufficient knowledge of a particular small subcontractor’s quality of performance to pass independent judgment on what past performance score that subcontractor should receive. Involving agency OSDBUs ordinarily is a good thing, but requiring them to pass judgment on a subcontractor’s past performance might not be the best way to go about it.

Finally, there is the question of just what sort of weight the typical contracting officer will afford to these ratings. Although the rating comes from the contracting agency, the rating itself is established by the subcontractor, prime contractor, and OSDBU. It’s possible that some contracting officers will see these ratings as less persuasive than “ordinary” prime contractor ratings developed by government contracting officials.

Fortunately, Congress seems to have anticipated that the pilot program might need to be improved. The 2017 NDAA requires the GAO to assess the program one year after it is established and report various findings back to Congress, including “any suggestions or recommendation the Comptroller General has to improve the operation of the pilot program.”

The statute calls for the SBA to establish the pilot program, but doesn’t provide a specific deadline for the SBA to do so. Once the program is up and running, it will last for three years,, beginning on “the date on which the first applicant small business concern receives a past performance rating for performance as a first tier subcontractor.” At that point, it will be up to Congress whether to continue the pilot program.

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