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Koprince Law LLC

When my nephew started kindergarten, his vocabulary expanded to include a new phrase: “Rules are rules, and you have to follow the rules!” For my nephew (who, if I’m being honest, can be a bit mischievous), this newfound respect for following rules was adorable.

Government contractors should commit this lesson to heart: you have to follow the rules! As one government contractor recently learned, this includes GAO’s bid protest filing rules. Where a protester doesn’t follow the rules, its protest is likely to be dismissed.

By way of background, GAO’s regulations include strict deadlines relating to protest filings: after a disappointed offeror files its protest, an agency has 30 days to file its response to the protest (called an “agency report”). The protester then must file its reply (or “comments”) to the protest within 10 days from the date it receives the agency report. The importance of complying with this deadline is unambiguous: “The protest shall be dismissed unless the protester files comments within the 10-day period, except where GAO has granted an extension or established a shorter period” for doing so.

That takes us to the case in question, PennaGroup, LLC, B-414840.2, B-414841.2 (Aug. 25, 2017). PennaGroup submitted a bid on the two-phase border wall solicitation and was excluded for not acknowledging several amendments to the solicitation (as required by the agency).

PennaGroup protested at the GAO, and the agency filed its agency report on July 26. PennaGroup’s comments were due by August 7. PennaGroup failed, however, to submit its comments by the deadline.

On August 8, GAO asked PennaGroup to confirm whether it filed comments. It responded by saying that it didn’t think comments were necessary, as its “legal team has reviewed the [agency’s] response and finds no new or factual arguments not fully set forth in length in our Bid Protest.” Essentially, because PennaGroup didn’t think there was anything worth responding to, it just didn’t respond.

The agency then moved to dismiss PennaGroup’s protest. Agreeing with the agency, GAO wrote that its bid protest deadlines are designed to facilitate the expeditious resolution of protests:

To avoid delay in the resolution of protests, our Bid Protest Regulations provide that a protester’s failure to file comments within 10 calendar days “shall” result in dismissal of the protest except where GAO has granted an extension or established a shorter period. But for this provision, a protester could idly await receipt of the report for an indefinite time, to the detriment of the protest system and our ability to resolve the protest expeditiously.

GAO dismissed the protest.

GAO’s logic makes sense—given the short deadline to resolve protests and the potential disruption to the procurement system, parties should abide by the deadlines. PennaGroup’s excuse for not doing so, however, highlights a tension in this requirement (especially from the perspective of protesters wanting to keep legal costs low): should a protester be required to comment on a protest just for the sake of doing so, even if its comments won’t necessarily add any new facts or legal justification? GAO’s decision in PennaGroup confirms that, notwithstanding this tension, protesters must abide by all applicable filing deadlines–including by filing comments within the appropriate time frame.

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Koprince Law LLC

As we get closer to the end of the fiscal year, things can get a little crazy in the world of government contracts.  This week is no exception, with plenty of news and commentary in our SmallGovCon Week In Review.

In this mid-September edition, court documents reveal a bribery scheme centered on a former VA OSDBU official, the GSA has relaxed certain contracting rules to speed efforts to rebuild after Hurricane Harvey, the OFPP is planning a third in its series of highly-regarded “mythbusters” memos, and much more.

  • Newly released court documents have revealed an elaborate scheme with a former VA OSDBU official, who was accepting bribes for lucrative government contracts. [CBS Denver]
  • In the wake of Hurricane Harvey, the GSA is relaxing certain contracting rules to encourage speed and local awards. [Government Executive]
  • Contractors are playing a major role in assisting with disaster relief in the wake of Hurricanes Harvey and Irma. [Federal News Radio]
  • A former Department of Commerce official has found himself with a four year prison sentence and ordered to forfeit approximately a quarter of a million dollars for conspiracy to pay and receive bribes. [United States Department of Justice]
  • A contractor who was debarred from entering into contracts with the DoD in 2013, but continued to provide airplane parts to the government, has been sentenced to 26 months imprisonment and ordered to pay $420,000 in restitution. [United States Department of Justice]
  • 109 startup companies, venture capital firms and angel investors were interviewed to come up with a report titled “Why Startups Don’t Bid on Government Contracts.” [fedscoop]
  • The Office of Federal Procurement Policy is planning a third mythbusters memo as part of its continuing effort to improve communication around acquisition. [Federal News Radio]
  • The Senate will be voting on the 2018 NDAA soon, and Federal News Radio put together a list of four important amendments for contractors to watch. [Federal News Radio]

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Koprince Law LLC

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

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

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

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

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

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

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

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

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

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Koprince Law LLC

An agency’s oral advice, given at a pre-proposal conference, did not amend the solicitation or legally bind the agency.

In a recent bid protest decision, the GAO reiterated that offerors rely on oral advice from agencies at their own risk–particularly when the oral advice in question appears to contradict the plain language of the solicitation.

GAO’s decision in Technology and Telecommunications Consultants, Inc., B-415029 (Oct. 16, 2017) involved an Air Force solicitation seeking IT services in support of the Air Command Personnel Recovery Division.  The solicitation was issued as a competitive 8(a) set-aside under the GSA’s 8(a) STARS II GWAC.

The solicitation provided a list of tasks that the awardee wold be expected to perform.  Under one of these tasks, the solicitation stated that the awardee would be expected to provide support to the Air Force Special Operations Command at Hurlburt Field, Florida.  However, the solicitation did not state that offerors were required to propose an employee specifically dedicated to AFSOC support.

Before the due date for proposals, the agency held a pre-proposal conference.  During the conference, attendees asked about the AFSOC position.  The Contracting Officer’s Representative said that the “AFSOC position is still funded and yes, it is still a requirement.”

After evaluating proposals, the agency announced that the task order had been awarded to a company named Constellation West.  The incumbent contractor, Technology and Telecommunications Consultants, Inc., filed a GAO bid protest challenging the award.

TTC argued that CW’s proposal was technically unacceptable because CW failed to propose an employee specifically dedicated to providing AFSOC support.  TTC contended, in part, that the statement made by the COR at the pre-proposal conference demonstrated that the Air Force required an employee specifically dedicated to this function.

“Contrary to TTC’s position,” the GAO wrote, “our cases have frequently concluded that offerors rely upon oral advice from an agency at their own risk.”  Oral advice “does not operate to amend the solicitation or otherwise legally bind the agency.”

This is “particularly the case, where, as here, the oral advice directly conflicts with the plain language of the solicitation.”  The GAO concluded: “TTC cannot use the erroneous oral advice effectively to revise the solicitation’s plain language in order to support its interpretation.”

The GAO denied TTC’s protest.

Pre-proposal conferences (and similar events) can be very helpful for prospective offerors.  But as the Technology and Telecommunications Consultants protest demonstrates, the oral advice provided at these events cannot modify the terms of the solicitation, or otherwise legally bind the agency.  Listener, beware.

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Koprince Law LLC

With what is being deemed “The Great American Eclipse” ready to hit the skies on Monday, there is a lot of excitement in the air here in Lawrence. We are just off the path of totality and are expecting 99.3% coverage. My colleagues and family will be outside (with protective eyewear of course) and witness this amazing moment. As for me, I’ll be in San Diego, speaking at the 2017 Department of the Navy Gold Coast Conference which will drop my near total eclipse view down to a partial eclipse of about 58% coverage–but it’s well worth it to be part of this great event.

Before I take off for the West Coast, it’s time for the latest SmallGovCon Week In Review. This week, two Senators have filed an amendment to the 2018 National Defense Authorization Act called the Modernizing Government Technology Act, an “Amazon-like” procurement system might not be too far off, a company is forced to repay millions of dollars amid allegations of overcharging the government, and much more.

  • The bipartisan Modernizing Government Technology Act is being attached as an amendment to the 2018 National Defense Authorization Act in hopes of improving its chances of being approved. [Federal News Radio]
  • With six weeks left in FY 2017, budget experts are warning federal contractors to begin planning for a possible government shutdown. [Federal News Radio]
  • A provision in the House version of the annual National Defense Authorization Act may soon make ordering office supplies, equipment, or even contract services as easy as placing an order on Amazon. [Government Executive]
  • A contractor will pay $9.2 million dollars to settle allegations of overbilling the U.S. Navy and Coast Guard for labor charges. [WLOX]
  • Government contracts sales guru Eileen Kent provides some pointers for businesses interested in cashing in on opportunities available at the end of the federal fiscal year. [Government Product News]
  • A lawsuit by the American Small Business League, heading for trial, alleges that some large defense contractors manipulate data to falsely claim they are meeting their small business subcontracting targets. [Forbes]

View the full article

Koprince Law LLC

Although a lease may be a “contract” in common parlance, does a lease qualify as a contract under the Contract Disputes Act?

The answer is important, because the Contract Disputes Act provides jurisdiction for the Court of Federal Claims and Board of Contract Appeals to decide challenges to contracting officers’ final decisions.  If a lease isn’t a contract under the Contract Disputes Act, government lessors could be in a bind.

The United States Court of Federal Claims recently decided the issue–and came down on the side of lessors, at least under the facts at hand.

In Lee’s Ford Dock, Inc. v. Secretary of the Army, 865 F.3d 1361 (Fed. Cir. 2017), the Court of Appeals for the Federal Circuit was called on to resolve a dispute between the United States Army Corps of Engineers and Lee’s Ford Dock, a marina operator on Lake Cumberland, Kentucky.

Lake Cumberland is a man-made lake resulting from the damming of the Cumberland River. The dam was constructed in 1951 by the Corps and has been in continuous operation ever since.

In 2000, Lee’s Ford Dock, Inc. entered into a lease with the Corps for roughly 166 acres of land and water real-estate on Lake Cumberland. The lease was for a 25 year term, with an option to extend for an additional 25 years. Importantly, under the lease, the Corps reserved the right to manipulate the water levels of Lake Cumberland.

In 2007, seven years into the lease, the Corps determined the dam was at a high risk of failure and initiated risk reduction measures, including lowering the water level. It was not until 2014 that remedial work on the dam was completed and the water level returned to its pre-2007 levels.

The drawdown of Lake Cumberland had significant ramifications for Lee’s Ford Dock, which was dependent on the higher water-levels for its marina operations. It filed a claim with the contracting officer for damages associated with the depressed water levels and reduced marina revenues. Lee’s Ford Dock alleged these damages totaled at least $4 million dollars.

The Contracting Officer denied the claim, and Lee’s Ford Dock appealed to the Armed Services Board of Contract Appeals. After the ASBCA ruled in the Corps’ favor, Lee’s Ford Dock appealed yet again, this time to the Federal Circuit.

The Corps argued that the Federal Circuit lacked jurisdiction because the case did not arise under the Contract Disputes Act. That forced the Federal Circuit to address a threshold question, is a lease a “contract” subject to the Contract Disputes Act?

Pursuant to Section 7102(a), the Contract Disputes Act generally applies to “any express or implied contract . . . made by an executive agency for” the following:

(1) the procurement of property, other than real property in being;

(2) the procurement of services;

(3) the procurement of construction, alteration, repair, or maintenance of real property; or

(4) the disposal of personal property.

Of the available options, the best chance for jurisdiction would be if the lease was considered personal property that the Corps disposed–the fourth item on the list above.

The Federal Circuit found the lease to constitute a contract for personal property. As the Court explained, “t is well settled that leasehold interests are items of personal property unless a statute commands otherwise.” As the Corps could point to no statute commanding otherwise, the Federal Circuit concluded that Lee’s Ford Dock’s right to operate a marina on the leased premises was personal property.

Next, the Federal Circuit considered whether the Corps “disposed” of property when it entered into the lease. The Court concluded the Corps did dispose of property through the lease and explained its reasoning accordingly:

“Dispose” is a broad term meaning “to exercise control over; to direct or assign for a use; to pass over into the control of some one else; to alienate, bestow, or part with.” By entering into the Lease with [Lee’s Ford Dock], the Corps “bestowed,” “directed,” and “assigned”—and therefore disposed of—a personal property right to [Lee’s Ford Dock] to operate a marina on the leased premises. The Lease therefore embodies a contract for “the disposal of personal property” within the purview of the [Contract Disputes Act].

Finding the lease was personal property that was disposed of by the government, the Federal Circuit concluded it had jurisdiction to decide the case on the merits. But unfortunately for Lee’s Ford Dock, it won the battle but lost the war: the Federal Circuit dismissed a portion of the appeal on different jurisdictional grounds, and affirmed the ASBCA’s ruling as to the remainder of the appeal.

Although Lee’s Ford Dock didn’t win its appeal, the Federal Circuit’s decision establishes an important precedent for those who engage in lease transactions with the government.  While the Lee’s Ford Dock decision was specific to the facts at hand and won’t necessarily apply to every lease, the Court’s broad reading of the Contract Disputes Act is a good thing for contractors.

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Koprince Law LLC

As a branch of the Treasury Department, the United States Mint would usually be subject to federal procurement laws, like bid protests. As one contractor recently discovered, however, certain activities at the Mint have been exempted from many federal procurement laws, including GAO protest review.

Simply put, the GAO can’t decide a bid protest of Mint procurements.

A-Z Cleaning Solutions, B-415228 (Nov. 6, 2017), involved a procurement for janitorial services at the Mint facility in San Francisco, California. A-Z Cleaning was named an unsuccessful offeror. Following notification, A-Z Cleaning filed a protest before GAO, challenging the Mint’s best-value trade-off decision.

The Mint moved to dismiss the protest, arguing that GAO lacked jurisdiction to hear the case. The Mint’s argument was based on the interaction between the Competition in Contracting Act (the “CICA”) and specific statutes addressing Mint activities.

Under the CICA, GAO has the authority to decide “a protest submitted . . . by an interested party.” See 31 U.S.C. § 3553(a). Protests are a “written objection by an interested party to . . . [a] solicitation or other request by a Federal agency for offers for a contract for the procurement of property or services.” 31 U.S.C. § 3551(1)(A). Federal agency is defined as “an executive agency[.]” 40 U.S.C. § 102(5). What this collection of statutes means is that GAO generally has jurisdiction to decide protests of procurements conducted by executive branch agencies.

The Mint, as a branch of the Treasury Department, is an executive agency. Accordingly, its procurement decisions should be subject to protest before GAO. A separate statute, however, complicates matters.

In 1996, Congress expressly exempted Mint procurements for operations and programs from the CICA. Pursuant to 31 U.S.C. § 5136, “provisions of law governing procurement or public contracts shall not be applicable to the procurement of goods or services necessary for carrying out Mint programs and operations.” The statute also defined Mint operations and programs as follows:

(1) [T]he activities concerning, and assets utilized in, the production, administration, distribution, marketing, purchase, sale, and management of coinage, numismatic items, the protection and safeguarding of Mint assets and those non-Mint assets in the custody of the Mint, and the [Mint Public Enterprise Fund]; and (2) includes capital, personnel salaries and compensation, functions relating to operations, marketing, distribution, promotion, advertising, official reception and representation, the acquisition or replacement of equipment, the renovation or modernization of facilities, and the construction or acquisition of new buildings[.]

In A-Z Cleaning, the Mint argued that the janitorial services it ordered were “functions relating to operations” of the Mint; therefore, the procurement of such services was excepted from procurement laws—including the CICA—and thus outside of GAO’s jurisdiction.

GAO agreed with the Mint’s argument. After walking through the statutes laid out above, GAO said:

Because the establishing legislation provides that federal procurement laws and regulations do not apply to the procurement of goods or services necessary for carrying out the Mint’s operations and programs, and those operations and programs are defined broadly enough to encompass substantially all of the Mint’s activities, we conclude that the Mint is not subject to the terms of CICA. Furthermore, because the bid protest jurisdiction of our Office derives from CICA, we must conclude that the Mint is not subject to that jurisdiction.

GAO further explained that its conclusion regarding the Mint was consistent with prior decisions regarding the Presidio Trust and United States Postal Service, which are subject to similar exemptions. Accordingly, GAO dismissed the protest.

What does GAO’s decision in A-Z Cleaning mean for Mint bidders? Clearly, GAO believes that it lacks authority to decide pretty much any bid protest of a Mint procurement. (As noted above, while the statutes may not be 100% clear on the extent of the prohibition, the GAO believes that the jurisdictional ban applies to “substantially all” of the Mint’s activities).  The Court of Federal Claims may still be an option; however, not all contractors are interested in full-blown courtroom litigation against the government. Simply put, for contractors bidding on Mint jobs, the potential protest options are considerably narrower than normal.

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Koprince Law LLC

After receiving “numerous” public comments, the VA has confirmed today that the extended three-year SDVOSB and VOSB verification term–originally adopted in February 2017–will remain in effect indefinitely. Before February, SDVOSBs and VOSBs were required to be reverified every two years.

When the VA originally adopted its SDVOSB and VOSB program regulations in 2010, the VA required participants to be reverified annually.  Needless to say, many early participants in the program weren’t happy with the requirement for reverification every year.  (VA might not have been too happy, either, since this undoubtedly created a lot of extra work for it, too).

In 2012, the VA extended the eligibility period to two years.  Then, in February 2017, the VA issued an “interim final rule,” further extending the period to three years.  At the time, the VA said that it would accept public comment on the interim final rule, then issue a final rule responding to those comments.

Now, the final rule is here, and the VA is sticking with the three-year eligibility period.

In the final rule, the VA reiterates that it is confident that “the integrity of the verification program will not be compromised by establishing a three year eligibility period.”  The VA points out that in Fiscal Year 2016, “from a total of 1,109 reverification applications, only 11 were denied,” or less than one percent.  And, the VA writes, there are other means of discovering ineligible participants, including “random, unannounced inspections” and “status protests” by VA contracting officers and other SDVOSBs and VOSBs.  Therefore, the “risk of extending the period from two to three years is very low.”

The VA says that “[n]umerous commenters expressed support for the extension of the eligibility period, asserting that it allows veterans more time to focus on the success of their business, and reduces the administrative burden of gathering and submitting the required documentation.”  Amen to that.

The VA has adopted its original interim rule without change, meaning that the three-year verification period is now in place indefinitely.

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Koprince Law LLC

Participants in the SBA’s 8(a) Program must timely submit their annual review packages to the SBA.

In a recent decision, the SBA Office of Hearings and Appeals held that the SBA may terminate a participant from the 8(a) Program for failing to provide the required information–even if the 8(a) company’s owner has had personal difficulties that contributed to the failure.

OHA’s decision in KC Consulting, LLC, SBA No. BDPT-563 (2017) involved the 8(a) Program participation of a Michigan-based small business.  On January 8, 2016, KC Consulting received a letter from the SBA requesting that the company provide its 8(a) annual review information.  KC Consulting did not provide the information.  The SBA sent a second letter in March 2016; again, KC Consulting didn’t comply.

On April 12, 2017, the SBA issued a Termination Letter to KC Consulting.  In the letter, the SBA stated that KC Consulting would be terminated from the 8(a) Program because of its repeated failure to submit the required annual review information.

KC Consulting filed an appeal with OHA, arguing that it should not be terminated from the 8(a) Program.  KC Consulting admitted that it failed to submit the annual review information despite SBA’s requests for it.  But KC Consulting explained that its President and Managing Member had been undergoing some personal difficulties: his parents had both passed away, and he was in the midst of divorce proceedings.  KC Consulting said that these issues had a significant impact on the firm, and asked for another year in the 8(a) Program to get the company “back on track.”

OHA noted that the SBA’s 8(a) Program regulations allow the SBA to terminate a participant for “[a] pattern of failure to make required submissions or responses to SBA in a timely manner,” including the timely submission of annual review information.  Here, KC Consulting “admits the violation and confirms SBA’s grounds for termination.”  It is “of no consequence that [KC Consulting’s] violation was not intentional.”

OHA dismissed the appeal.

As the KC Consulting case demonstrates, the SBA takes the 8(a) annual review very seriously.  Although it’s an area of broad discretion, the SBA has the right to terminate a company from the 8(a) Program for repeatedly failing to submit the annual review information, or other relevant information requested by the SBA–even if the 8(a) owner’s personal troubles made compliance more difficult.

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Koprince Law LLC

Happy Veterans Day to all our SmallGovCon readers. We hope that you will take some time today and tomorrow to honor the strength, loyalty and commitment that our brave veterans dedicated to this country. Veterans, we are deeply grateful for your service.

This edition of SmallGovCon Week In Review brings a look at six large companies with a high reliance on government contracts, the “Amazon Amendment” and how Amazon is looking to expand it’s operations through government procurement, the removal of Fair Pay and Safe Workplaces Rule, tips for WOSBs to succeed in the federal marketplace, and much more.

  • In a $3.7 trillion federal government budget, there are going to be a lot of companies doing well–here are the top six. [The Motley Fool]
  • Forbes offers tips for female business owners who are frustrated by the lack of opportunities and showcases the huge opportunity for women to get a piece of the set-aside contracts for women-owned businesses. [Forbes]
  • Amazon has an opportunity to dramatically expand its hold on the logistics space as it tries to capture $53 billion in defense procurement. [Freight Waves]
  • An alleged kickback and bribery scheme that went on for six years before being discovered has led to a Government contracting officer and his contractor facing a heap of trouble. [PNWC’s Government Contracting Update]
  • Federal contractors will not face requirements aimed at protecting employees from wage and unsafe working conditions under rule the Trump administration finalized on Monday. [Government Executive]
  • Effective November 6, 2017, the FAR Council finalized a final rule amending the Federal Acquisition Regulation for the removal of the Fair Pay and Safe Workplaces requirements. [Federal Register]
  • At least 125 companies were discovered to owe the federal government a total of $40,633,951 in unpaid taxes while still receiving federal contract awards totaling more than $134 million. [Live 5 News]
  • A jury deadlocked in a case against two men accused of SDVOSB fraud. [Arkansas Online]
  • An elaborate scheme between a former Army official and a contractor has led to an 18 month sentence and forfeiture of over a quarter of a million dollars. [Department of Justice]
  • A look at what did, and did not, make it through the conference version of the 2018 National Defense Authorization Act. [Nextgov]

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Koprince Law LLC

Welcome to 5 Things You Should Know, a new SmallGovCon series aimed at providing foundational information on topics relevant to government contractors.

In the posts that follow, I’ll try to distill complex contracting topics to their very essence. Unsure about what, exactly, a claim or bid protest is? What is the All Small mentor protégé  program? I’ll walk through each of these topics (and others) and explain why they matter.

These posts won’t be a treatise on each topic discussed, but hopefully they’ll help you navigate the complex world of federal contracts.

If there’s a particular topic you’d be interested in learning more about, please send it to me.

In the first post, we’ll tackle the basics of bid protests. Other posts will follow approximately every two weeks.


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Koprince Law LLC

The VA has officially withdrawn its November 2015 proposal to overhaul its SDVOSB and VOSB regulations.

The VA’s action isn’t surprising, given that the 2017 National Defense Authorization Act requires the VA to work with the SBA to prepare a consolidated set of SDVOSB regulations, which will then apply to both VA and non-VA procurements.  What’s interesting, though, is that the VA doesn’t say that it’s withdrawing the 2015 proposal because of the 2017 NDAA, but rather because of numerous objections to the proposal–including objections from the SBA.

By way of quick background, the VA’s 2015 proposal would have significantly overhauled its SDVOSB and VOSB regulations with the goal of finding “an appropriate balance between preventing fraud in the Veterans First Contracting Program and providing a process that would make it easier for more VOSBs to become verified.”  The VA accepted comments on the proposal until January 2016.

As it turns out, those comments were largely negative.  According to the notice of withdrawal published in the September 1, 2017 Federal Register, of the 203 comments received, “134 of these comments were adverse to the proposed rule and VA’s verification program in general.”

Several of the adverse comments came from the SBA.  The SBA wrote, among other things, that the VA did “not provide any indication of the number of small businesses that may be impacted by the proposed change,” and that the proposed rule “failed to provide statutory or other legal authority following each cited substantive provision.”

Not all of the SBA’s objections concerned the rulemaking process.  SBA also objected to the VA’s proposal to remove an SDVOSB or VOSB from the database if the veteran in question was formally accused of a crime involving business integrity.  SBA (correctly, I think), said that this proposal “would seem to deny an applicant due process of law” because an accusation is not the same as a finding of guilt.

Other commentators also objected to various portions of the rule, including the VA’s proposal to make a firm wait 12 months, instead of six, to reapply after an application is denied.

After summarizing the reaction to its proposal, VA simply states: “ecause of the adverse comments received during the comment period, VA is withdrawing the proposed rule.”

What comes next for the SDVOSB and VOSB regulations?  Well, the 2017 NDAA directed the SBA and VA to issue a joint proposal within 180 days of the final enactment of the statute.  Former President Obama signed the bill into law on December 23, 2016, so the joint proposal is overdue–although I understand that the two agencies are working on it.

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Koprince Law LLC

I am pleased to announce that Shane McCall has joined our team of government contracts attorney-authors here at SmallGovCon.  Shane is an associate attorney with Koprince Law LLC, where his practice focuses on federal government contracts law.

Before joining our team,  Shane was an attorney with Lentz Clark Deines PA, where he advised individuals and small businesses alike on complex legal matters.  Check out Shane’s full biography to learn more about our newest author, and don’t miss his first SmallGovCon post on how “fair and reasonable pricing” is evaluated under solicitations requiring line-item prices.

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Koprince Law LLC

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

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

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

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If you’re a winner under a solicitation, you can’t challenge the ground rules under which you won–at least under the facts of a recent GAO bid protest decision.

In that decision, GAO concluded that the protestor of a solicitation’s terms lacked standing when the protester was subsequently identified as an awardee under the solicitation.

Daekee Global Co., Ltd., B-414899 et al., (Oct. 10, 2017), involved an IDIQ procurement for ship husbanding services in the Navy’s Seventh Fleet area of operation. Performance of the contract was to occur at both commercial and military ports throughout Korea, Japan, Russia, and Taiwan. The Solicitation broke down the services required into a number of CLINs, which included ship movement, fleet handling, waste disposal, transportation, and cargo loading, among others.

The solicitation anticipated making multiple awards to the lowest priced bidders that did not take exception to the solicitation’s terms. According to GAO, “to be considered for award, offerors needed to submit by the solicitation closing a signed proposal (with acknowledgment of all amendments) that shows the offeror is not taking exception to any solicitation term; includes the certifications and representations contained in the solicitation; and includes unit prices and total prices for all line items and sub line items in the solicitation.” Bidders were also to include a signed letter stating they were not taking exception to any of the solicitation’s terms and possessed the requisite licenses and approvals for operation.

Prior to the closing date for the solicitation, Daekee Global Co., Ltd. filed a protest challenging the terms of the solicitation. Daekee raised a number of concerns with the structure of the solicitation, including concerns about regulatory compliance and the fairness of subsequent task order competitions.

Despite filing a timely protest, Daekee also submitted a proposal in response to the solicitation. While Daekee’s protest was pending, the Navy evaluated proposals and determined Daekee was a presumptive awardee. The Navy planned to make an award to Daekee as soon as the protest’s performance suspension period was lifted.

Because Daekee was a presumptive awardee under the Solicitation, the Navy moved to dismiss the protest, arguing that Daekee was not an “interested party” within the meaning of the GAO’s Bid Protest Regulations. While Daekee was pleased to discover it was a presumptive awardee, it contended its protest should still be resolved on its merits because significant questions regarding the structure of the Navy’s procurement remained outstanding. Specifically, Daekee reiterated concerns about the fairness of competition at the task order level.

GAO was not convinced. According to GAO, the question was one of competitive prejudice. As GAO explained:

Competitive prejudice is a required element of every viable protest, and where none is shown, we will not sustain a protest. In the context of a protest challenging the terms of a solicitation, competitive prejudice occurs where the challenged terms place the protester at a competitive disadvantage or otherwise affect the protester’s ability to compete.

Since Daekee had been identified as an apparent awardee under the Solicitation, GAO concluded Daekee had not been at a competitive disadvantage under the solicitation’s terms. As for Daekee’s allegations regarding the fairness of competition at the task order level, GAO concluded these challenges were premature.

In our experience, it’s not exactly common for an agency to announce, in the midst of a pre-award GAO bid protest, that the protester will be awarded a contract once the protest concludes. That said, Daekee Global Co. suggests that an agency might be able to eliminate any pre-award bid protest simply by announcing an intent to award a contract to the protester. It remains to be seen whether GAO’s decision is truly that broad, or whether there might be exceptions under which a protester could show competitive prejudice despite being named as an awardee.

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It’s a Sunday afternoon and instead of watching football (CHIEFS!), you’re shopping for a new refrigerator. You explain to the salesman your must-haves: a black refrigerator with a bottom-drawer freezer and an in-door water dispenser. But rather than showing you refrigerators that meet your criteria, he insists on showing you stainless steel models with the freezer on the side.

If the refrigerator doesn’t meet your needs (or your wants), odds are you won’t buy it. The federal government is no different: if it identifies salient characteristics in a solicitation, proposals that deviate from them likely aren’t going to win the award.

This refrigerator-shopping scenario (which, by the way, sounds like a nightmare) is basically what happened in Phoenics Corporation, B-414995 (Oct. 27, 2017). There, the Navy issued a solicitation for a ground-penetrating radar and named three brand-name items that would meet its needs. Alternatively, an offeror could propose a different model if that model met several salient characteristics listed by the Navy.

Included among these characteristics was a requirement that the radar “have an external and removable locking pin to hold arm secure whether in operation or storage mode.” The solicitation further cautioned that an internal gear mechanism was not acceptable.

Phoenics submitted the lowest-priced quote, but its product was deemed unacceptable by the Navy. Although the gear mechanism in Phoenics’ proposed radar “positively locks the arm with an integral locking insert/pin in either the operating or storage mode,” its locking mechanism was not external and removable. Instead, the locking mechanism was “performed via a control button/lever within easy reach of the operator.” Because Phoenics’ proposed radar did not meet the salient characteristics, the Navy found it unacceptable.

Phoenics then filed a GAO bid protest, saying its product basically met the Navy’s salient characteristics. In response, GAO denied this challenge and stated that Phoenics did not refute the agency’s allegation that the locking pin was neither external nor removable. In other words, GAO said that when it comes to salient characteristics, close isn’t good enough.

From my vantage, Phoenics might have had more luck had it challenged the Navy’s identified salient characteristics as part of a pre-award protest. Offerors can be hesitant to challenge the terms of a solicitation for fear it might lead to animosity by the contracting officer.

But in our practice, we find that concern to be somewhat overblown: if done professionally and civilly, a pre-award challenge to ambiguous or unnecessary terms can be advantageous to both offerors (who have clarity over the requirements) and the government (who will get the best possible proposals). Here, for example, Phoenics might have argued that the salient characteristics overstated the government’s minimum needs by excluding a product like the one Phoenics ultimately offered.

In a footnote, GAO suggested the same thing. It wrote that “to the extent that there was a conflict between the brand name products and the salient characteristics, we find that any resulting ambiguity was patent—that is, apparent on its face.” As such, “Phoenics was required to protest any such defect in the terms of the RFQ prior to the date set for receipt of quotations, which it did not.”

As Phoenics Corporation reiterates, an offeror simply won’t be successful if it doesn’t propose what the government wants. And if the government’s salient characteristics appear overly restrictive, the best time for legal action might be before proposals are due—not after award.

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When an agency opens discussions with offerors, those discussions must be fair.

In a recent decision, GAO recommended the reopening of competition for a contract worth up to $283 million based, in part, on a finding that an agency had engaged in misleading and unequal discussions.

Discussions are a type of exchange between an agency and each offeror before award of a solicitation that allows offerors a chance to revise their proposals to address weaknesses. In discussions, GAO noted, “an agency may not mislead an offeror through the framing of a discussion question into responding in a manner that does not address the agency’s actual concerns, or otherwise misinform the offeror concerning a problem with its proposal”, and the agency cannot favor one offeror over another.

Unfortunately, GAO found that the Census Bureau had engaged in just such unequal conduct in a major solicitation dealing with mobile devices related to the 2020 census.

In AT&T Corp., B-414886 (Oct. 5, 2017), AT&T protested issuance of a task order to CDW Government LLC under a request for proposals for a mobile devices solution to support the 2020 Decennial Census. The Census Bureau sought proposals for a fixed-price task order. Proposals needed to demonstrate “usability, performance, and security requirements; continuous, reliable cellular network coverage; and a technology refresh assessment.”

Evaluation would be on a best-value basis considering factors including past performance and technical approach. The technical approach “required offerors to address 13 elements including, as relevant here, a description of the specific mobile device proposed and why it was selected; how the offeror would provide a cellular service solution and maximize signal strength/reliability by designating the best carriers for each area; and how the offeror would address the requirements for technology refresh cycles for mobile devices.”

The agency received four proposals, including proposals from AT&T and CDWG. After completing an initial technical evaluation, the agency opened discussions with offerors and requested revised technical proposals. After evaluating revised proposals, the CDWG was rated technically highest, with a price of $283,492,962, while AT&T was ranked second, with a price of $191,850,841. As is relevant here, AT&T’s proposal was assigned a technical risk related to its multi-carrier solution.

In its protest, AT&T argued that both it and CDWG were initially “evaluated to have potential bias in their multi-carrier approaches, but only CDWG’s technical exchange addressed potential bias.”

In talks with CDWG, the agency “expressed concern that ‘CDWG’s pre-negotiated rates with [DELETED] [presented] a risk that could result in bias during the cellular carrier analysis,’–that is, the rates could affect carrier selection” and asked, “[h]ow does CDWG plan to ensure that its pre-negotiated rates with cellular carriers are unbiased?” Although the decision does not exactly spell this out, I believe what the agency was concerned with was that the mobile device provider would have too cozy of a relationship with one carrier and therefore not get the best rates, technology, or cellular coverage for the government. In response to these questions, CDWG revised its proposal (in a manner redacted in the decision), and the agency upgraded CDWG’s technical score by finding it had eliminated the risk of bias.

“Unlike the exchange with CDWG, the agency’s technical exchange with AT&T did not mention bias, even though the evaluators expressly raised a concern about bias for both companies.  Instead, the agency asked, “[how] does AT&T plan to include multiple cellular carriers into their cellular network approach?'” AT&T answered that it would use certain methods to determine the best-value carrier.

GAO concluded that

the record as a whole demonstrates the impropriety in the conduct of discussions. To the extent the agency contends that it was concerned about CDWG’s rates, and AT&T’s lack of detail–rather than bias–the record does not support the agency’s contentions.  As noted above, AT&T’s response was found lacking because it did not address bias in carrier selection.  To the extent the agency was concerned with the potential bias in each offeror’s approach, and raised bias with CDWG, it was obligated to similarly raise this concept with AT&T.  Accordingly, the agency’s discussions with CDWG were misleading and unequal in this respect, and we sustain the protest.

GAO recommended that “the agency reopen the competition, conduct discussions, accept revised proposals, reevaluate, and make a new selection decision in accordance with the evaluation criteria set forth in the RFP” and award costs to AT&T.

We have touched on inequality in discussions on SmallGovCon before.  For instance, GAO has noted that an agency cannot allow one offeror, but not others, to make revisions to a proposal as part of discussions. As the AT&T case demonstrates, when an agency conducts discussions, those discussions must be fair. Here, the lack of fairness could end up changing the result of an award worth a quarter billion dollars.

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Asking new employees to sign arbitration agreements is common in the commercial business world. But it can be a big no-no in government contracting.

In a recent bid protest decision, GAO sustained a protest where a Reston, Virginia company required its proposed key personnel to sign binding arbitration agreements.  In other words, requiring key personnel to arbitrate employment disputes cost the original awardee a $41 million contract.

The problem with doing so, according to the decision in L3 Unidyne, Inc., B-414902 (Oct. 16, 2017), is that it seems to have been contrary to the Fiscal Year 2010 Defense Appropriations Act.

Defense appropriations bills, which are passed by Congress annually, serve the primary purpose of funding the Department of Defense for the upcoming fiscal year. But it is common practice for lawmakers to use the opportunity to introduce a number of policy concerns, or occasionally bizarre pet projects, into a bill that they know will pass.

According to L3 Unidyne, the 2010 Act precludes the expenditure of funds on any federal contract in excess of $1 million, unless the contractor agrees not to enter into a binding arbitration agreement for certain types of employment claims, including discrimination claims under title VII of the Civil Rights Act of 1964. The 2010 requirement has been incorporated into the DFARS, where contracts will contain the clause at DFARS 252.222-7006 (Restrictions on the Use of Mandatory Arbitration Agreements).

The procurement in question sought various services in connection with the Navy’s towed sonar array. The Navy issued the solicitation to holders of the Seaport-e IDIQ contract. The work was to last a maximum of two years. Importantly, the solicitation required offerors to provide letters of intent from proposed key employees.

The Navy received several proposals, only one of which was found technically acceptable, that of Leidos, Inc. of Reston, Virginia. The Navy announced that Leidos had won the award at an evaluated cost of $41.4 million.

One of the unsuccessful offerors, L3 Unidyne, Inc., of Norfolk, Virginia, filed a protest. It argued that Leidos had required key employees to sign arbitration agreements contrary to the 2010 Defense Appropriations Act, and that the Navy failed to evaluate Leidos’ proposal for compliance.

The evidence showed that Leidos had required four proposed key employees to sign arbitration agreements as a condition of employment. Leidos’s submitted letters of intent for the employees included the following language: “All new hires and rehires of Leidos must execute an Arbitration Agreement prior to commencement of employment.”

GAO sustained the protest, holding:

As noted, the record shows that four of Leidos’s key employees were proposed as contingent hires. Each of them executed a letter of intent agreeing to accept employment with Leidos, and each of those letters of intent expressly conditioned the individual’s employment on execution of an arbitration agreement. As the protester correctly notes, there is no evidence in the record to show that the agency ever meaningfully considered whether or not the Leidos proposal complied with the statutory requirements described above in light of the terms of the letters of intent.

GAO added that the Navy “could not properly have considered the Leidos proposal awardable without resolving whether or not the arbitration agreements here violate the statutory prohibition.”

What is unclear from the case is why L3 relied solely on the 2010 appropriations bill, rather than DFARS 252.222-7016 or more recent statutory authority. There are no dates in the opinion, but it is fair to assume that the solicitation came out in 2017, maybe 2016 at the earliest. It is hard to imagine it reaching all the way back to 2010. It is possible, but again unclear from the case, that L3 cited the 2010 bill because that was in effect when the parties received the underlying Seaport-e contract. Regardless, GAO noted that “Although the provision to which the protester refers related to fiscal year 2010 funds, Congress repeatedly has reenacted identical provisions, most recently in the Consolidated Appropriations Act, 2017 . . . .”

Thus, GAO recommended that the Navy go back and “determine as an initial matter whether the Leidos proposal violates the statutory prohibition against requiring individuals to enter into arbitration agreements as a condition of employment.” GAO also recommended that the Navy pay L3 its costs, including attorneys’ fees—which, if this result is any indication, were probably very well-earned.

The L3 Unidyne case is an important reminder to defense contractors that they may be prohibited from requiring employees or independent contractors to sign mandatory arbitration agreements covering certain claims. Contractors would be wise to review their practices, and adjust them if necessary, before the issue comes to light in a bid protest with a contract hanging in the balance.

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This Sunday we celebrate Father’s Day.  I’m looking forward to celebrating with my kids, my father, and my brother (himself the father of three). Happy Father’s Day to all the other dads out there!

In this mid-June edition of SmallGovCon Week In Review, about 500 new small business partners were added to the GSA 8(a) STARS II vehicle , a USAID Deputy Director pleads guilty to procurement fraud charges, new SBA Administrator Linda McMahon wants to implement more efficient processes for contractors to obtain socioeconomic certifications, and much more.

  • An Army Colonel and his wife have been charged in a bribery scheme, accused of accepting $60,000 in payments from a contractor. [FOX 54]
  • Sometimes, through no fault of a contractor, a contract is terminated anyway.  Here are some steps to prepare for that possibility. [Washington Technology]
  • The DHS has had a tough couple weeks, having lost one major bid protest and canceling a second large procurement–but one commentator writes that the DHS is still an example of an agency “getting strategic sourcing right.” [Federal News Radio]
  • A USAID Deputy Director has pled guilty to charges alleging that he engaged in cronyism and contract-steering, choosing to reward a friend with federal money instead of actively seeking the most qualified and cost-effective bidder. [United States Department of Justice]
  • The Civilian Agency Acquisition Council released a memorandum that temporarily retracts the Fair Pay and Safe Workplaces final rule, pending a final change removing these provisions from the FAR. [GSA Office of Governmentwide Acquisition Policy]
  • The two highest-ranking officials in the GSA’s acquisition service are resigning after a shakeup in the service’s structuring that includes new leadership. [fedscoop]
  • A contracting dispute is delaying the OPM’s background investigations processing after the GAO sustained a protest of the award. [Government Executive]
  • SBA Administrator Linda McMahon wants to make SBA’s certification programs “more user-friendly,” saying that the application forms are complex. Amen to that–but McMahon more ominously says that if SBA can’t make the programs more effective and efficient, “those programs have to go.” [Government Executive]
  • The GSA 8(a) STARS II GWAC recently added approximately 500 qualified industry partners during an Open Season. [General Services Administration]

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

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

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

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Whether you are an active small business federal contractor, or an entrepreneur still getting your business off the ground, you are going to need a cybersecurity plan. Many DoD contractors, in particular, face a pending deadline to comply with NIST 800-171, as mandated by DFARS 252.204-7012.

The Kansas SBDC Cybersecurity Center for Small Business wants to help.

Located in downtown Lawrence, Kansas—just across town from us coincidentally—the Cybersecurity Center, housed at the KU Small Business Development Center, is the only SBDC in the country with an office dedicated to helping small businesses contend with the growing threat of data breaches. According to Director Brian S. Dennis, the center can be a resource for small businesses across the country, not just those in the state of Kansas.

Mr. Dennis has been the director of the Cybersecurity Center since it was founded in July. He was gracious enough to answer a few questions:

Q: Don’t hackers target only huge businesses? Why does a small business need to worry about cybersecurity? 

A: The International Data Corporation released a report in 2016 estimating that by 2020 over $101 billion dollars will be spent by companies trying to protect their digital footprint. America’s small businesses have not made a dedicated effort to build cybersecurity into their P&Ls [Profits and Losses]. That lack of funding on the small business side has been noticed by hackers. Small businesses are the backdoor into big business. A Fortune 500 company or the U.S. Government can throw as many dollars as they want at the threat of a cybersecurity breach, but all it takes is one small business vendor to take down the whole thing. A prime example of this is the 2013 Target data breach. The billion dollar retailer announced a huge data breach of customer information and it happened because of a third-party vendor had been granted access to the Target network.  The growing threat of a data breach is forcing the U.S. Government and corporate America to rethink how they choose their vendors.

Q: What causes most cybersecurity breaches?  

A: Almost any cybersecurity professional you speak to today will tell you that if there were no human users, there would be no cybersecurity threat. As end users of systems, we are flawed in our approach to internet safety. Ransomware is a prime example of this. The FBI estimates that $24 million was paid in ransoms in 2015. By 2016 that number was over $1 billion. Ransomware only works when a user on the receiving end of an exchange takes an action. We need to incorporate training across the board that enables each and every user with the knowledge of how to remain safe in the digital age.

Q: It seems like things change so quickly. How can a small business find out if its practices are sufficient or if it is at risk without knowing it? 

A: It all starts with planning. Creating a plan that works and can be tested is paramount to a small business surviving a cyber event. The threat of a digital interruption is looming over all of us and there is no silver bullet that will prevent every single attack or occurrence. But if a small business can build a plan that follows five steps, the likelihood of survival increases. Those steps are:

  1. Identify — What structures and practices do you have in place to identify cyber threats?
  2. Protect — What are the basic practices you have in place to protect your systems?
  3. Detect — What do you use to identify someone or something malicious?
  4. Respond — How will you deal with a breach if and when one occurs?
  5. Recover — How will you get your business back to normal after a breach?

Q: What if a small business is not as secure as it could be—by its nature, a small business has to choose where to put its resources, why does it need to spend money on cyberseucrity? 

A: According to Symantec, nearly half of all cyber attacks these days are targeted on small business. Small businesses are the entry point into larger operations. When your business decides to allocate resources away from cybersecurity, your opportunities will begin to diminish. The hard part is understanding where to potentially shift money and resources to ensure that this can even happen. America’s Small Business Development Center (ASBDC) has over 1,100 business consultants and advisers working across America. Find a local SBDC near you and ask them for help. A good business consultant can help you get a better grasp of your P&Ls and determine where dollars can be set aside for your cyber effort. The service is free, but the commitment is your time and effort.

[Ed. Note: SBDCs are funded in part by the U.S. Small Business Administration, which helps keep consulting costs down—services are often free.]

Q: Seriously though, what’s the worst that could happen? Is a business going to lose its contracts? Something worse?

A: The Federal government is moving swiftly to ensure that its vendors and contractors are secure. The National Institute of Standards and Technology (NIST) has created a framework for cybersecurity that is already being rolled out by the Department of Defense. DOD contractors have to complete the framework by December 31st of this year. And this is just the start. If you make the decision to not properly protect your business and you are doing business with the government, you will lose contracts, that is a guarantee. Losing contracts is just the start. The something worse that is looming on the horizon is the legal responsibility. Several states are looking at what types of recourse clients/consumers will have against a small business that allows data to be breached.

Q: What do you see coming in the future? 

A: There is no crystal ball for guessing what the next cyber threat will look like, but the general consensus is that cyber criminals will continue to prey upon our inability to properly train end users. Ransomware is a direct result of poor training. Attacks that started against users demanding ransoms in the hundreds of dollars range have morphed into attacks against municipalities demanding millions of dollars. Ransomware is easy to send out and easy to collect. Unfortunately, it will be here until someone develops a dedicated way to fight it.

The future will also hold the possibility for more business and industry to pick up the torch of the NIST Framework. The Framework is probably the best start to a business being protected. Banking, insurance and finance industries will be watching closely as the Framework is rolled out this year.

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I was grocery shopping the other day, and I had to make the tough choice between the name-brand cereal and the store-brand cereal. I don’t know about you, but with some products, the name brand has a certain flavor that the store brand just can’t replicate. When it comes to government contracts, the same is true–sometimes the government wants a certain brand or supplier and will accept no substitutes.

GAO recently held that, where an agency required quotations including parts from one approved source of supply, and an offer is submitted that proposes an “alternate product,” the agency can reasonably reject the bid–and that a protest of the approved source restriction itself is untimely if it isn’t filed before the proposal deadline.

The additional wrinkle in this decision is that, if the vendor wishes to protest the sole-supply-source restriction in the solicitation, the protest has to be made before the submission deadline for the solicitation. Therefore, the protester’s argument that it should be considered an alternate source was dismissed as untimely because the alternate-source issue is a term the protester should have raised prior to the solicitation submission deadline. This is yet another variation on the tricky rules of bid protest timeliness–in this case, involving the issue of proposing an alternative to the approved source set forth in the solicitation.

GAO’s decision, W K Engineering Int’l, Inc., B-414932, (Oct. 13, 2017), involved an RFQ issued by the DLA for headrest pad assemblies associated with aircraft ejection seats.  The RFQ required that vendors submit one headrest for first article testing, and also noted that “[o]nly quotes from the approved source of supply or authorized dealers are acceptable. The dealer must provide a copy of the letter from the approved source of supply approving them to act as a dealer/distributor with their quote.  Quotes from secondary dealers will not be accepted.” The approved source of supply was AMI Industries, Inc., and the agency indicated the specific part number and listed no other approved suppliers.

The solicitation also incorporated the terms and conditions set forth in the DLA master solicitation for automated simplified acquisitions. Under these terms, alternate products would not be evaluated if the solicitation was “automated,” and the DLA, with GAO concurrence, contended that the solicitation was indeed automated through DIBBS, the DLA’s Internet Bid Board System.

WK Engineering submitted its bid with an alternate product to that required in the solicitation and did not include a letter from AMI approving WKE as a dealer of AMI’s product. WKE, upon submission for its quotation, received a notification from the DIBBS system that “[o]ffers of alternate products will not be evaluated for the current procurement.” DLA awarded the purchase order to AMI, the approved source of supply.

GAO dismissed WKE’s protest, holding that, as applicable to WKE, “[a] protester is not an interested party to protest an award to an approved source where the protester would not be eligible for award because it is not itself an approved source for the item.” This seems fairly straightforward, at least as GAO describes it. If the solicitation says quotations must include an approved source of supply, and a quotation does not include that source of supply (or indicate the vendor will act as a dealer for the source of supply), then the protester could never be awarded the bid, so it is not an interested party to protest.

The second part of GAO’s opinion is more nuanced. WKE argued that it should be considered equally with AMI, the approved source, because it is a “qualified manufacturer of similar parts.” GAO held that this amounted to a challenge “based upon alleged improprieties in a solicitation, which are apparent prior to the time set for receipt of initial quotations, [which] must be filed prior to the time set for receipt of initial quotations” under 4 C.F.R. § 21.2(a)(1).

According to the GAO, since the requirement to use the specific source was clearly apparent in the RFQ, WKE should have been able to formulate its objection upon reading the RFQ, and therefore any protest was due prior to the proposal deadline. A problem that is clear on the face of the solicitation is sometimes called a patent defect, and patent defects ordinarily cannot be challenged after the date proposals are due. Since the protest was not filed until after award was made, this part of the protest was also dismissed.

GAO’s holding is another reminder that, if a contractor believes there is an improper requirement or error in a solicitation, a protest must be made before any submission deadline. In this particular example, if a potential vendor thinks there should be alternatives to an approved source of supply, any protest of that issue is probably due before the quotation deadline. If you wait too long, GAO will not usually give you a second chance to raise this kind of issue in a protest.

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You might think that if you send an email with the delivery receipt option and the delivery receipt comes back, the email was delivered. But when an offeror submits a proposal by email, does a delivery receipt mean that the agency necessarily received the proposal in its inbox?

At least under the facts of one recent GAO bid protest, the answer was “no.” In that case, the GAO held that an email delivery receipt wasn’t sufficient to demonstrate that the agency received the electronic proposal.

In ManTech Advanced Systems International, Inc., B-414985, (Oct. 20, 2017), the GAO examined a proposal submitted by ManTech to provide cyber security services to the Air Force. ManTech submitted its proposal under a task order solicitation issued under the Air Force’s Cyber Security and Information Systems Technical Tasks IDIQ.

The task order proposals were to be submitted electronically via e-mail to the contract specialist, at the specialist’s email address, no later than 1:00 p.m. Central Daylight Time on July 17, 2017. The solicitation provided that receipt of proposals would be acknowledged by return e-mail.

ManTech sent its email with the proposal to the designated email address on July 17, 2017, at 1:25 p.m. Eastern Daylight Time (EDT) “and received confirmation of completed delivery through its Microsoft Outlook delivery receipt feature.”

Between 1:30 and 2 p.m. EDT, ManTech attempted to confirm receipt. First, it contacted the Air Force and learned the proposal had not been received, so ManTech resent the proposal to the designated inbox, the agency employee it had spoken to, and the contract specialist. Then it sent the email without the cover letter.

Finally, the agency told ManTech to stop trying because it was past the deadline. The agency later informed ManTech that, because the proposal hadn’t been received on time, the agency hadn’t considered ManTech for award.

ManTech filed a GAO bid protest challenging the agency’s decision. ManTech argued that the Air Force should have considered the proposal because the proposal was timely sent to the correct email address, and ManTech received confirmation that it had been received.

ManTech relied heavily on email tracking records from its Microsoft Outlook delivery system. ManTech submitted a declaration from its Director of Network Services to argue that “since it did not receive a bounce back indicating that the e-mail containing the proposal had been rejected, it must have been accepted by the agency’s e-mail exchange server.”

The Air Force responded by tracing the path of an email to its email system:

when an e-mail is sent to any recipient that is at an organization that is part of the Department of Defense, it is first scanned by the enterprise e-mail security gateway (EEMSG) for malicious content.  EEMSG delivers the e-mail to the recipient’s e-mail exchange server if no malicious content is found. The recipient’s e-mail exchange server then performs additional scans based on the specific policies of the recipient organization. The recipient’s server can block, quarantine, drop, or deliver the e-mail to the recipient’s e-mail box.  The Air Force reports that the e-mails sent by ManTech were received by the EEMSG system, which scanned them and attempted to deliver them to the specified Air Force e-mail address. However, based on the content, they were rejected by the Air Force server.  ManTech did not receive a bounce back because the EEMSG inbound system cannot initiate a connection to the internet.

GAO wrote that “t is an offeror’s responsibility to deliver its proposal to the proper place at the proper time.” Moreover, the offeror “has the burden of showing that it timely delivered its proposal to the agency at the specified address.”

Here, “ManTech has demonstrated that it timely sent its proposal to the agency, and that it reached the EEMSG server.” However, “ManTech has failed to establish that its proposal was actually delivered to the agency’s designated e-mail prior to the time set for the receipt of proposals, and thus, has failed to meet its burden of showing the proposal was timely delivered to the agency.”

We have covered electronic timeliness issues on SmallGovCon before, as GAO seems to issue an opinion on the topic every six months. Most of these cases haven’t gone well for the protester. For example, GAO has denied a protest when an initial government server receives a proposal on time, but the proposal doesn’t make it to the final destination until after the deadline. The same result held even when the protester asserted the late email was the result of faulty government servers. And along the same lines (and pretty close to the result here), the GAO denied a protest where the offeror’s proposal was rejected by the agency’s spam filter.

To be clear, my colleagues and I here at SmallGovCon aren’t big fans of these decisions (or the decision in ManTech). Why should a contractor be punished if a government server malfunctions, or a government spam filter rejects a proposal, or (as here) the government server simply “rejects” the proposal after a scan? It seems to us that if the proposal is under government control at the time specified in the solicitation, that should be enough, in most cases, to require the government to evaluate it.

Encouragingly, the Court of Federal Claims may agree. As we discussed in the latter half of this post, the Court has issued several decisions that seem to be at odds with the GAO’s strict view. For companies like ManTech, the Court–not the GAO–is probably the better forum for a protest of this nature.

That said, offerors submitting proposals electronically should be aware of the tough rules that often apply.  As ManTech Advanced Systems International demonstrates, even an email delivery receipt may not be enough to prove that an electronically-submitted proposal actually arrived at the correct place.

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Koprince Law LLC

GAO bid protests succeeded almost half the time in Fiscal Year 2017.

According to the GAO’s latest Bid Protest Annual Report, the effectiveness rate of GAO bid protests was 47% in the recently-completed fiscal year.  The statistics are striking, because they come just as Congress is finalizing the 2018 National Defense Authorization Act, which includes measures aimed at reducing bid protests.  But with bid protests succeeding at a nearly 50% clip, why does the protest “reform” debate seem to center almost entirely on discouraging contractors to protest, rather than on decreasing the number of flawed source selection evaluations?

The GAO’s annual report indicates that 17% of protests were sustained in Fiscal Year 2017.  That’s the stat that will get bandied about by those who contend that protests are largely frivolous.  “Less than a fifth of protests get sustained!” they’ll say.  But using the sustain rate as evidence of protest frivolity is misleading.

When a protest is filed at GAO, the procuring agency has two options: fight the protest, or voluntarily take “corrective action” to address the flaws alleged by the protester.  Although agencies rarely say it out loud, a decision to take corrective action typically is a tacit admission that the evaluation was flawed.  In other words, the agency counsel has reviewed the protest and thought, “I’m not sure I can win this one.”  When an agency has a losing hand, corrective action is the right move.

The GAO knows this, and uses the effectiveness rate statistic to measure how often the protester obtains “some form of relief from the agency . . . either as a result of voluntary corrective action or our Office sustaining the protest.”  And as I mentioned at the outset, that all-important statistic was at a sky-high 47% in FY 2017.  That’s higher than in any recent year, although not a major outlier: the effectiveness rate has been 43% or higher since FY 2013.

Recently, Congress has been debating so-called reforms to the bid protest process.  I discussed the proposals in-depth in a July post, but the underlying rationale appears to be that protests are ever-increasing and typically frivolous.  Thus, protest “reform” is aimed almost entirely at discouraging contractors to protest in the first place–or outright prohibiting certain protests.  For example, the 2017 National Defense Authorization Act jacked the GAO’s jurisdictional threshold for most DoD task and delivery order protests from $10 million to $25 million.  Lose a $22 million DoD order?  Sorry, no protest allowed.  The Senate’s versions of the 2017 and 2018 NDAAs would have imposed other poorly-conceived restrictions.

Why is there a popular belief that protests are both pervasive and frivolous?  The discussion seems driven by the sky-is-falling comments of some agency officials, who make it sound like every other acquisition is being frivolously protested. One former high-ranking official even went full-on Scarlet Letter and suggested creating a “shame list” for losing protesters.  (Hint: the result of every GAO protest already is available on the GAO’s website).

Sure, it stinks when you’re the contracting officer on the receiving end of a protest, but the fact remains that protests only occur on a very low percentage of acquisitions.  Headlines like “Drowning in Protests” may catch some eyeballs, but they’re not particularly factual.  Indeed, GAO protests were down 7% in Fiscal Year 2017, while the effectiveness rate was up.  But you probably won’t see many articles with headlines like “Not Drowning in Protests.”

That’s not to say that frivolous protests never occur, although GAO has the power to deal with that problem on its own.  My point, rather, is that protest “reform” efforts seem to focus almost entirely on getting contractors to protest less often, without acknowledging that some of the best ways to decrease protests involve internal government reforms rather than punitive measures directed at contractors.

What could government be doing to reduce protests?

Well, when 47% of protests succeed (despite the protester having the burden of proof!) it means that evaluators are messing up a lot of source selections.  Also, when the GAO’s stats suggest it’s essentially a coin flip as to whether a protested source selection was defensible, that’s reason for a potential protester to move forward, even without a slam dunk initial case.  Improving source selection training and processes would improve the underlying source selections, which would be the best thing anyone could do to reduce protests.

Additionally, as OFPP has pointed out, improved communication with industry–particularly in debriefings–is likely to reduce protests, as well.  In debriefings, agencies often act like they’re guarding Coke’s secret formula, rather than discussing the outcome of a competitive procurement.  Our clients sometimes come away from post-award debriefings with little more than a just-the-facts-ma’am  recitation of the minimal information required by FAR 15.506–or worse, a PowerPoint debriefing in which three-quarters of the slides simply regurgitate generic information about the FAR and solicitation’s evaluation factors.  I understand the agency’s thought process (“the more information we give them, the more they’re likely to use it against us”), but it’s often dead wrong.  The client walks out of the debriefing (or closes the PowerPoint slideshow) feeling as though the agency is hiding something.  In my experience, minimalist debriefings increase protests.

Congress seems to recognize that OFPP may be on to something, because the conference version of the 2018 NDAA includes a provision entitled “Enhanced Post-Award Debriefing Rights,” which would require the DoD to provide additional information in certain debriefings.  Unfortunately, this provision is limited to DoD awards of $100 million or more, although small businesses and “nontraditional contractors” could request an enhanced debriefing in the case of an award exceeding $10 million.

The move toward enhanced debriefings is a step in the right direction, but I worry that it won’t be enough to address the underlying issue–and not just because enhanced debriefings will be limited to large DoD procurements. So long as many agency officials believe that the best policy in a debriefing is to supply the bare minimum required by law, offerors may still walk away with the sense that the agency is hiding something.  Congress can’t legislate a culture change, but that’s really what’s needed to make debriefings truly effective in reducing protests.

Like any other contracting process, the bid protest process should always be evaluated to see if it can be improved.  But the GAO’s statistics (and those compiled by others) make very clear that the sky isn’t falling.  I’m not suggesting a public “shame list” for agency officials who poorly plan or execute an acquisition.  But instead of squawking about how bid protests are ever-increasing and frequently frivolous, acquisition officials ought to get their own houses in order first.

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Koprince Law LLC

When an agency requests that offerors provide past performance references, the agency ordinarily is not precluded from considering outside past performance information.

In a recent bid protest decision, the GAO confirmed that an agency’s past performance evaluation may include information outside the past performance references submitted by the offeror–and the agency can use any negative past performance information to downgrade the offeror’s score.

The GAO’s decision in Fattani Offset Printers, B-415308 (Nov. 20, 2017) involved a USAID solicitation for printing services.  The solicitation called for award to be made on a “best value” basis.  In its evaluation, the agency was to consider several factors and subfactors, including past performance.  The solicitation asked offerors to provide at least five past performance references.

Fattani Offset Printers submitted a proposal.  Fattani’s proposal included five past performance reference letters.  All five reference letters gave Fattani positive reviews.

In its evaluation, USAID reviewed Fattani’s five letters, and contacted three of those references.  USAID also contacted references outside of the five Fattani had provided.  Some of those sources gave Fattani negative reviews.  Based partly on this concern, USAID gave Fattani only 5 out of a possible fifteen points for past performance.  USAID awarded the contract to a competitor at a higher price.

Fattani filed a GAO bid protest, raising several issues.  Among its allegations, Fattani contended that it was improper for the agency to contact additional past performance references because the solicitation did not expressly allow it.

The GAO disagreed.  “Contrary to Fattani’s view,” the GAO wrote, “an agency is generally not precluded from considering any relevant past performance information, regardless of its source.”  Accordingly, “the agency acted reasonably when it solicited additional past performance references beyond those listed in Fattani’s proposal, notwithstanding the fact that the solicitation did not specify that the agency could seek alternate past performance references.”

The GAO denied the protest.

When an agency asks for past performance references, it’s a great opportunity for an offeror to put its best foot forward.  But, as the Fattani Offset Printers case demonstrates, just because an agency requests references doesn’t mean that the agency can’t consider other past performance information.  If the agency wishes, it ordinarily can consider past performance information from other sources, so long as that information is relevant.

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