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Koprince Law LLC

I am very pleased to announce that Candace Shields is joining our team of government contracts bloggers here at SmallGovCon.

Candace comes to us from the Social Security Administration, where she was an Attorney Advisor for several years.  As an associate attorney at Koprince Law LLC, Candace’s practice focuses on federal government contracts law.

Please check out Candace’s online biography and great first blog post, and be sure to visit SmallGovCon regularly for the latest legal news and notes for small government contractors.


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Koprince Law LLC

An offeror’s proposal must conform to all technical requirements of an agency’s solicitation–even if the offeror believes those requirements to differ from standard industry practice.

In a recent bid protest decision, the GAO held that an agency appropriately rated an offeror’s proposal as technically unacceptable because the offeror failed to conform to certain material solicitation requirements; the offeror’s insistence that those requirements varied from standard industry practice was irrelevant.

In Wilson 5 Serv. Co., Inc., B-412861 (May 27, 2016), the VA issued a SDVOSB set-aside RFQ seeking facility maintenance support operations at the VA’s Capitol Region Readiness Center (CRRC). The CRRC operates on a 24-hour per day, 7-day per week, 365-days per year (24/7/365) basis and serves a mission-critical role in the VA National Data Center Network.

The RFQ’s PWS required offerors to “determine the appropriate onsite staffing levels to support a 24/7/365 operations.” In written responses to vendor questions, the VA confirmed that “t is a requirement for staff to work onsite in support of the CRRC 24/7/365.”

Wilson 5 Service Company, Inc. (“Wilson 5”) was one of three offerors to submit quotations. Wilson 5’s staffing plan included on-site staffing from 7am to 5pm and emergency “on-call” services after hours, with an ability to call back personnel to the facility if necessary.

The VA determined that Wilson 5’s “lack of off-hours onsite support represents a material failure to meet the Government’s requirement . . ..”  The VA rated Wilson 5’s quotation as unacceptable, and excluded Wilson 5 from the competitive range.

Wilson 5 filed a GAO bid protest. Wilson 5 acknowledged that its quotation did not provide for 24/7/365 onsite support. Wilson 5 argued, however, that the RFQ did not require vendors to provide onsite off-hours staffing. Wilson 5 noted that it is “standard industry practice for a contract to provide 24/7/365 coverage by calling back personnel to the facility for an emergency,” rather than staffing the facility onsite during off-hours.

GAO wrote that, when a protester and agency disagree over the meaning of a solicitation, GAO will read the solicitation “as a whole and in a manner that gives effect to all of its provisions.” In this case, GAO held, “the agency’s interpretation of the RFQ, when read as a whole, is reasonable, and the protester’s interpretation is not reasonable.” The GAO noted that various portions of the solicitation “advised vendors of the responsibility to provide onsite staffing to support the 24/7/365 operation.” GAO found that there was no indication that the solicitation could be interpreted to permit call back service as an alternative to the on-site staffing requirement. GAO denied Wilson 5’s protest.

This decision serves as a reminder that offerors must meet the Government’s technical requirements, even if those requirements appear to vary from standard industry practice. As Wilson 5 learned the hard way, the plain terms of a solicitation will trump standard industry practice.

Megan Connor, a summer law clerk with Koprince Law LLC, was the primary author of this post.


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Koprince Law LLC

In determining whether a prime contractor and subcontractor are affiliated under the ostensible subcontractor rule, the SBA is supposed to consider the totality of the relationship between the parties.  But when it comes to determining whether the ostensible subcontractor rule has been violated, not all components of the prime/subcontractor relationship are created equal.

In a recent decision, the SBA Office of Hearings and Appeals confirmed that there are “four key factors” that are strongly suggestive of ostensible subcontractor affiliation–especially if the subcontractor will perform a large percentage of the overall contract work.

OHA’s decision in Size Appeal of Charitar Realty, SBA No. SIZ-5806 (2017) involved a GSA solicitation for custodial, landscaping and grounds maintenance at two federal courthouses.  The solicitation was issued as an 8(a) set-aside under NAICS code 561720 (Janitorial Services), with a corresponding $18 million size standard.  The solicitation required, among other things, that offerors provide at least three past performance references, completed over the last three years, for similar work.

After evaluating competitive proposals, the SBA announced that Charitar Realty was the apparent successful offeror.  An unsuccessful competitor then filed a size protest.  Although the size protest was found to be untimely, the SBA believed that the protest raised valid concerns.  The Director of the SBA’s Fresno District Office initiated his own size protest against Charitar.

Charitar’s proposal identified itself as the prime contractor and Zero Waste Solutions, Inc. as its subcontractor.  ZWS was the incumbent contractor, but had graduated from the 8(a) Program and was not eligible for the follow-on contract.

The proposal stated that “the allocation of financial risk, responsibility, and profit sharing will be 51% [Charitar] and 49% [ZWS].”  The proposal included three past performance references: two for ZWS and one for Charitar.  The project performed by Charitar was much smaller in scope and value.

The proposed Project Manager was a current employee of ZWS, who had agreed to move to Charitar’s payroll if Charitar won the prime contract.  Additionally, the SBA Area Office found that Charitar’s “entire workforce” would be hired from ZWS.

The SBA Area Office determined that Charitar was unusually reliant upon ZWS.  The SBA Area Offices deemed the firms affiliated under the ostensible subcontractor rule.  The affiliation caused Charitar to be ineligible for award.

Charitar appealed to OHA.  Charitar argued that the SBA Area Office had erred by finding a violation of the ostensible subcontractor rule.

OHA began its opinion by reiterating that the ostensible subcontractor rule “provides that when a subcontractor is performing the primary and vital requirements of the contract, or when the prime contractor is unusually reliant upon the subcontractor, the two firms are affiliated for purposes of the procurement at issue.”  The rule is intended ” to prevent [large] firms from forming relationships with small firms to evade SBA’s size requirements.”

To determine whether a relationship violates the ostensible subcontractor rule, the SBA Area Office “must examine all aspects of the relationship, including the terms of the proposal and any agreements between the firms.”  However, OHA’s prior case law has “identified ‘four key factors’ that have contributed to the findings of unusual reliance.”  OHA explained that those four factors are:

(1) the proposed subcontractor is the incumbent contractor and is ineligible to compete for the procurement; (2) the prime contractor plans to hire the large majority of its workforce from the subcontractor; (3) the prime contractor’s proposed management previously served with the subcontractor on the incumbent contract; and (4) the prime contractor lacks relevant experience and must rely upon its more experienced subcontractor to win the contract.

When these four factors are present, “violation of the ostensible subcontractor rule is more likely to be found if the proposed subcontractor will perform 40% or more of the contract.”

In this case, all four of the “key factors” were present.  ZWS was “ineligible to submit its own proposal” under the solicitation.  Charitar “will staff its portion of the contract almost entirely with personnel hired from ZWS.”  Charitar proposed “a ZWS employee to manage the contract” as Charitar’s Project Manager.  And although Charitar had some experience in the industry, Charitar produced no evidence that it had “ever performed” a contract of the size defined as “Similar Work” in the solicitation.  Finally, ZWS was proposed to perform 49% of the work, “a larger proportion than the 40%” that heightens the risk of ostensible subcontractor affiliation.

OHA affirmed the SBA Area Office’s size determination.

Ostensible subcontractor affiliation is intensely fact-specific, and the SBA will examine the totality of the relationship between the parties.  But as the Charitar Realty case demonstrates, the risk of ostensible subcontractor affiliation increases significantly where the “four key factors” identified in the case are present–particularly where the subcontractor will perform more than 40% of the work.

Because ostensible subcontractor affiliation is so fact-specific, it’s difficult to be 100% sure that any specific relationship will pass muster.  That said, avoiding the four key factors will likely go a long way toward showing the SBA that there has been no ostensible subcontractor violation.


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Koprince Law LLC

When multiple unsuccessful offerors protest a solicitation, the GAO ordinarily will dismiss any and all bid protests associated with the procurement in the event one unsuccessful offeror takes its case to federal court–even if some protesters would prefer to remain at the GAO.

As one federal contractor recently learned in Colleague Consulting, LLC—Reconsideration, B-413156.18 (Sept. 12, 2016), the GAO’s jurisdictional rules prevent it from deciding protests when the outcome of the protest could be affected by a pending federal court decision.

Colleague Consulting involved a competition for a GSA contract. Colleague Consulting, LLC was eliminated from the pool of successful offerors because its proposal was deemed technically unacceptable. After learning of its exclusion, CCL filed protest with the GAO.

Separately, another unsuccessful offeror under the same solicitation filed a bid protest before the GAO challenging the GSA’s decision not to conduct discussions. After a time, that second unsuccessful offeror withdrew its protest from the GAO and refiled it before the U.S. Court of Federal Claims.

One of the goals of the GAO protest process is to give government contractors an administrative alternative to pursuing their bid protests in federal court. The GAO process, by design, is typically faster and less expensive than pursuing a protest in court (though not always). Despite this option, contractors also are afforded the opportunity to pursue bid protests at the Court of Federal Claims.

Because both the GAO and the Court of Federal Claims are authorized to decide bid protests, there is the possibility that different adjudicators will come to differing—and potentially contradictory—conclusions. To prevent such an outcome, the GAO’s jurisdictional regulations, at 4 C.F.R. § 21.11(b), state that “GAO will dismiss any case where the matter involved is the subject of litigation before, or has been decided on the merits by, a court of competent jurisdiction.”

Returning to Colleague Consulting, after the GAO received notice of the Court of Federal Claims protest, determined that “disposition of the COFC case could render a decision by our Office on CCL’s protest academic.” The GAO dismissed CCL’s protest, citing 4 C.F.R. § 21.11(b).

CCL filed a motion for reconsideration, urging the GAO to reverse its decision and continue hearing its protest. CCL argued that the word “matter” within  4 C.F.R. § 21.11(b) should be construed narrowly to mean that the GAO must dismiss a protest only where the arguments before the GAO and Court are similar. In this case, CCL argued, the arguments were entirely dissimilar: CCL was protesting its technical evaluation whereas the other unsuccessful offeror was protesting the GSA’s decision not to hold discussions.

The GAO disagreed.  It wrote:

While the word ‘matter’ is not defined, there is nothing in the language of the regulation, or elsewhere, to suggest that it is meant to apply to the exact narrow issue involved in the protest before our Office. Instead, the matter before the court can properly be characterized as a dispute over which companies should have remained in the competition under the GSA solicitation. While that matter remains before the [federal court], GAO will not also decide the question.

GAO denied CCL’s request for reconsideration.

In today’s contracting environment, it is not uncommon for more than one offeror to pursue a protest over the same procurement. With each offeror being able to choose where it wants to file (i.e. GAO or the Court of Federal Claims), an offeror wishing to use the GAO’s administrative processes may nonetheless be out of luck if a competitor chooses the Court.

Ian Patterson, a law clerk with Koprince Law LLC, was this post’s primary author.


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Koprince Law LLC

Resolving a protest challenging a past performance evaluation, GAO is deferential to the agency’s determinations. It is primarily concerned with whether the evaluation was conducted fairly and in accordance with the solicitation’s evaluation criteria; if so, GAO will not second-guess the agency’s assessment of the relevance or merit of an offeror’s performance history.

For protesters, therefore, challenging an agency’s past performance evaluation can be difficult. But a recent decision makes clear this task is not impossible—GAO will sustain a protest challenging a past performance evaluation if the agency treats offerors differently or unfairly, such as by more broadly reviewing the awardee’s CPARs than the CPARs of the protester.

At issue in CSR, Inc., B-413973 et al. (Jan. 13, 2017) was the Department of Justice’s evaluation and award of a blanket purchase agreement to Booz Allen Hamilton. The BPA sought performance measurement tool services for the Office of Justice Programs, to assist with the Office’s award of grants to federal, state, local, and tribal agencies for criminal justice, juvenile justice, and victims’ matters.

According to the solicitation, offerors were allowed to submit up to nine past performance examples. DOJ could supplement this information with “data obtained from other sources, including, but not limited to, other DOJ and OJP contracts and information from Government repositories[.]” CSR (the protester) submitted six past performance examples, three of which concerned task orders involving similar services previously performed for the agency.

Booz Allen scored an exceptional rating while CSR earned only an acceptable rating. CSR filed a GAO bid protest, alleging that these ratings were caused by DOJ’s disparate treatment of the offerors.

CSR contended that DOJ only considered CPARs for CSR’s submitted past performance examples (finding the quality of CSR’s prior work to be mixed) but considered Booz Allen’s CPAR ratings for past performance projects that were not identified in its proposal (finding them to be of high quality). CSR alleged that had DOJ considered CPARs for its other projects (as it had for Booz Allen), its past performance score would have been higher.

GAO found the past performance evaluation to be unequal. In doing so, GAO noted that it will not normally object to an agency’s decision to limit its review of past performance information. But this discretion comes with a large caveat—as a fundamental matter of fairness, offerors must be evaluated on the same basis and the evaluation must be consistent with the solicitation’s terms. Explaining its decision, GAO wrote:

[T]he agency’s evaluation of CSR’s past performance was based on only the most recent CPARs for those specific projects identified by the vendor in its quotation. However, when evaluating BAH’s past performance, the agency considered CPARs for other than the specific projects that BAH had identified in its quotation. . . . Quite simply, to the extent that the agency’s past performance evaluation of BAH considered CPARs for other than the projects specifically referenced by the awardee in its quotation, the agency was required to do the same when evaluating CSR’s past performance. As the agency was required to treat vendors equally and evaluate past performance evenhandedly, and failed to do so here, the agency’s actions were disparate and unreasonable.

GAO sustained CSR’s protest.

Though agencies typically enjoy discretion in evaluating past performance, CSR confirms that this discretion isn’t unlimited. Agencies must evaluate offerors fairly. This means that, if an agency considers a broad range of CPARs from one offeror, it must consider a similar range of CPARs for other offerors, too.


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It’s been a very busy week in government contracting with the SBA issuing its final rule on the small business mentor-protege program. It has given us here at Koprince Law a lot to read over and blog about so that SmallGovCon readers can stay abreast of all of the changes packed inside this lengthy document.

But as important as the mentor-protege rule is for small and large contractors alike, it’s not the only government contracts news making headlines this week.  In this week’s SmallGovCon Week in Review, you’ll find articles on proposed new whistleblower protections, opportunities for small businesses at the close of the fiscal year, significant pricing discrepancies under GSA Schedule contracts, and much more.

  • A new bipartisan measure would give subgrantees and personal services contractors the same whistleblower protections currently afforded contractors, grant recipients  and subcontractors. [Government Executive]
  • An advocacy group for small businesses is once again claiming that  giant corporations are reaping billions from federal small business contracts. [Mother Jones]
  • It’s not too late to get in on the fourth quarter government spending bonanza so long as you are a company that has some prospects in the pipeline. [Federal News Radio]
  • DoD’s new procurement evaluation process is moving toward objectivism and a more mathematical system of judgement, as part of an overall shift in favor of Lowest Price Technically Available evaluations.  [Federal News Radio]
  • Officials at five Army components failed to fully comply with rules for evaluating contractors’ past performance when awarding those firms work. [Government Executive]
  • An audit report shows that Army officials did not consistently comply with requirements for assessing contractor performance. [Office of Inspector General]
  • IT reseller contracts present significant challenges for the GSA’s schedules program, according to a GSA IG report. [Office of Inspector General]
  • Nearly half of the Democratic House caucus asked defense authorization conferees to remove “harmful language” narrowing the application of the Fair Play and Safe Workplaces executive order. [Bloomberg BNA]
  • Small businesses can find plenty of opportunities as the curtain comes down on the federal fiscal year. [Government Product News]
  • An update to the Freedom of Information Act was signed into law earlier this month and mandates a presumption of openness, and adds new appeal rights for citizens whose requests are denied. [Federal News Radio]

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Koprince Law LLC

Ordinarily, whether an offeror’s proposed personnel actually perform under a contract is a non-protestable matter of contract administration. But GAO will consider the issue when an offeror proposes personnel that it did not have a reasonable basis to expect to provide during contract performance in order to obtain a more favorable evaluation. Such a “bait and switch” amounts to a material misrepresentation that undermines the integrity of the procurement and evaluation.

That’s exactly what happened in a recent protest, where the GAO disqualified the awardee from competition after determining that its proposal misrepresented the incumbent employees’ availability to continue working under the contract.

At issue in Patricio Enterprises, Inc., B-412738 et al. (May 26, 2016) was a task order solicitation to provide support for five product management teams for the Marine Corps’ Program Manager, Infantry Weapons Systems. Patricio and Knowledge Capital Associates (“KCA”) were each incumbents for some of these requirements under different existing task orders. The solicitation combined those services and contracts into one procurement.

The solicitation had three evaluation criteria: Management and Staffing Capability, Past Performance, and Price. The first (and most important) factor was comprised of two subfactors (Management and Staffing Capability). Under the Staffing Capability subfactor, offerors were required to provide a detailed approach to staffing that met the PWS requirements, and to provide detailed information (such as labor qualifications, proposed labor categories, and organizational structure) for its key personnel and other staff. The agency would then evaluate this subfactor by reviewing the “capabilities, qualifications, and experience of each offeror’s proposed key personnel” and the processes, resources, and organizational structure necessary to support the PWS tasks. The Government would also evaluate the offeror’s “approach to providing staffing necessary to achieve full performance by month five[.]”

Patricio and KCA timely submitted offerors, which were rated equally under the Management and Staffing Capability and Past Performance factors. Because KCA’s price was almost $5 million less than Patricio’s, KCA was named the awardee.

After Patricio’s attorneys obtained a copy of KCA’s proposal (probably as part of the Agency Report responding to Patricio’s initial protest), Patricio challenged KCA’s staffing approach. KCA, in short, touted its ability to begin work on “day one without missing a beat[.]” KCA further promised 100% staffing on “the very next day” following expiration of the existing support contracts.

KCA’s aggressive transition plan was based in part on KCA’s representations that it would employ incumbent personnel under its award. KCA went so far as to claim it had “signed contingent offers for select personnel” working for other companies (including Patricio) under incumbent contracts, and that these individuals “will be available at the immediate start of the Task Order.”

These representations, though, were (at best) misleading. Patricio produced sworn statements from its employees that were specifically named in KCA’s proposal, in which each person “stated that he or she had not been contacted by the awardee regarding potential employment for the PM IWS task order prior to the time for submission of proposals.”

In its own comments, KCA did not dispute these sworn declarations. Instead, KCA justified its proposal on the basis of discussions with Patricio employees, which led KCA to believe that the Patricio personnel identified in its proposal “would likely be willing to work for KCA in the event it was awarded the task order.” KCA claimed that its reference to “signed contingent offer letters” was misunderstood: according to KCA, this reference simply meant that the letters were prepared and signed by KCA’s president, not that the prospective personnel had signed them (or were even aware of them).

GAO found KCA’s reference to “signed contingent offers” and “signed contingent employment letters” to be an attempt to mislead the agency about KCA’s readiness to perform. GAO wrote that these references “appear[] purposefully crafted to convey that there had been communications with the individuals in question.” KCA’s apparent intent to later attempt to hire these individuals did not excuse this misrepresentation because “regardless of KCA’s intent to hire the individuals named in the proposal, the proposal misrepresented the commitment of the non-KCA employees to work for the awardee.”

KCA’s misrepresentation, moreover, impacted the Marine Corps’ evaluation. According to GAO, KCA earned a strength for its staffing approach and transition approach, which was based in part on KCA’s “approach to providing personnel, including key personnel, who would be capable of performing the work, and would be available at the start of performance.” Absent KCA’s pledge to provide incumbent staffing, it is unlikely that it would have been assessed such a strength.

GAO sustained Patricio’s protest. It also recommended that KCA be excluded from the competition:

[E]xclusion of an offeror from a competition is warranted where it made a material misrepresentation in its proposal and where the agency’s reliance on the misrepresentation had a material effect on the evaluation results. As our Office has stated, where an offeror’s material misrepresentation has a material effect on a competition, the integrity of the procurement system “demands no less” than the remedy of exclusion.

Patricio serves as a cautionary reminder: though offerors might want to increase their chances of award by hyping (or puffing) their abilities, going too far might amount to material misrepresentations. Here, the GAO found that KCA crossed the line–and deserved to be excluded.


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With the finalization of the new SBA Small Business Mentor Protégé Program, other agencies without statutorily-authorized mentor-protege programs must seek SBA approval of their mentor-protege programs within one year, if they wish those programs to continue.

In a final rule scheduled to be effective August 24, 2016, the SBA questioned the need for other agencies (except the Department of Defense) to continue to operate their own mentor-protege programs, but provided a road map for agencies to preserve their separate mentor-protege programs if they wish.

 

As we have discussed in detail on SmallGovCon, the new “universal” small business mentor-protégé program establishes a government-wide program open to all small businesses, consistent with the SBA’s mentor-protégé program for participants in SBA’s 8(a) Program. But the final rule doesn’t just add a new SBA mentor-protege program–it may also signal the end of many other Federal mentor-protege programs.

Under the final rule, a Federal department or agency can no longer operate its own mentor-protégé program, unless: 1) the agency submits a program plan to the SBA, and 2) receives the SBA Administrator’s approval of the plan within one year of the SBA’s mentor-protégé regulations finalization. The requirement for SBA approval does not apply to DoD, which has special statutory authority to operate its own mentor-protege program. However, the SBA approval requirement does apply to most other Federal mentor-protege programs, including those operated by the VA, NASA, DHS, State Department, and so on.

The SBA “received only a few comments” regarding the proposal to require most agencies to obtain SBA approval to continue independent mentor-protege programs. These commenters “agreed with the statutory provisions in questioning the utility of other Federal mentor-protege programs” now that the SBA has established a mentor-protege program open to all small businesses. However, commenters raised two specific concerns about the potential phase-out of other agencies’ mentor-protege programs: 1) Would the new regulations be a disincentive for mentors to utilize their protégés as subcontractors? And, 2) would the SBA have the necessary resources to handle mentor-protégé applications for the entire government?

Many of the other agency-specific mentor-protégé programs incentivize mentors to utilize their protégés as subcontractors. For example, some agencies provide additional evaluation points to a large business submitting an offer on an unrestricted procurement where the large business is using its protege as its subcontractor. Other agencies give a large prime contractor additional credit toward its subcontracting plan goals where the large prime contractor uses its protege as a subcontractor.

The SBA acknowledged that the new small business mentor-protege program “assume more of a prime contractor role for proteges, but would also encourage subcontracts from mentors to proteges as part of the developmental assistance that proteges receive from their mentors.” The SBA declined to adopt specific subcontracting incentives as part of its final rule, but will allow individual procuring agencies the flexibility to do so. The SBA writes:

SBA believes that it is up to individual procuring agencies whether to provide subcontracting incentives for any specific procurement, SBA also believes that these incentives should be authorized and used, where appropriate. As such, this final rule identifies subcontracting incentives as a possible benefit to be provided by procuring activities in appropriate circumstances. The final rule authorizes procuring activities to provide incentives in the contract evaluation process to a firm that will provide significant subcontracting work to its SBA-approved protégé firm.

With respect to the processing of mentor-protege applications, the SBA writes that it is “working to adequately process mentor-protege applications,” but if it is unable to handle the volume of applications and agreements, the SBA may institute “open” and “closed” periods wherein the SBA would only accept mentor-protégé applications in the “open” periods. Since the SBA itself is unable to predict whether it will have the resources to process mentor-protege applications year-round, other agencies will have to decide for themselves whether this uncertainty is a reason to maintain separate mentor-protege programs.

The government’s mentor-protege programs have been in a state of flux since early 2013, when Congressfirst directed the SBAto adopt rules governing other agencies’ mentor-protege programs. In 2017, we should finally get some long-awaited clarity as to whether other agencies’ mentor-protege programs will continue.

 

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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 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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For Federal Supply Schedule procurements, agencies are not required to evaluate past performance references of subcontractors, unless the solicitation provides otherwise.

As one offeror recently discovered in Atlantic Systems Group, Inc., B-413901 (Jan. 9, 2017), unlike negotiated procurements, where agencies “should” evaluate the past performance of subcontractors that will perform major or critical aspects of the contract, offerors bidding under FSS solicitations should not assume that a subcontractor’s past performance will be considered.

Atlantic Systems involved a solicitation for technical, engineering, management, operation, logistical, and administrative support for the Department of Education’s cybersecurity risk management program. The solicitation was set aside for SDVOSB concerns that held Schedule 70 contracts.

Pursuant to the solicitation, offerors were to be evaluated for both corporate experience and past performance. In order to enable the agency to conduct the past performance/experience evaluation, each “offeror” was to provide evidence of the experience “of the organization” with similar projects or contracts.

For corporate experience, offerors were to provide between 3 and 5 performance examples that demonstrated the offeror’s capabilities “with similar projects or contracts, in terms of the nature and objectives of the project or contract; types of activities performed; studies conducted; and major reports produced.” Similarly, under the past performance factor, offerors were to provide between 3 and 5 performance examples “performed in the past [3] years that were similar in size, scope, and complexity” to the solicitation. The solicitation did not specify how the agency would treat a subcontractor’s past performance.

Under both corporate experience and past performance categories, Atlantic Systems provided two examples of its own performance and two examples from its subcontractor. In its evaluation, the agency did not consider the subcontractor’s past performance. Rather, “since the solicitation asked for experience and past performance for the organization, offeror, the agency only considered the information provided for the entities in whose name the offers were submitted.” Based in part on this determination, the agency rated Atlantic Systems as “does not possess” for corporate experience, and “neutral” for past performance. The agency awarded the order to a competitor.

Atlantic Systems filed a bid protest at GAO. Atlantic Systems contended, in part, that the agency had erred by failing to consider the past performance and experience of its subcontractor. Atlantic Systems pointed out that in a prior bid protest, Singleton Enterprises, B-298576 (Oct. 30, 2006), GAO sustained the protest, holding that the solicitation contained a “latent defect”: the agency had reasonably concluded that “offeror” meant only the prospective prime contractor; the protester had reasonably believed otherwise.

But Singleton was a negotiated procurement; offers were evaluated under FAR Part 15. FAR 15.305(a) states that agencies “should” consider the past performance of a subcontractor that will perform major or critical aspects of the contract. FAR 15.305(a) was central to GAO’s ruling in Singleton, because it created a reasonable expectation that a subcontractor’s past performance would be considered.

Here, in contrast, “the solicitation was issued pursuant to FAR part 8,” which applies to FSS procurements. FAR Part 8 “does not suggest that in evaluating an offeror’s past performance an agency should also consider the past performance of its proposed subcontractors.” Accordingly, “we do not find that the solicitation here is ambiguous, and it was reasonable for the agency to consider the experience and past performance of the offeror (i.e., the entity that submitted the offer) and not its subcontractors.”

As a policy matter, it’s fair to wonder if the underlying rule for consideration of a subcontractor’s past performance should vary depending on which Part of the FAR applies to the acquisition. But as a practical matter, Singleton Enterprises stands for an important principle: if an FSS solicitation does not specifically indicate that a subcontractor’s past performance will be considered, there is no guarantee that it will be.


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Two Missouri men have been indicted for allegedly perpetrating an SDVOSB “rent-a-vet” scheme to fraudulently obtain 20 contracts totaling more than $13.8 million.

According to a Department of Justice press release, the veteran in question nominally served as the company’s President, but did not control the company’s strategic decisions or day-to-day management–in fact, the veteran apparently was working full-time for the DoD instead of managing the SDVOSB.

The indictment contends that Jeffrey Wilson, who is not a service-disabled veteran, owned a Missouri-based construction company.  According to the DOJ, Wilson conspired with Paul Salavtich, a service-disabled veteran, to obtain SDVOSB set-aside contracts with the VA and Army.

Salavitch was nominally the President of his company, Patriot Company, Inc.  However, the DOJ contends, Mr. Salavitch did not actually manage Patriot’s long-term decisions or day-to-day operations, nor did he work full-time for Patriot.  Instead, Salavitch was a full-time employee with the DoD, based in Leavenworth, Kansas.  The indictment suggests that Mr. Wilson, not Mr. Salavitch, actually controlled the company.

The indictment is rife with examples of conduct that appear to suggest that the conspirators knew that what they were doing was wrong–and were taking steps to try to hide it.  For example, when Patriot was leasing new space, Mr. Wilson stated in an email that he wanted a “thing or two” from Mr. Salavitch “to put in that office that is personal.”  Mr. Wilson stated that the purpose of obtaining these personal items was so “if one stepped into [the office], it would look and feel like Patriot.”

It will be up to a judge or jury to decide why Mr. Wilson made statements like these, but here’s one guess: Mr. Wilson was aware that the VA Center for Verification and Evaluation performs unannounced on-site visits, and, for the benefit of potential VA inspectors, was attempting to create the impression that Mr. Salavitch actually worked out of the Patriot office.

The indictment alleges that Patriot was awarded 20 SDVOSB and VOSB set-aside contracts with the VA and Army, totaling $13,819,522.  The contracts included construction projects across the Midwest; the largest contract was $4.3 million.

Mr. Wilson, Mr. Salavitch and Patriot are charged with conspiracy and four counts of major government contract fraud.  Mr. Wilson is also charged with one count of wire fraud and two counts of money laundering.  The indictment contains forfeiture obligations, which would require Mr. Wilson and Mr. Salavitch to forfeit any property derived from the proceeds of the fraud scheme.  Law enforcement has already seized over $2 million from various financial accounts.

As with any indictment, the defendants are entitled to a presumption of innocence.  But if Mr. Wilson and Mr. Salavitch are found guilty, perhaps they will find themselves better acquainted with Leavenworth than they would have hoped.  I’ll keep you posted.


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Having been a part of the federal contracting community for close to 30 years, I’ve seen quite a few changes in policy and process that have both improved and degraded the ability of small business concerns to participate as contractors and subcontractors. I’m not referring solely to changes where the language targeted small business, I’m also including those intending to change how business is done based on a specific commodity, contract cost type, procurement method, agency mission or government-wide initiative.

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In this, my first contribution to GovCon Voices, I’m taking a look back at recent proposed changes that resulted in lots of conversations with my friend Steve Koprince, a slew of articles and blogs and way too many anxious moments awaiting the outcomes. This is the first of a three part series I’m calling ‘The Good, the Bad and the Just Plain Ugly Changes That Almost Were!’

 The Just Plain Ugly

The 2017 NDAA was chock full of changes that included:

  • DoD having the option to forego price or cost evaluation for certain multiple-award contracts;
  • GAO being mandated to provide Congress a list of the most common grounds for sustaining protests;
  • A pilot program for certain small subcontractors to receive past performance ratings;
  • Requiring justification for ‘Brand Name or Equivalent’ purchases, and;
  • Strengthening small business subcontracting plan enforcement, just to name a few.

One of the intended changes that died in conference was the provision introduced as Section 838 of the Senate version. Its name was “Counting of major defense acquisition program subcontracts toward small business goals.” and the very negative effects of this rule would be catastrophic to small business, if enacted.

guy-img-2.jpgNot familiar with Major Defense Acquisition Programs or MDAP? Think of program names like Global Hawk, the Presidential Helicopter, Arleigh Burke Class Destroyer, Littoral Combat Ship and more. Each of these and numerous other MDAP programs are critical to our Nation’s security. As a result, collectively thousands of small business subcontractors capturing tens of billions of dollars in revenues are engaged. Had this provision made it into the 2017 NDAA, the Department of Defense would be able to include 1st and 2nd tier subcontract dollars, reported by MDAP prime contractors, towards the Department’s overall small business set-aside goals. In short, DoD could reduce set-aside award dollars by replacing them with dollars that may have been awarded to small businesses via subcontracts.

The scenario represented potential lost dollars to small contractors starting in the area of $18,000,000,000 based on DoD’s FY16 OUSD Comptroller/CFO publication that indicated Major Defense Acquisition Programs (MDAPs) and Major Automated Information Systems (MAIS) accounted for 43% of the requested $177.7B. If we take 23% of $76B (the MDAP/MAIS portion of the OUSD FY16 request) what we end up with is the amount of set-aside obligations DoD would not have to issue in FY17 and beyond. The amount is effectively 1/3 of the dollars awarded to small business via set-aside or sole-source in FY2016. Let that sink in.

In the spaghetti western movie ‘The Good, the Bad and the Ugly’ there is a line I find very relevant to this legislative near-miss. It goes like this:

“In this world there’s two types of people my friend.
Those with loaded guns and those who dig. You dig.”

I’m beyond overjoyed this piece of legislation had to dig and I hope it stays buried.

Your comments and questions are always welcome! Stay tuned for ‘The Bad’ change that almost was.

Peace!

Guy Timberlake, The Chief Visionary
http://www.theasbc.org | @theasbcguy | @govconguy |@govconchannel

“The person who says it cannot be done should not interrupt the person doing it.”


Guy Timberlake, Chief Visionary Officer and Co-Founder,
The American Small Business Coalition, LLC
(410) 381-7378 x200 | founder@theasbc.org

‘Go-To’ Guy Timberlake is an accomplished veteran of federal contracting with nearly 30 years of experience, knowledge and relationships acquired in support of civilian, defense and intelligence agency programs since Operation Desert Storm. He’s called ‘Edutainer’ for his ability to make mundane discussions about business essential topics (like finding and winning federal contracts and subcontracts!) interesting, and presenting them so they are practical and sticky. Most important is that Guy is a devoted husband, a proud father and loves pizza night with his family and friends. ‘Go-To-Guy’ is the nickname given to him by his defense customers in the 1990’s.

GovCon Voices is a regular feature dedicated to providing SmallGovCon readers with candid news, insight and commentary from government contracting thought leaders.  The opinions expressed in GovCon Voices are those of the individual authors, and do not necessarily reflect the opinions of Koprince Law LLC or its attorneys.


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Debriefings play a vital role in the procurement process. When conducted fully and fairly, a debriefing provides an offeror with valuable insight into the strengths and shortcomings of its proposal, thus enabling the offeror to improve its offering under future solicitations. But when an agency provides only a perfunctory debriefing, the process can be virtually worthless–and may actually encourage an unsuccessful offeror to file a bid protest.

With this in mind, the Office of Federal Procurement Policy recently issued a memorandum that urges agencies to strengthen the debriefing process. In doing so, OFPP has encouraged agencies to adopt a debriefing guide that will help facilitate effective and efficient debriefings.

FAR 15.506, which governs the post-award debriefing process, provides only general guidance as to the information that must be included in a debriefing. Basically, agencies need only provide minimal information about the award decision, including the evaluation of a proposal’s significant weaknesses or deficiencies and a “summary of the rationale for award.” The FAR prohibits an agency from providing a point-by-point comparison of proposals, or any information that can be deemed as confidential, proprietary, or as a trade secret. Given these restrictions, and considering that agencies are often tasked with debriefing numerous offerors under a solicitation (including the awardee), debriefings can devolve into little more than a notation of the offeror’s score and the awardee’s price.

Written as part of its “myth-busting” series on issues under federal contracting, OFPP’s memorandum explains the importance of effective debriefings:

Debriefings offer multiple benefits. They help vendors better understand the weaknesses in their proposals so that they can make stronger offers on future procurements, which is especially important for small businesses as they seek to grow their positions in the marketplace. In addition to contributing to a potentially more competitive supplier base for future work, debriefings allow agencies to evaluate and improve their own processes.

Despite these benefits, agencies often skimp on the information provided to offerors in a debriefing by providing only the bare minimum required under the FAR. In doing so, an agency may assume that it is limiting its exposure to a post-award protest, by limiting the information (or ammunition) available to a potential protester. OFPP’s memorandum addresses this myth head-on:

[A]gencies that conduct quality debriefings have found a decreased tendency by their supplier base to pursue protests. Studies of the acquisition process have observed that protests may be filed to get information—information that could have been shared during a debriefing—about the agency’s award decision to reassure the contractor that the source selection was merit-based and conducted in an impartial manner.

Offerors—who spend a tremendous amount of time and money to prepare their proposals—are entitled to a debriefing that adequately explains the strengths and weaknesses of their effort and confirms that a fair selection occurred. But agencies are too often quick to limit the information provided in debriefings, in the misguided effort to limit potential protests. OFPP’s memorandum addresses this disconnect, by explaining that an effective debriefing actually tends to lower the risk of a protest.

In our experience, OFPP’s memorandum is spot-on. My colleagues and I frequently speak with clients who are very frustrated with the scant information provided in debriefings. Perception matters in government contracting, and cursory debriefings can appear disrespectful of the time and effort that an offeror puts into its proposal. Worse, bare-bones debriefings can give the impression that the agency has something to hide. In many cases in which we’ve been involved, the agency likely could have avoided a protest if it had provided a comprehensive debriefing. And on the flip side, we have seen many other cases in which a client was initially eager to protest, but changed its mind after a thorough debriefing.

As we recently noted, Congress has also required DoD to analyze and address the effect of the quality of a debriefing on the frequency of bid protests. Hopefully this requirement, together with OFPP’s memorandum, will encourage agencies to make the most of the debriefing process.


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An incumbent contractor won a protest at GAO recently where it argued that the awardee’s labor rates were too low, because they were lower than the rates the incumbent itself was paying the same people.

GAO faulted the agency for concluding that the awardee’s price was realistic without checking the proposed rates against the incumbent rates. In other words, GAO told the agency to start at the obvious place—the compensation of the current employees.

The decision in SURVICE Engineering Company, LLC, B-414519 (July 5, 2017) involved a price realism analysis of rates proposed for workers to provide engineering, program management, and administrative services at Eglin Air Force Base. (Steve Koprince blogged about the unequal evaluation component of this case here.)

The solicitation called for a fixed-price labor-hour contract and required offerors to submit a professional compensation plan. The Air Force said it would evaluate the plan pursuant to FAR 52.222-46, which includes a price realism component.

Price realism, for the uninitiated, is an evaluation of whether an offeror’s price is too low. In the context of a fixed-price labor hour contract like the Air Force solicitation, “this FAR provision anticipates an evaluation of whether an awardee understands the contract requirements, and has proposed a compensation plan appropriate for those requirements.”

The Air Force initially concluded that the price proposed by Engineering Research and Consulting Inc., or ERC, was too low, comparing the price to “Government estimates.” But after discussions and revisions, the agency decided that the revised salary ranges were acceptable. The Air Force awarded the contract to ERC.

The protester, SURVICE Engineering Company, LLC, as the incumbent, obviously knew what it was currently paying the employees who were doing the work. SURVICE figured that the only way ERC could have proposed such a low price was to slash compensation. In fact, ERC had proposed exactly that, but still said it would retain many of the incumbent personnel. (GAO has previously noted that proposing to capture incumbents but pay lower rates brings up obvious price realism concerns.)

SURVICE argued that the evaluation was unreasonable because the agency did not evaluate the complete plan, did not compare the plan to incumbent rates, and still found ERC’s proposal acceptable.

GAO agreed, stating that “the record is silent as to whether, in the end, any of ERC’s rates were lower than incumbent rates but nevertheless acceptable to the Air Force.”

It concluded, “the Air Force did not reasonably compare ERC’s salaries to incumbent salaries, a necessary step to determine whether the proposed salaries are lower than incumbent salaries. Accordingly, we find that the agency failed to reasonably evaluate whether ERC offered ‘lowered compensation for essentially the same professional work,’ as envisioned by FAR provision 52.222-46. We therefore sustain this aspect of [SURVICE]’s protest.”

SURVICE won this aspect of the protest because GAO faulted the Air Force for not taking an obvious step, but it is also a good reminder that seeking to underbid the competition by slashing incumbent pay rates can raise significant price realism concerns.


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The ongoing federal movement to prevent fraud waste, and abuse in the contracting process continues. And as demonstrated in a recent federal court decision, the government retains its ability to refuse to pay a procurement contract tainted by fraud.

In the recent decision of Laguna Construction Company, Inc. v. Ashton Carter, Appeal Number 15-1291, the U.S. Court of Appeals for the Federal Circuit affirmed that a procurement contract tainted by violations of the Anti-Kickback Act is voidable under the doctrine of prior material breach.

In 2003, the government awarded Laguna Construction Company a contract to perform work in Iraq. Under the contract, Laguna received 16 cost-reimbursable task orders to perform the work, and awarded subcontracts to a number of subcontractors.

In 2008, the government began investigating allegations that Laguna’s employees were engaged in kickback schemes with its subcontractors. In October 2010, Laguna’s project manager pleaded guilty to conspiracy to pay or receive kickbacks, conspiracy to defraud the United States, and violations of the Anti-Kickback Act, which broadly prohibits prime contractors from soliciting or accepting kickbacks in exchange for awarding subcontracts. The project manager admitted that, for approximately three years, he allowed subcontractors to submit inflated invoices to Laguna, and profited from the difference.

In February 2012, three principal officers of Laguna were charged with receiving kickbacks for awarding subcontracts. The company’s Executive Vice President and Chief Operating Officer also was charged with conspiring to defraud the United States by participating in a kickback scheme from December 2004 to February 2009, which he pleaded guilty to in July 2013.

After performing work until 2015, Laguna sought payment of past costs. The government refused a portion of these costs alleging that it was not liable because Laguna had committed a prior material breach by accepting subcontractor kickbacks under the contract. The Armed Services Board of Contract Appeals agreed, stating that Laguna “committed the first material breach under this contract, which provided the government with a legal excuse not to pay [Laguna’s] invoices.”

Laguna appealed to the Federal Circuit.  Laguna argued, in part, that any alleged breach was not material because the Government may audit and reconcile costs, thereby “assur[ing] that the Government will incur no damages.”

The Federal Circuit explained that, the prior material breach doctrine, a contractor’s claim against the government may be barred when the contractor breaches the contract through “fraud-based” contract.”  The court further explained that its decision comported with the Supreme Court’s instruction “that the government must be able to ‘rid itself’ of contracts that are ‘tainted’ by fraud, including kickbacks and violation of conflict-of-interest statutes,” citing to the Supreme Court’s prior rationale that:

[E]ven if the Government could isolate and recover the inflation attributable to the kickback, it would still be saddled with a subcontractor who, having obtained the job other than on merit, is perhaps entirely unreliable in other ways. This unreliability in turn undermines the security of the prime contractor’s performance–a result which the public cannot tolerate, especially where, as here, important defense contracts are involved.

In this case, the court wrote that Laguna “committed the first material breach” by agreeing to accept kickbacks from its subcontractors. The court held that “[t]he Board properly determined that these criminal acts constituted material breach that may be imputed to Laguna, since both employees were operating under the contract and within the scope of their employment when they ‘manipulated the contracting process.'”  The court denied Laguna’s appeal, and affirmed the ASBCA’s decision.

This decision provides a cautionary example of one of the many risks involved in accepting kickbacks for awarding subcontracts. The Anti-Kickback Act continues to provide for criminal, civil, and administrative penalties–and some of those penalties were assessed against Laguna’s employees. But the Laguna case demonstrates that violations of the Anti-Kickback Act (and other fraud-based breaches of a government contract) also may excuse the government from paying a contractor’s claim for additional contract costs.


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When issues arise in performance of a federal contract, a contractor may seek redress from the government by filing a claim with the contracting officer. However, commencing such a claim may result in an exercise of patience and waiting by the contractor.

The Contract Disputes Act, as a jurisdictional hurdle for claims over $100,000, requires a contractor to submit a “certified claim” to the agency. The CDA also requires the contracting officer, within sixty days of receipt of a certified claim, to issue a decision on that claim or notify the contractor of the time within which the decision will be issued.

That second part of the equation can lead to some frustration on the part of contractors. As seen in a recent Civilian Board of Contract Appeals decision, a contracting officer may, in an appropriate case, extend the ordinary 60-day time frame by several months.

In Stobil Enterprise v. Department Veterans Affairs, CBCA No. 5616 (2017), the VA awarded Strobil a contract to provide housekeeping and dietary services for an inpatient living program at a VA facility. After encountering contractual issues, Stobil initially filed a claim in the amount of $166,000. The VA denied this claim, and Stobil appealed. The CBCA dismissed Stobil’s appeal because the underlying claim hadn’t included the required certification.

Stobil then went back to the drawing board and filed a certified claim, “based on the same contracts and similar issues as those presented” in the first claim. But the certified claim was in the amount of $321,288.20, plus a whopping $2.3 million in interest. Stobil filed its certified claim on November 28, 2016.

By way of a January 27, 2017 letter, the contracting officer notified Stobil that the contracting officer would issue a decision on the certified claim by March 31, 2017. According to the contracting officer, the decision would be issued about four months after Stobil had filed its claim–or about twice as long as the 60-day time frame set forth in the CDA.

Apparently frustrated with the delay, Stobil requested the CBCA direct the contracting officer to issue its decision sooner. The CBCA declined this request.

In its rationale, the CBCA noted that the CDA doesn’t require a contracting officer to issue a decision within 60 days, but instead provides the contracting officer the option of notifying the contractor of the time within which the decision will be issued. The CDA doesn’t provide an outer limit on the period in which the decision may be extended beyond 60 days. Instead, the question is whether the delay was reasonable in light of the specific facts and circumstances of the case.

The CBCA continued:

Typically, in evaluating undue delay and reasonableness [of the date proposed by the contracting officer for issuance of a decision on a claim], a tribunal considers a number of factors, including the underlying claim’s complexity, the adequacy of contractor-provided supporting information, the need for external technical analysis by experts, the desirability of an audit, and the size of and detail contained in the claim.

The CBCA explained that while the VA had previously issued a decision on Stobil’s claims involving similar matters,”Stobil nearly doubled the amount of its claim from its former appeal . . . and is also now seeking around $2.3 million in interest.” This is, the CBCA said, “by no means a slight up-tick in money sought, such that the contracting officer should be able to rely primarily on whatever documentation Stobil previously submitted” with its initial claim. The CBCA agreed with the VA that with the significantly increased monetary demand and possibility of new items requiring review, the contracting officer was not “unduly delayed” in issuing a decision. The CBCA concluded that the VA’s timeline for issuing a decision on the certified claim was “reasonable, constituting only a modest delay.”

It’s commonly understood that a claim filed pursuant to the Contract Disputes Act must be decided within 60 days. But as the Stobil Enterprise case demonstrates, agencies have the discretion to extend the 60-day period significantly, provided that the extension is deemed “reasonable.” Here, the contracting officer essentially doubled the underlying 60-day period, but was guilty of nothing more than a “modest delay.” Contractors availing themselves of the claims process should be prepared to play the waiting game.


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A dissatisfied U.S. Postal Service customer filed an appeal with the Postal Service Board of Contract Appeals, seeking $50,000 in damages resulting from the Postal Service’s failure to deliver a Priority Mail package.

The appellant contended that it had a contract with the Postal Service, which was breached when the Postal Service failed to deliver the package.  But the appellant’s cleverness wasn’t enough to prevail: the Board held that it lacked jurisdiction over the appeal.

The case of Triumph Donnelly Studios LLC v. United States Postal Service, PSBCA No. 6683 (2017) began in August 2016, when Triumph Donnelly mailed a package from South Carolina to California using Priority Mail.  The package was never delivered, and the Postal Service admitted that the package was lost.

The Postal Service automatically insures most Priority Mail packages in the amount of $50.  Triumph filed a claim for this amount, and was reimbursed by the Postal Service.

But Triumph wasn’t satisfied with a mere $50.  Triumph filed a claim with the Postal Service’s National Tort Center seeking $50,000.  The National Tort Center denied Triumph’s claim and a subsequent request for reconsideration.  The National Tort Center advised Triumph that its decision was final, and that Triumph’s next legal option would be to file suit in federal district court.

Instead, Triumph filed an appeal with the Board, arguing that the Postal Service breached a contract when it lost the Priority Mail package.  The Postal Service asked the Board to dismiss the appeal for lack of jurisdiction.

The Board held that the Contract Disputes Act applies to the Postal Service.  Under the CDA, a Board of Contract Appeals has jurisdiction over “any express or implied contract . . . made by an executive agency for (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.”

The Board wrote that its jurisdiction is limited “to the four contract types” identified in the CDA.  More specifically, the CDA “does not apply to a contract under which the government provides a service.”

Here, the Board determined, “ecause the alleged contractual relationship between the Postal Service and Triumph Donnelly would be just such a contract for the government to provide a service, we hold that it is not covered by the CDA.”  The Board concluded: “imply put, we do not have jurisdiction to decide disputes between the Postal Service and its customers involving delivery of the mail.”

The Board dismissed the appeal.

Sadly, the PSBCA’s decision doesn’t answer an obvious question: what the heck was in that Priority Mail package, anyway?  Cold cash?  Ultra-rare Nintendo games?  The possibilities are endless, and perhaps raw speculation is more fun than an answer.

The Triumph Donnelly case is interesting because of its facts, but it also demonstrates an important point of law: the jurisdiction of a Board of Contract Appeals is limited by the CDA to specific matters–and excludes cases in which the government provides a service.


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To encourage joint venturing, the SBA’s size regulations provide a limited exception from affiliation for certain joint venturers: a joint venture qualifies for award of a set-aside contract so long as each venturer, individually, is below the size standard associated with the contract (or one venturer is below the size standard and the other is an SBA-approved mentor, and they have a compliant joint venture agreement). In other words, the SBA ordinarily won’t “affiliate” the joint venturers—that is, add their sizes together—if the joint venture meets the affiliation exception.

Because of this special treatment, it can be easy for the venturers to assume that they are completely exempt from any kind of affiliation. But as the SBA Office of Hearings and Appeals recently confirmed, however, the exception isn’t nearly so broad.

The facts in Veterans Construction Coalition, SBA No. SIZ-5824 (Apr. 18, 2017) are relatively straightforward: AWA Business Corporation (an 8(a) company) and Megen Construction Company (a small business) formed a joint venture called Megen-AWA 2 (“MA2”), to bid on and perform various construction projects at Wright-Patterson Air Force Base, under an 8(a) set-aside solicitation. The solicitation in question was issued under NAICS code 236220 (Commercial and Institutional Building Construction), with a corresponding $36.5 million size standard.

After evaluating competitive proposals, the Air Force announced that MA2 was the apparent awardee. An unsuccessful competitor filed a size protest, arguing that AWA and Megan were affiliated in various ways, including identity of interest (as the companies were owned by brothers), common management (the brother who owned AWA used to be vice president of Megen), and totality of the circumstances (the companies had worked together under other joint ventures before).

In response to these allegations, MA2 argued, in part, that it qualified as a small business because AWA and Megen both fell below the solicitation’s $36.5 million size standard, as required by the joint venture exception from affiliation. The SBA Area Office agreed, but went a step farther: it held that because AWA and Megan were parties to a joint venture, they could not be affiliated on the “general affiliation” grounds of identity of interest, common management, or totality of the circumstances. The SBA Area Office issued a size determination finding MA2 to be an eligible small business.

On appeal, OHA asked the SBA Office of General Counsel to comment on the breadth of the joint venture exception from affiliation found in 13 C.F.R. § 121.103(h)(3). The SBA Office of General Counsel wrote that the provision “created an exception to affiliation on the basis of participation in a joint venture.” The provision does not create a general exemption to affiliation for joint ventures—“[t]hat is, firms exempted from joint venture affiliation . . . still could be found to be affiliates for reasons other than those set forth in § 121.103(h).”

OHA agreed with the Office of General Counsel. OHA wrote that the affiliation exemption at issue “applied to ‘affiliation under paragraph (h),’ which is affiliation based on joint ventures. Logically, then, the exception was confined to contract-specific affiliation based on joint ventures and did not extend to issues of general affiliation[.]” Because the Area Office did not consider the general affiliation allegations (like identity of interest, common management, and totality of the circumstances), OHA remanded to the Area Office for additional analysis.

Sometimes, small businesses think that their participation in a joint venture serves as a broad exemption from affiliation with their partner. Veterans Construction confirms this isn’t true—joint venture partners can still be deemed affiliated for reasons other than their participation in the joint venture. Knowing when such affiliation might be found—and taking steps to minimize any indicia of affiliation—just might save a contract award.


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As a general rule, an agency is only required to evaluate a fixed-price offer for reasonableness (that is, whether the price is too high). Agencies are not required to evaluate fixed-price offers for realism (that is, whether the price is too low) and, in fact, cannot do so unless the solicitation advises offerors that a realism evaluation will be conducted.

GAO recently reaffirmed this principle when it denied a protest challenging an agency’s refusal to consider the realism of offerors’ fixed prices as part of a corrective action, even though the agency suspected that at least one offeror’s price was unrealistically low.

Under FAR 15.404-1(d)(3), an agency may evaluate fixed-price contracts for realism “in exceptional cases,” but it is not required to do so. Ripple Effect Communications, B-413722.2 (Jan. 17, 2017), confirmed the breadth of an agency’s discretion to evaluate—or not—fixed price offers for realism.

Ripple Effect involved a challenge to the terms of a corrective action following Venesco, LLC’s protest challenging an award made to Ripple. Venesco argued in its protest that the Army improperly declared its price to be unrealistic, in part because the solicitation was ambiguous as to whether offerors’ fixed prices would be evaluated for realism. The Army then announced that the procurement would be resolicited, and made clear that price realism would not be evaluated.

Ripple then protested the scope of this corrective action, arguing that the Army should be required to evaluate offerors’ prices for realism. Ripple noted that the Army’s evaluation of Venesco’s proposal already revealed concerns with Venesco’s labor rates, “which were far below the average of all evaluated proposals in all but one labor category.” Thus, “it would be unreasonable for the agency not to consider the risk posed by Venesco’s prices.”

In response to these arguments, the Army noted that it never intended to evaluate offerors’ proposed prices for realism. And although Venesco’s debriefing noted concern with unrealistic prices, the Army called this a “conclusory finding” that was not actually based on a completed price realism evaluation. In any event, offerors’ ability to submit revised proposals (including prices) mitigated any need for a price realism evaluation.

GAO agreed with the agency and denied the challenge to the corrective action. In doing so, it relied on an agency’s broad discretion to evaluate (or not) price realism under fixed-price solicitations:

Because the solicitation contemplates the award of a fixed-price contract, the agency’s intended evaluation approach is consistent with the Federal Acquisition Regulation (FAR), which establishes that an agency “may . . . in exceptional cases,” provide for a price realism evaluation when awarding a fixed-price contract, but is not required to do so. Given the agency’s broad discretion to decide whether to include a price realism evaluation in this instance, we have no basis to conclude that the agency’s decision was unreasonable.

Denying Ripple’s protest, GAO reaffirmed the principle that agencies have broad discretion to evaluate fixed-price offers for realism. Ripple Effect shows the breadth of this discretion—even where an agency has reason to suspect an offeror’s fixed-price might be unrealistically low, it is not required to evaluate that price for realism unless the solicitation specifically says otherwise.


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An agency has been caught creating fake source selection documents to pad its file in response to several GAO bid protests.

A recent GAO bid protest decision shows that, after award, the agency created new source selection documents and revised others, then pretended those documents had been part of the contemporaneous source selection file.  And although the agency’s conduct resulted in the cancellation of a major procurement, it’s not clear whether the agency employees who created the fake documents will face any punishment.

The GAO’s decision in EDC Consulting et al., B-414175.10 et al. (June 9, 2017) involved the DHS solicitation for the Flexible Agile Support for the Homeland or “FLASH” procurement.  The solicitation was to result in 8 to 12 IDIQ contracts, with an estimated value of $1.54 billion. The solicitation called for a “best value” tradeoff considering technical merit, staffing, past performance, and price.

DHS made initial award decisions in November 2016, but after several GAO bid protests were filed, the agency elected to perform a reevaluation.  The reevaluation involved a technical evaluation team and price evaluation team, each of which prepared consensus reports.  The TET chair and contracting officer conducted a best value analysis and recommended awards; the ultimate award decisions were made by a source selection authority.

On March 6, 2017, the SSA made award to 11 offerors, all of which had been recommended by the TET chair and contracting officer.  The March 6 source selection decision document stated that the best value decisions were based on the documents in the source selection file.

Nine unsuccessful offerors, including EDC Consulting, LLC, filed protests at the GAO.  During the course of the protest “a question was raised as to whether the documents supporting the agency’s source selection decisions, filed with the agency reports (AR), had been prepared or revised after the March 6 decisions were made.”

The GAO asked the DHS to respond.  On May 1, the DHS’s counsel admitted that the price evaluation report was “incorrect” and that “some of the information provided in the AR . . . was prepared or changed after award.”  These post-award changes involved “the insertion of a multi-page table, as well as the creation of several memoranda regarding the price realism evaluation and findings.”  Additionally, “[a]fter award, the agency revised the Technical Evaluation Report and [the] Best Value Tradeoff Analysis.”

The GAO, obviously, was deeply concerned.  After a series of conference calls, it informed the parties that it intended to conduct a hearing to address various matters, “including the agency’s preparation and submission of the altered documents.”  This, itself, is rather unusual, as most GAO bid protests are resolved without hearings.  (The GAO held hearings in 2.5% of cases in Fiscal Year 2016).

The DHS apparently had no desire to be cross-examined about its conduct.  On May 26, just a few days before the hearing was to occur, the DHS announced that it would terminate all of the awards and cancel the procurement.  In its notice of corrective action, the DHS stated that because documents had been created and revised after award, “DHS has determined that the evaluation process and documents do not meet DHS’ standards for award.”  DHS also said that there were other pieces of the solicitation that needed to be resolved to meet “DHS’ evolving mission needs.”

There must  be something in the water, because this is the second time in less than two months that an agency has been caught creating fake “contemporaneous” documents to defend against a bid protest.  As I wrote in late April, the Court of Federal Claims sharply criticized the U.S. Special Operations Command for creating backdated market research to support a set-aside decision.

Judge Thomas Wheeler’s comments in that case apply equally to DHS’s conduct here.  Judge Wheeler said:

The integrity of the administrative record, upon which nearly every bid protest is resolved, is foundational to a fair and equitable procurement process.  While the Government has accepted responsibility for its misconduct, the importance of preventing a corrupted record cannot be overstated.  The Court encourages USSOCOM to take all reasonable steps to ensure that its contracting office appreciates the necessity of conducting a well-documented, well-reasoned procurement and producing a meticulous and accurate record for review.  The Court will not tolerate agency deception in the creation of the administrative record.

I’ve said it before, and I’ll say it again–in my experience, the vast majority of agency officials are honest, honorable people.  But the integrity of the competitive contracting process is harmed when agency officials don’t live up to those standards.  Indeed, the mere perception that the game might be rigged is extraordinarily harmful–what reason is there for a company to participate in the process if it appears that the agency won’t play fair?

The GAO’s decision doesn’t mention what sanctions, if any, the DHS employees responsible for the misconduct might face.  DHS has a chance to send a strong message by terminating, or otherwise severely punishing, those responsible.  We’ll see what happens.

For now–and I can hardly believe I’m saying this–contractors and their counsel who receive source selection documents as part of a protest might want to check when those documents were created.  Just in case.


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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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President Obama signed the 2017 National Defense Authorization Act into law on December 23, 2016.  As is often the case, the NDAA included many changes affecting government contractors.

Here at SmallGovCon, my colleagues and I have been following the 2017 NDAA closely.  Here’s a roundup of all 16 posts we’ve written about the government contracting provisions of the 2017 NDAA.

That’s a wrap of our coverage for now, but we’ll keep you posted as various provisions of the 2017 NDAA begin to be implemented.  And of course, it won’t be long until we start covering the upcoming 2018 NDAA.

Happy New Year!


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The SBA has changed its affiliation regulations to clarify when a presumption of affiliation exists due to family relationships or economic dependence.

In its major final rulemaking published today, the SBA clears up some longstanding confusion regarding affiliation based on a so-called “identity of interest.”

The SBA’s current “identity of interest” affiliation rule states that businesses controlled by family members may be deemed affiliated–but does not explain how close the family relationship must be in order for the rule to apply.  The SBA’s final rule eliminates this confusion.  It 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.

By limiting the application of the rule to certain types of close family relationships, the SBA essentially codifies SBA Office of Hearings and Appeals case law, which has long interpreted the rule to apply only to close family relationships.  It’s a good thing to have the types of relationships at issue spelled out in the regulation, rather than buried in a series of administrative decisions.

More interesting to me is the fact that the final rule suggests that the presumption of affiliation doesn’t apply unless the firms in question “conduct business with each other.”  I wonder whether this regulation essentially overturns OHA’s recent decision in W&T Travel Services, LLC.  In that case, OHA held that two firms were affiliated because the family members in question were jointly involved in a third business–even though the two firms in question had no meaningful business relationships.  I will be curious to see how OHA addresses this component of the final rule when cases begin to arise under it.

The SBA’s final rule also codifies OHA case law regarding so-called “economic dependence” affiliation.  As my colleague Matt Schoonover recently wrote, OHA has long held that a small business ordinarily will be deemed affiliated with another entity where the small business receives 70% or more of its revenues from that entity.  The final rule provides:

(2) SBA may presume an identity of interest based upon economic dependence if the concern in question derived 70% or more of its receipts from another concern over the previous three fiscal years.

(i) This presumption may be rebutted by a showing that despite the contractual relations with another concern, the concern at issue is not solely dependent on that other concern, such as where the concern has been in business for a short amount of time and has only been able to secure a limited number of contracts.

As with the rule on family relationships, the codification of the “70% rule” will help small businesses better understand their affiliation risks, without having to delve into OHA’s case law.  In that regard, it’s a positive change.


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A group of companies has agreed to pay $5.8 million to resolve a False Claims Act case stemming from alleged affiliations among the companies.

According to a Department of Justice press release, the settlement resolves claims that En Pointe Gov Inc (now known as Modern Gov IT Inc.) falsely certified that it was a small business for purposes of federal set-aside contracts, despite alleged affiliations with four other companies–all of whom will also pay a portion of the settlement.

The government alleged that, between 2011 and 2014, En Pointe Gov Inc. falsely represented that it was a small business.  “In particular,” the press release states, “the government alleged that En Pointe Gov Inc.’s affiliation with the other defendants rendered it a non-small business, and, thus, ineligible for the small business set-aside contracts it obtained.”  The government also alleged that En Pointe under-reported sales made under its GSA Schedule contract, resulting in underpayment of the Industrial Funding Fee.

The issue came to light as the result of a lawsuit filed by an apparent competitor, Minburn Technology Group, and Minburn’s managing member.  Minburn filed the lawsuit under the False Claims Act’s whistleblower provisions, which allow private individuals to sue on behalf of the government.  Miburn and its managing member stand to receive approximately $1.4 million as their share of the settlement.


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