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Koprince Law LLC

An agency failed to meet its obligations to properly publicize a simplified acquisition valued between $15,000 and $25,000 where the agency placed the solicitation in a three-ring binder at the reception desk in a government office–and that office was closed during most of the relevant time.

In a recent decision, the GAO affirmed that principle that even when the dollar value of a simplified acquisition doesn’t meet the requirement for electronic posting on FedBizOpps, the agency still must take reasonable steps to maximize competition.

GAO’s decision in Bluehorse Corp., B-413533 (Oct. 28, 2016) involved a Bureau of Indian Affairs solicitation for diesel fuel for a school district served by the BIA in New Mexico.

After identifying an emergency need for the diesel fuel, the BIA prepared an RFQ on Saturday, July 30.  The RFQ was prepared under the procedures for the streamlined acquisition of commercial items under FAR 12.6, and called for a performance period of delivery from August 2, 2016 through April 30, 2017.

The RFQ stated that because it was an “emergency requirement,” the deadline for receipt of quotations would be August 1, 2016.  Since the contracting officer did not expect the award to meet the FAR’s threshold for electronic posting on FedBizOpps ($25,000), she instead sent the RFQ by email to three firms she had identified as eligible Indian Economic Enterprises.

In addition to sending the RFQ to the three IEEs, the contracting officer placed a copy of the RFQ in a three-ring binder kept at a reception desk of the BIA Navajo Region Contracting Office in Gallup, New Mexico.  That office was closed on Saturday, July 30 and Sunday, July 31.

The BIA received two quotations by August 1.  Both quotations were from vendors who had received the RFQ by email.  The BIA awarded the contract to one of those vendors at a price of $20,800.

After learning of the award, Bluehorse Corporation filed a GAO bid protest.  Bluehorse (which was not one of the three firms that had been sent the RFQ by email) argued that it was eligible to compete for the contract and capable of supplying the diesel fuel, but had been denied a fair opportunity to compete.  In particular, Bluehorse contended that the BIA failed to publicize the requirement properly, which effectively precluded Bluehorse from submitting a quotation.

The GAO wrote that when a procurement is expected to be valued between $15,000 and $25,000, the contracting officer must “display . . . in a public place, or by any appropriate electronic means, an unclassified notice of the solicitation or a copy of the solicitation,” and that the solicitation “must remain posted for at least 10 days or until after quotations have been opened, whichever is later.”

In this case, the GAO held, the BIA did not properly publicize the RFQ:

The BIA’s actions here fell short of the minimum standards for obtaining maximum practicable competition when using simplified acquisition procedures with respect to both publication of the requirement and soliciting sources.  We do not regard the Saturday placement of the solicitation in a binder, in an office that was effectively closed to the public on a weekend, for quotations that were due by 2 p.m. on Monday, as meeting the requirement for public posting. 

The GAO held that “the BIA’s actions fail to show appropriate concern for fair and equitable competition,” and sustained Bluehorse’s protest.

Competition is the cornerstone of the government contracting process, even for most simplified acquisitions.  As the Bluehorse protest demonstrates, even simplified acquisitions between $15,000 and $25,000 must be reasonably publicized to allow for competition.


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Koprince Law LLC

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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Koprince Law LLC

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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Koprince Law LLC

One might think that when an electronic proposal is received by a government server before the solicitation’s deadline, the proposal isn’t late. A government server is under government control, so the proposal is timely, right?

Not necessarily, at least the way the GAO sees it. As one contractor recently learned, waiting until the last minute to submit a proposal electronically carries significant risk that the proposal will not be considered timely, even if the proposal reaches the government server in time.

Peers Health, B-413557.3 (March 16, 2017) involved a Navy RFQ for occupational health disability and treatment guidelines. Quotations were to be submitted no later than 12:00 p.m. EST on November 28, 2016. The RFQ stated that quotations were to be submitted via email to a certain point of contact, and at an email address identified in the solicitation. Alternatively, offerors could submit their proposals by regular or overnight mail.

The Solicitation incorporated FAR 52.212-1 (Instructions to Offerors – Commercial Items), which provides, among other things, that proposals not timely received will not be considered for award. Notably, FAR 52.212-1 provides the following exceptions under which the government may accept late proposals:

(A) If [the proposal] was transmitted through an electronic commerce method authorized by the solicitation, it was received at the initial point of entry to the Government infrastructure not later than 5:00 p.m. one working day prior to the date specified for receipt of offers; or

(B) There is acceptable evidence to establish that it was received at the Government installation designated for receipt of offers and was under the Government’s control prior to the time set for receipt of offers. . . .

FAR 52.212-1(f)(2)(i). As the regulation explains, proposals received after the deadline for proposal submission will be considered timely if they are submitted electronically the day before the submission deadline, or if the government received the proposal and was in control of it prior to the submission deadline.

Peers submitted its quotation by email at 11:59 a.m. on November 28, 2016—one minute before the deadline. While the government server received the submission at 11:59 a.m., Peers’ email did not reach its final destination (the point of contact identified in the RFQ)  until 3:49 p.m. GAO did not explain what caused the lengthy delay in transmission from the server to the Navy point of contact.

The Navy eliminated Peers from the competition, stating that Peers’ quotation was untimely. After Peers learned of the Navy’s decision, it filed a GAO bid protest.

Peers argued that under FAR 52.212-1(f)(2)(i)(B), its proposal was timely because the email was received by the government’s server at 11:59 a.m. As such, Peers contended, its proposal was eligible for the timeliness exemption under FAR 52.212-1(f)(2)(i)(B) because it was “received at the government installation designated for receipt of offers and was under the Government’s control prior to the time set for receipt of offers . . . .”

GAO was not convinced. GAO explained that in an earlier case, Sea Box, Inc., B-291056, 202 CPD ¶ 181 (Comp. Gen. Oct. 31, 2002), GAO had ruled that only FAR 52.212-1(f)(2)(i)(A) applied to electronically submitted proposals because it spoke directly to the issue of electronic submission. GAO concluded that applying the broader government control exception found in FAR 52.212(f)(2)(i)(B) to electronic submission would make the specific day prior requirements for electronic submission redundant. To the dismay of Sea Box, GAO concluded the government control exception does not apply to electronic submissions.

Applying its reasoning from Sea Box, GAO concluded Peers’ proposal submission was untimely because it was neither received by the intended recipient prior to the closing date for proposal submission, nor received before 5:00 p.m. the working day prior to proposals being due. As such, Peers’ proposal was properly eliminated from competition as untimely, even though it had reached a government server before the deadline.

Interestingly, the Court of Federal Claims disagrees with the GAO’s reasoning in Sea Box (and, presumably, in Peers Health, as well).  In Watterson Construction Company v. United States, 98 Fed. Cl. 84 (2012), the Court carefully analyzed the regulatory history of the exceptions, and concluded that the “government control” exception does apply to emailed proposals. The Court has since confirmed its ruling, most recently in Federal Acquisition Services Team, LLC v. United States, No. 15-78C (Feb. 16, 2016).

In our view here at SmallGovCon, the Court has the better position: and not just because arguing with a federal judge isn’t usually a good idea. The regulation states that a late proposal may be accepted where the electronic commerce “or” the government control exception applies. The plain language of the regulation (and the Court’s careful study of the underlying history) suggest to us that Peers should have won its protest.

As we’ve discussed on this blog before, it’s bad news when the GAO and Court disagree about an important matter of government contracting. True, the GAO isn’t required to follow the Court’s rules. However, a bid protest shouldn’t turn on which forum the protester selects. My colleagues and I hope that the GAO reconsiders its position in future protests.

Perhaps Peers will take its case to the Court and obtain a different result. For now, contractors should be aware that under the GAO’s current precedent, the only way to ensure that an electronic proposal submission is timely received is to file before 5:00 p.m. the day before proposals are due. If the proposal is submitted later, and gets stuck on the government’s server, a potential protester should make plans to skip the GAO and head directly to the Court of Federal Claims.


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Koprince Law LLC

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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Koprince Law LLC

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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Koprince Law LLC

An agency’s spam filter prevented an offeror’s proposal from reaching the Contracting Officer in time to be considered for award–and the GAO denied the offeror’s protest of its exclusion.

A recent GAO bid protest decision demonstrates the importance of confirming that a procuring agency has received an electronically submitted proposal because even if the proposal is blocked by the agency’s own spam filter, the agency might not be required to consider it.

GAO’s decision in Blue Glacier Management Group, Inc., B-412897 (June 30, 2016) involved a Treasury Department RFQ for cybersecurity defense services. The RFQ was issued as a small business set-aside under GSA Schedule 70.

The RFQ required proposals to be submitted by email no later than 2:00 p.m. EST on November 9, 2015. The RFQ advised that the size limitation for electronic submissions was 25MB.

Blue Glacier Management Group, Inc. electronically submitted its proposal at 10:55 a.m. EST on the due date. The total size of BG’s attachments was below the 25MB limitation specified in the RFQ.

But unbeknownst to BG or the contracting officer, the email was captured in the agency’s spam filter. The contracting officer did not receive the proposal email or any type of quarantine/spam notification. Five other proposals were timely received from other offerors without incident.

BG sent a follow-up email to the contracting officer on January 29, 2016, over two months after it first submitted its proposal. But, because the contracting officer did not recognize BG as a recent offeror for the proposal, she did not respond.

Another month passed before BG followed up again by phone on February 26, 2016. The contracting officer indicated that, from her standpoint, it appeared that BG had not submitted a proposal. BG explained that it had submitted a proposal and thought it was being considered for the award.

BG re-submitted its proposal via email on February 26, 2016, just as it had done on November 9. The contracting officer again did not receive it. The contracting officer consulted with the agency’s IT department and discovered the February 26 email had been captured in the spam filter. However, the IT department was unable to recover the original November 9 email because the agency’s email network automatically deletes emails in the spam filter after 30 days.

At this point, Treasury was in the final stages of evaluating proposals. The contracting officer declined to evaluate BG’s re-submitted proposal.

BG filed a GAO bid protest challenging the agency’s decision. BG’s argued, in part, that BG was not to blame for the fact that its proposal (which complied with the 25MB size limit) had been blocked by the agency’s spam filter.

The GAO wrote that “it is the vendor’s responsibility, when transmitting its quotation electronically, to ensure the delivery of its quotation to the proper place at the proper time.”  However, there is an exception where a proposal is under “government control” at the proper time. In order for the government control exception to apply, “a vendor must have relinquished custody of its quotation to the government so as to preclude any possibility that the vendor could alter, revise or otherwise modify its quotation after other vendors’ competing quotations have been submitted.”

In this case, “because Blue Glacier did not seek prompt confirmation of the agency’s receipt of its quotation, Blue Glacier’s November 9 email was automatically deleted from the agency’s system after 30 days.” The GAO continued:

Accordingly, the agency has no way to confirm the contents of the Blue Glacier email that entered the Treasury Fiscal Services network on November 9; that is, it has no way to confirm that the November 9 email included a quotation identical to the quotation furnished by the protester on February 26. Whether the protester actually altered its quotation is not the issue; rather, the issue is whether, under the circumstances, there is any possibility that the protester could have altered its quotation. This requirement precludes any possibility that a vendor could alter, revise or otherwise modify its quotation after other vendors’ competing quotations have been submitted. Because Blue Glacier was not precluded from altering its quotation here, the government control exception is inapplicable in this instance.

The GAO denied Blue Glacier’s protest.

Electronic proposal submission is increasingly common, and offers many advantages. But, as the Blue Glacier Management Group decision demonstrates, electronic submission can also carry unique risks–like agency spam filters.  As shown by Blue Glacier Management Group, it’s a very good idea for offerors to confirm receipt of electronic proposals, just in case.

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


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Koprince Law LLC

An agency’s decision to award a contract as an 8(a) sole source is a “business decision” for which the agency has broad discretion–and a potential protester challenging the agency’s use of that discretion will have an uphill battle.

In a recent bid protest decision, the GAO confirmed that government officials are presumed to act in good faith, and that the presumption extends to the decision to award an 8(a) sole source contract instead of competing the work in question.

The GAO’s decision in NTELX, Inc., B-413837 (Dec. 28, 2016) involved a Consumer Product Safety Commission procurement for the operation and maintenance of CPSC’s international trade data system risk assessment methodology (“RAM”) software system.

In 2010, the CPSC awarded an 8(a) sole source contract for the development of the initial RAM system.  NTELX, Inc. was a subcontractor under the original contract, and developed the system using its proprietary software.  The CPSC subsequently awarded a second contract, also as an 8(a) sole source, for the development of a “RAM 2.0” system.  The second contract was awarded to TTW Solutions, Inc., an 8(a) Program participant.  Unlike the first contract, the RAM 2.0 contract used open source software.  NTELX served as a subcontractor to TTW.

In 2016, the CPSC awarded a new 8(a) sole source contract to TTW, this time for the continued operation and maintenance of the RAM 2.0 contract.  Apparently the relationship between TTW and NTELX had soured, and NTELX was not offered a subcontract.

NTELX filed a GAO bid protest challenging the new 8(a) sole source award to TTW.  NTELX argued that the CPSC acted in bad faith and violated the FAR’s competition requirements by making an 8(a) sole source award to TTW.  NTELX argued that it was the only contractor that could successfully perform the work, and that an award to TTW was irrational.

The GAO noted that 8(a) contracts may be awarded “on either a sole source or competitive basis.”  Further, “because of the broad discretion afforded the SBA and the contracting agencies under the applicable statute and regulations, our review of actions under the 8(a) program generally is limited to determining whether government officials have violated regulations or acted in fraud or bad faith.”  Government officials “are presumed to act in good faith and a protester’s claim that contracting officials were motivated by bias or bad faith must be supported by convincing proof; our Office will not attribute unfair or prejudicial motives to procurement officials on the basis of inference or supposition.”

In this case, the CPSC stated that TTW was capable of performing the contract; the GAO declined to second-guess the CPSC’s determination in that regard.  “Therefore,” the GAO wrote, “although NTELX may disagree with the agency’s business decision to award TTW an 8(a) sole source contract for RAM 2.0, it has failed to demonstrate that the agency has engaged in any fraud or bad faith.”

The GAO denied NTELX’s protest.

So long as a procuring agency abides by the inherent limitations of the 8(a) sole source program–most notably, the dollar limitations–the agency (with the SBA’s approval) has broad discretion to choose to award an 8(a) sole source contract.  As the NTELX, Inc. decision demonstrates, a protester trying to make the case that the agency abused its discretion will face a difficult challenge.


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Koprince Law LLC

Welcome back after a hopefully enjoyable long 4th of July weekend! Although this week is a shortened one, there was no shortage of news floating around the county.

This week’s SmallGovCon Week In Review looks at the number of suspensions and debarments of government contractors, a proposed penalty for Pentagon contractors trying to game the system, a case of fraud and much more.

  • Government contractors shouldn’t be celebrating that the number of suspensions and debarments dropped in fiscal 2015. [Federal News Radio]
  • The Federal Risk and Authorization Management Program rolled out the final version of the high impact baseline, a framework for authorizing third party vendors to host some of the government’s most sensitive data. [FederalTimes]
  • The National Labor Relations Board is preparing to report alleged labor law violations by government contractors. [Bloomberg BNA]
  • One of the biggest questions with the final Alliant 2 Unrestricted and Small Business RFPs is whether to team, but many contractors are finding the options presented in the final RFPs confusing. [Washington Technology]
  • One of the legislative proposals the Senate will debate this week would penalize Pentagon contractors that game the bid protest system. [FederalSmallBizSavvy.com]
  • The Strategic Sourceror explains what the Women-Owned Small Business Program is, and why businesses should become certified. [The StrategicSourceror]
  • A possible 20 year sentence could be handed down to a woman who accepted bribes in exchange for using her company as a “straw” contractor that allowed nonminority-owned firms to circumvent regulations for federally funded transportation projects. [MyCentralJersey.com]
  • A federal whistleblower lawsuit alleging that information technology companies duped the government in order to win money specifically set aside for small businesses has agreed to pay $5.8 million dollars. [Los Angeles Business Journal]

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Koprince Law LLC

An agency ordinarily is not required to perform calculations to determine whether an offeror’s proposal complies with a solicitation’s requirements, according to the GAO.

In a recent bid protest decision, the GAO rejected the protester’s argument that, in determining whether the proposal satisfied certain requirements, the agency should have used the information in the proposal to perform certain calculations.

The GAO’s decision in Mistral, Inc., B-411291.4 (Feb. 29, 2016) involved a DHS small business set-aside solicitation to obtain new mobile video surveillance systems.  The solicitation called for a best value evaluation considering three factors: technical, past performance, and price.

After taking corrective action in response to a bid protest, the DHS opened discussions with offerors in the competitive range, including Mistral, Inc.  In its written discussion questions for Mistral, the DHS asked Mistral to provide “an analysis and calculations” Mistral used to justify “the performance claims for Critical Failure Rate and Achieved Availability as prescribed in Section L of the solicitation.”  In response, Mistral’s final proposal revision directed the DHS to “the Excel spreadsheet (all formulas embedded)” submitted to the agency on a CD-ROM.

When the DHS examined the CD-ROM submitted by Mistral, it found only a PDF of the required information–not an Excel file.  Although Mistral provided a table with calculations, the DHS was unable to access the embedded calculations contained in the original Excel spreadsheet.  The DHS assigned Mistral a risk for failing to provide the formulas, and an overall “Satisfactory” rating for its technical proposal.  The DHS awarded the contract to a competitor, which also received a “Satisfactory” technical rating, but proposed a lower overall price.

Mistral filed a bid protest with the GAO.  Mistral argued, in part, that the agency could have derived the calculations and formulas from the information provided in the PDF, and therefore should not have assigned a risk for the supposed absence of this information.

The GAO wrote that Mistral “does not explain how this could or should be done.”  And, “[m]ore importantly . . . an agency is not required to perform calculations or adapt its evaluation to comply with an offeror’s submission in order to determine whether a proposal was compliant with stated solicitation requirements.”  The GAO continued:

Stated differently, the question is not what the agency could possibly do to cure a noncompliant submission, but rather, what it was required to do.  Based on our review of the record, we agree with the agency’s conclusions that without the substantiating evidence to support Mistral’s performance claims as required by the solicitation, and requested by the agency during discussions, it was reasonable to assign a medium risk to Mistral’s proposal in this area. 

The GAO denied Mistral’s protest.

The Mistral, Inc. protest is a good reminder that it is up to an offeror to prepare a thorough, well-written proposal, including all information required by the solicitation.  It is not the agency’s responsibility, in the ordinary course, to perform calculations using the information provided by the offeror to determine whether the proposal meets the solicitation’s requirements.

And of course, Mistral is also a warning to offerors to be sure that electronic proposals are submitted in the appropriate format.  Although PDFs are commonly used in the submission of electronic proposals, there are circumstances in which a PDF may not get the job done–such as in Mistral, where the underlying Excel calculations, which weren’t available in PDF format, were important to the evaluation.


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Koprince Law LLC

It’s hard to top last week’s government contracting news, which included the major SDVOSB Supreme Court victory in Kingdomware.  But with the Fourth of July just a week and a half away, there is still plenty going on in the world of government contracts law.

In this week’s SmallGovCon Week in Review, an SDVOSB’s owner speaks out about his important GAO bid protest win, suspensions and debarments of government contractors dropped in 2015, major changes are coming to the GSA Schedule, HUBZone contract awards decline, and much more.

  • After winning a legal battle with the VA, Spur Design’s owner talks about what his company’s victory means for veteran-owned businesses. [Flatland]
  • The Office of Management and Budget has directed federal agencies to adopt practices that will simplify and streamline software acquisition. [E-Commerce Times]
  • Agencies’ budgets for extramural research are wavering amid increasing requirements to set aside funding for small business tech and innovation programs. [fedscoop]
  • A construction company executive has been found guilty of wrongfully winning $100 million in federal contracts that give preference to veteran-owned companies. [Boston Globe]
  • Defense Department procurement officials have agreed to expand their use of the General Services Administration’s single contract for complex professional services known as OASIS. [Government Executive]
  • Suspension and debarments of government contractors fell 3.7 percent in fiscal year 2015 over the previous year according to the annual report of the Interagency Suspension and Debarment Committee. [Government Executive]
  • The Department of Homeland Security will begin accepting video proposals in addition to written ones as part of a procurement innovation initiative. [Federal Times]
  • Vendors could save millions with the new General Services Administration reporting requirement that is being called the “most transformational change to GSA’s Federal Supply Schedules Program in more than two decades.” [Federal Times]
  • Plans to file a lawsuit against the Army are in the works based on claims that the military service has shown bias against off-the-shelf products in its solicitation for a $206 million intelligence IT contract. [Federal News Radio]
  • HUBZone contract awards have stalled again, after two years of modest increases, continuing a mostly downward trend that began six years ago. [Set-Aside Alert]
  • The Labor Department is investigating whether workers on Donald Trump’s renovation of Washington, D.C.’s Old Post Office are being paid less than federal law requires. [Politico]
  • Are Federal agencies overspending billions of dollars each year by allowing employees to make micropurchases on government charge cards instead of using the government’s buying power? [Government Executive]

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Koprince Law LLC

A former 8(a) protege was not automatically entitled to take advantage of the past performance it obtained as part of a mentor-protege joint venture, in a case where the former mentor would not be involved in the new contract.

In a recent bid protest decision, the GAO held that a procuring agency erred by crediting the protege with the joint venture’s past performance without considering the extent to which that past performance relied on the mentor–and the extent to which the mentor’s absence under the new solicitation might impact the relevance of the past performance as applied to the new work.

The case, Veterans Evaluation Servs. Inc., B-412940 et al. (July 13, 2016), involved a solicitation by the VA to acquire medical disability examination services. The VA issued the RFP seeking to award several large IDIQ contracts. Each contract carried a minimum value of $3.7 million and a top value of $6.8 billion. (That’s billion-with-a-b for those scoring at home.)

The RFP split the services area to seven districts throughout the United States and abroad. The VA intended to award two contracts per district 1 through 6, and required the contractors to propose to locate, subcontract with, and train a network of healthcare professionals to perform the examinations.

VetFed Resources, Inc. had been performing the incumbent contract as part of an 8(a) mentor-protege joint venture with QTC Medical Services, Inc.  The mentor-protege arrangement apparently had expired by the time that proposals were due under the RFP.  VetFed independently submitted proposals for districts 1, 2, and 5.  In districts 1 and 5, VetFed proposed to use QTC as its major subcontractor, making available QTC’s provider network and infrastructure. But for district 2, VetFed did not propose to use QTC as its subcontractor.

After evaluating competitive proposals, the VA awarded contracts to VetFed for districts 1, 2, and 5.  In its evaluation of all three districts, the VA rated VetFed’s past performance as good.

Three unsuccessful competitors filed GAO protests challenging the results of the VA’s evaluation.  All three protesters argued that in district 2, VetFed would not be able to take advantage of QTC’s provider network and infrastructure. The protesters argued that VetFed’s good past performance rating was a result of VetFed’s having access to the resources of its former mentor, and that without that access, VetFed did not deserve a good rating.

GAO wrote that “[a]n agency may attribute the experience or past performance of a parent or affiliated company to an offeror where the firm’s proposal demonstrates that the resources of the parent or affiliate with affect the performance of the offeror.” In this regard, “the relevant consideration is whether the resources of the parent or affiliated company–its workforce, management, facilities, or other resources–will be provided or relied upon for contract performance . . ..” For this reason, “it is inappropriate to consider an affiliate’s record where that record does not bear on the likelihood of successful performance by the offeror.”

In this case, GAO wrote that “VetFed’s relevant past performance example is a contract it performed in close cooperation with QTC; the firms performed using a mentor-protégé arrangement, and there is no dispute that QTC’s provider network and IT infrastructure played a material part in VetFed’s successful performance of the predecessor contract. . . . Since the record here does not show that the agency gave consideration to this question, we conclude that its assignment of a good rating to VetFed for its past performance in district 2 was unreasonable.” GAO sustained this part of the protest.

Given SBA’s strong interest in how mentor-protege joint ventures are treated, it is somewhat surprising that GAO didn’t seek SBA’s input on this aspect of its decision–especially since the decision is troubling from the perspective of 8(a) proteges like VetFed. While GAO’s decision is a logical outgrowth of GAO’s longstanding case law regarding the past performance of affiliates, the particular context is unique, and the SBA’s comments might have been instructive.

In sum, GAO essentially said that a protégé might not get full past performance credit for work it performed in a mentor-protégé arrangement unless the mentor sticks around (in this case as a subcontractor). This is bad news for the protégés of the world, who presumably enter into these relationships in large part for the purpose of gaining experience and knowledge so that they can perform larger contracts on their own in the future. Especially with the new universal mentor-protege program coming online on October 1, it will be important for everyone–mentors, proteges, and contracting officers alike–to fully understand exactly how past performance of mentor-protege joint ventures is to be treated.


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

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

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

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

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


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In conducting a cost realism evaluation, an agency was entitled to use an offeror’s historic approved indirect rates and current incumbent direct labor rates to upwardly adjust the offeror’s evaluated cost, in a case where the offeror’s proposed rates were significantly lower.

The GAO recently held that an agency did not err by adjusting a protester’s rates to better align with the protester’s historic indirect rates and current direct rates, where the agency was unable to determine that the protester’s significantly lower proposed rates were realistic.

In AM Pierce & Associates Inc., B-413128 et al. (Aug. 22, 2016), GAO considered a protest by a disappointed offeror challenging the Navy’s evaluation under a solicitation seeking program management support services for the H-60 Helicopter Program Office. The solicitation was completely set-aside for EDWOSBs. The resulting contract was to be awarded on a cost-plus-fixed-fee basis, under a best-value evaluation.

The solicitation said that offerors’ proposed costs would be evaluated for realism, to determine whether the overall costs were realistic for the work to be performed, reflective of the offeror’s understanding of the requirements, and/or consistent with the technical proposal. To facilitate the evaluation, the RFP required offerors to substantiate their proposed direct and indirect labor rates through payroll verification, contingent offer letters, DCAA rate verification or approval letters, or other detailed justification methods. The cost realism analysis would then involve a calculation of each offeror’s evaluated costs, to reflect the estimated most probable costs. This determination would include an evaluation of the offeror’s cost information—including its substantiated labor rates.

Under the technical proposal, offerors were required to complete a “workforce qualifications spreadsheet” for each employee—including contingent or prospective hires—for the base year. The offerors were further required to demonstrate that this information exceeded the personnel labor category requirements outlined in the solicitation. Then, in the cost proposal, offerors were required to provide the proposed rates for employees based on labor categories.

AM Pierce & Associates, Inc. and Island Creek Associates, LLC were two of the six offerors. AM Pierce’s proposal scored higher under several technical subfactors, and its proposed cost was about $2.5 million less expensive than Island Creek’s. But after evaluating cost proposals, the Navy made significant upward revisions to AM Pierce’s proposed costs. Following these revisions, Island Creek’s evaluated cost was about $300,000 less than AM Pierce’s.

The upward adjustment to AM Pierce’s proposed cost resulted from two aspects of its cost proposal.

First, in its cost proposal, AM Pierce offered lower indirect rates than its historical rates, claiming the reduction was based, in part, on a change to its accounting system. Evaluating its proposal, the Navy instead considered AM Pierce’s historical rates, as approved by DCAA.

Second, AM Pierce’s direct rates were adjusted upwards for proposed personnel after the Navy found the proposed rates to be “drastically inconsistent with the rates verified by current and contingent employees.” To determine the most probable cost, the Navy used verified rates for proposed employees in each labor category for the base year and, for option years, used the median of all verified rates for each labor category in which hours would be reduced in option years.

After conducting a best value tradeoff, the Navy awarded the contract to Island Creek.

AM Pierce protested the award. AM Pierce argued that the Navy had erred by upwardly adjusting AM Pierce’s indirect and direct rates.

GAO explained that “[w]hen an agency evaluates a proposal for the award of a cost reimbursement contract, an offeror’s proposed estimated costs are not dispositive because, regardless of the costs proposed, the government is bound to pay the contractor its actual and allowable costs.” Therefore, “an agency must perform a cost realism analysis to determine whether the estimated proposed cost elements are realistic for the work to be performed, reflect a clear understanding of the requirements, and are consistent with the unique methods of performance and materials described in the offeror’s proposal.” An offeror’s proposed costs “should be adjusted, when appropriate, based on the results of the cost realism analysis.”

GAO first addressed the Navy’s evaluation of AM Pierce’s proposed indirect costs. Although AM Pierce argued that a change in its accounting practices justified the lower indirect rates, “DCAA did not approve AMP’s provisional billing rates for 2016, which reflected changes to AMP’s accounting practices, until April 11, 2016, after the agency had completed its cost evaluation.” GAO wrote that “it appears that the agency considered the most realistic and verifiable information available when calculating AMP’s most probable cost,” and denied this aspect of AM Pierce’s protest.

GAO then turned to the evaluation of AM Pierce’s direct labor rates. Noting that the Navy had based its evaluation on AM Piece’s actual current labor rates, GAO wrote that AM Pierce’s argument was little more than an assertion that “the agency should ignore the rates currently being paid to proposed employees in calculating the most probable cost in the base and option years.” Though it is true that current employees might leave and be replaced at lower rates, “the possibility of changes to personnel does not negate the fact that the actual rates currently being paid to personnel proposed by AMP are the most realistic rates available.” The GAO denied this aspect of AM Pierce’s protest, as well.

Cost realism evaluations can be complicated. But AM Pierce underscores two important points: first, that an agency can use historic verified indirect rates instead of unsubstantiated rates proposed by an offeror; second, an agency can upwardly adjust the direct labor rates proposed by an offeror for incumbent employees based on the actual costs for those employees.


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

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

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

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

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

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

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

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

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

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

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


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With Christmas just two days away, it is time for  many of us to focus on family and friends and enjoy a few days off. I hope that you have an enjoyable holiday season and are able to surround yourself with those that mean the most to you. Before we take a little break for the holidays we are happy to bring you this final 2016 edition of SmallGovCon Week In Review. (We won’t be publishing a Week in Review next week, but will be back with more in 2017).

As we head into the final week of 2016, we take a look at two separate fraud cases where million dollar fines have been assessed, more predictions of how the incoming Trump Administration will affect government contractors, 2017 is shaping up as a competitive year in IT contracting, and much more.

  • The Trump transition and campaign websites provide some insight about the acquisition agenda that the new administration will pursue, as well as other policies that may impact government contractors and federal acquisition personnel. [Washington Technology]
  • A Rhode Island business will pay $1 million dollars to resolve civil allegations that it violated the False Claims Act by submitting, or causing the submission of, claims for reimbursement for funding earmarked for minority, women-owned, or small business that it was not entitled to receive. [The Valley Breeze]
  • Two Arkansas business owners are accused of falsely claiming to be a service-disabled veteran owned business in order to collect more than $15.5 million in federal contracts. [Arkansas Online]
  • Our very own Senior Associate Attorney Matthew Schoonover was interviewed for this article on the controversy surrounding the Trump Washington hotel. [Bloomberg Politics]
  • According to one commentator, the GSA is taking steps to make multiple award schedules more expensive for contractors. [Allen Federal Business Partners]
  • President-elect Donald Trump’s pick for Army Secretary has some people wondering who? But that may be just what the Army needs. [Federal News Radio]
  • 2017 is shaping up to be a very competitive year for IT contracts across the U.S. military branches and Defense Department. [Nextgov]
  • A handful of defense organizations are crying foul on a proposed regulation that may eat into research funding the Defense Department gives to industry. [Federal News Radio]
  • The National Defense Authorization Act of 2017 directs more limited use of Low Price Technically Acceptable procurements, which may be a welcome holiday gift for federal contractors. [Washington Technology]
  • Jason Miller of Federal News Radio takes an in depth look at three changes to federal acquisition agencies that industry should know about. [Federal News Radio]
  • The federal government maintains a database of every contract action above the $3,500 threshold, but despite this expansive data set, the government does not capture meaningful visibility into what agencies are actually buying. [Federal News Radio]
  • Will a potential Trump hiring freeze on federal hiring result in the hiring of more contractors to compensate for a small internal agency workforce? [Government Executive]

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It’s a well-known aspect of federal contracting: if a contractor wishes to formally dispute a matter of contract performance, the contractor should file a claim with the contracting officer.

But if the contractor is working under a task or delivery order, which contracting officer should be on the receiving end of that claim—the one responsible for the order, or the one responsible for the underlying contract?

As a recent Civilian Board of Contract Appeals decision demonstrates, when a contractor is performing work under a Federal Supply Schedule order, a claim involving the terms of the underlying Schedule contract must be filed with the GSA contracting officer.

Consultis of San Antonio, Inc. v. United States, CBCA No. 5458 (March 31, 2017) involved an appeal relating to a task order award by the VA to Consultis under its GSA Federal Supply Schedule Contract, for various information technology services. During performance, one of Consultis’ employees raised concerns about wage rates, so the Department of Labor conducted an inquiry to determine the applicability of the Service Contract Labor Standards under the task order. The DOL found that, while the Service Contract Act was incorporated in Consultis’ GSA Schedule contract, the appropriate wage determinations were not. It therefore recommended that GSA and VA add them to the task order.

Both GSA and the VA initially declined to add the wage determinations to the task order. Some six months later, however, the VA’s contracting officer issued a unilateral modification that did so. About two months after that, Consultis requested a supplemental payment from the VA as a result of these wage determinations, saying that it would pay the increased wages as soon as the VA provided the payment. After additional correspondence, the VA’s contracting officer issued a “final decision” denying Consultis’ request, noting that compliance with the labor standards is a contractor’s responsibility. GSA’s contracting officer apparently was involved in this decision.

Consultis appealed this denial to the Civilian Board of Contract Appeals. But after a review of the appeal, the Board questioned whether the VA contracting officer’s final decision was sufficient to trigger the Board’s jurisdiction.

Specifically, the Board noted that “FAR 8.406-6 requires that disputes pertaining to the terms and conditions of contracts be referred to the schedule contracting officer for resolution . . . whereas disputes pertaining to performance may be handled by the ordering activity contracting officer.” The Board found that this provision required GSA’s contracting officer—not the VA’s—to decide Consultis’ claim:

Although the focus of this appeal is the applicability of the wage determinations to the task order contract, the resolution of that issue necessarily requires an examination of the terms and conditions of the schedule contract. . . . We are not persuaded that clauses mandated by statute in the FSS contract, including those mandating compliance with the SCLS, cannot be enforced if they are not expressly incorporated into the task order contract. The task order comes into existence under the schedule contract. . . . Whether the VA contracting officer merely made explicit (by issuing the modification) what the contract already requires is an issue of contract interpretation that is appropriate for consideration by the GSA contracting officer. At the very least, it is a mixed issue, involving both performance and contract interpretation, which . . . also requires a decision from the GSA contracting officer.

Because GSA’s contracting officer did not issue final decision, the Board ruled that it did not have jurisdiction to consider Consultis’ appeal. It therefore dismissed the appeal for lack of jurisdiction.

Though the principle that a contracting officer must first issue a final decision before a contractor may appeal that decision seems relatively straightforward, Consultis demonstrates that its real-world application is sometimes not. For disputes involving FSS contracts, contractors should consider which contracting officer—either the ordering agency’s or the GSA’s—should consider the claim; if the claim is not decided by the appropriate contracting officer, the Board will not have jurisdiction to consider any appeal.


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Circle October 1, 2o16 on your calendar: that’s when the SBA will begin accepting applications for its new universal small business mentor-protege program.

According to the SBA’s new website for the small business mentor-protege program, applications will only be accepted through the SBA’s new certify.sba.gov portal.  The SBA’s new website also has an overview on the small business mentor-protege program itself and a discussion of the eligibility requirements for the program.

For prospective mentors and proteges alike, there’s no time to waste in order to take immediate advantage of the new mentor-protege program.  Watch this space for additional information as the SBA makes it available.


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While an agency may require a unilateral reduction in a contractor’s price due to a reduced scope of work, the government carries the burden of proving the amount.

In a recent decision, the Armed Services Board of Contract Appeals held that while an agency was entitled to unilaterally reduce the scope of work, the agency had not proven the amount of the unilateral deduction it demanded–and the government’s failure to meet its burden of proof entitled the contractor to the remaining contract price.

In HCS, Inc., ASBCA No. 60533, 08-1BCA ¶ 33,748 (2016), the Naval Air Station at Corpus Christi developed a sink hole, which the Navy believed was attributable to a leak in a buried 8-inch pipe. To correct the problem, the Navy issued a firm-fixed price solicitation for excavation and repair of the damaged pipe section, among other tasks. Offerors were instructed they could expect to replace up to 60 feet of 8-inch pipe.

HCS, Inc. was subsequently awarded the contract at a fixed price of $40,975. After obtaining the necessary permitting, HCS began excavating the damaged pipe sections. During the excavation, HCS discovered there was a previously undisclosed section of 4-inch pipe that ran perpendicular to the 8-inch section the Navy believed was damaged. The 4-inch pipe intersected the 8-inch pipe in a “tee” joint. Upon further inspection, it became clear that the 4-inch pipe was the actual cause of the leak.

HCS consulted with the Contracting Officer’s Representative, who informed HCS that the 4-inch pipe previously provided water to a structure that had since been torn down. The 4-inch pipe had been capped, but was now leaking. HCS explained there were two paths forward. HCS could either splice in a new segment of 8-inch pipe, thereby removing the tee intersection with the 4-inch pipe, or demolish the majority of the discovered 4-inch pipe and recap it, preserving the tee intersection. HCS was instructed to preserve the tee intersection and recap the 4-inch pipe. No 8-inch pipe needed to be replaced.

As a result of the change in work, HCS estimated that the total price to the government would decrease by $1,435. But even though HCS had performed work related to the 8-inch pipe, the Navy contended the costs for the 8-inch pipe work should be removed from the contract. The Navy instructed HCS to submit a cost breakdown of labor, materials and equipment for the entire project. HCS countered that the Navy was only entitled to the documentation for the new work because this was a firm fixed price contract. When HCS did not provide all the documentation the Navy desired, the COR estimated the revised contract work to be worth $19,892.87. The Navy unilaterally lowered the contract price to that amount.

HCS filed a claim seeking payment of the full original contract price. The Contracting Officer (unsurprisingly) denied the claim. HCS then filed an appeal with the ASBCA, arguing that the amount of the Navy’s unilateral deduction was unreasonable and unsupported.

The ASBCA wrote that under the FAR’s Changes clause “the contract price must be equitably adjusted when a change in the contract work causes an increase or decrease in the cost of performance of its work.”  In the case of a “change that deletes contract work,” the government “is entitled to a downward adjustment in contract price to the extent of the savings flowing to the contractor therefrom.”

However, although the government is entitled to a downward adjustment in such cases, “[t]he government has the burden of proving the amount of cost savings due to deletion of work.” A contractor, therefore, “is entitled to receive its contract price, unless the government demonstrates the government is entitled to a price reduction for deleted work.”

In this case, the ASBCA held that “the burden of proof is on the Navy to show the amount of cost savings due to its deletion of work.”  The ASBCA rejected the Navy’s assertion that it was essentially entitled to “re-price” the entire contract, writing, “[w]e are aware of no authority allowing the Navy to delete work from a contract after work performance and then refuse to pay for the work initially specified and performed, and the Navy cites us no legal authority for such action.”

The ASBCA noted that “[a]t trial, the Navy did not specifically challenge the reasonableness of any of the dollar amounts presented by” HCS. “Simply put,” the ASBCA concluded, “the Navy did not carry its burden of proof.  It has made no showing here of entitlement to a price reduction based on deleted work.”

The ASBCA sustained HCS’s appeal, and held that HCS was entitled to recover $23,082, plus interest.

When a contract change results in a reduction in the contractor’s scope of work, the agency is entitled to an equitable adjustment. But, as HCS, Inc. demonstrates, the government–not the contractor–bears the burden of demonstrating that the amount of that downward equitable adjustment is appropriate. In the context of a firm fixed price contract, if the agency cannot provide the necessary proof, the contractor is entitled to the full contract price.


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Joint venture partner or subcontractor?  An offeror’s teaming agreement for the CIO-SP3 GWAC wasn’t clear about which tasks would be performed by joint venture partners and which would be performed by subcontractors–and the agency was within its discretion to eliminate the offeror as a result.

A recent GAO bid protest decision demonstrates that when a solicitation calls for information about teaming relationships, it is important to clearly establish which type of teaming relationship the offeror intends to establish, and draft the teaming agreement and proposal accordingly.

Here at SmallGovCon, my colleagues and I discuss teaming agreements and joint ventures frequently.  As important as teaming is for many contractors, one might think that the FAR would be overflowing with information about joint ventures and prime/subcontractor teams.  Not so.  Most of the legal guidance related to joint ventures and teams is found in the SBA’s regulations.  The FAR itself is much less detailed.  FAR 9.601 provides this definition of a “Contractor Team Arrangement”:

“Contractor team arrangement,” as used in this subpart, means an arrangement in which—

(1) Two or more companies form a partnership or joint venture to act as a potential prime contractor; or

(2) A potential prime contractor agrees with one or more other companies to have them act as its subcontractors under a specified Government contract or acquisition program.

So, under the FAR, a Contractor Team Arrangement, or CTA, may take two forms: a joint venture (or other partnership) under FAR 9.601(1), or a prime/subcontractor teaming arrangement under FAR 9.601(2).  The details of how to form each arrangement are left largely to guidance established by the SBA.

Let’s get back to the GAO protest at hand.  The protest, NextGen Consulting, Inc., B-413104.4 (Nov. 16, 2016) involved the “ramp on” solicitation for the NIH’s major CIO-SP3 small business GWAC IDIQ.  The solicitation included detailed instructions regarding CTAs.  Specifically, the solicitation provided that if an offeror wanted its teammates to be considered as part of the evaluation process, the offeror’s team needed to be in the form prescribed by FAR 9.601(1), that is, a joint venture or partnership.  In contrast, the solicitation provided that, for prime/subcontractor teams under FAR 9.601(2), only the prime offeror would be evaluated.

NextGen Consulting, Inc. submitted a proposal as a CTA.  NextGen identified three teammates: WhiteSpace Enterprise Corporation, Twin Imaging Technology Inc., and the University of Arizona.  The teaming agreement specified that NextGen and WhiteSpace were teaming under FAR 9.601(1), whereas Twin Imaging and the University were teaming with the parties under FAR 9.601(2).

The teaming agreement identified “primary delivery areas” for each teammate.  With respect to the 10 task areas required under the solicitation, NextGen was to handle overall contract management and related responsibilities for task areas 2 and 4-10, WhiteSpace was assigned task area 1, Twin Imaging was assigned task area 3, and the University was assigned task areas 1, 4, 5, and 10.  In its proposal, NextGen referred to the capabilities of “Team NextGen” for all 10 task areas.

The NIH found that because the teaming agreement distributed the task areas without regard for whether the teaming relationship fell under FAR 9.601(1) or FAR 9.601(2), it was impossible for the agency to distinguish between the two types of teammates.  The NIH concluded that the resulting confusion about the roles and responsibilities of the parties made it impossible for the NIH to evaluate the proposal in accordance with the solicitation’s requirements–which, of course, called for the evaluation only of FAR 9.601(1) teammates.  The NIH eliminated NextGen from the competition.

NextGen filed a bid protest with the GAO, challenging its exclusion.  NextGen argued that the NIH unreasonably excluded its proposal based upon a misintepretation of the teaming agreement.  NextGen contended that, taken as a whole, the teaming agreement was clear.  NextGen pointed out that the teaming agreement specifically identified itself and WhiteSpace as FAR 9.601(1) teammates, and specifically identified Twin Imaging and the University as FAR 9.601(2) teammates.

The GAO disagreed.  It noted that “the solicitation required that a CTA offeror submit a CTA document to clearly designate a team lead and identify specific duties and responsibilities.”  Contrary to NextGen’s contentions, “[t]he record shows that as a whole, NextGen’s CTA provided conflicting information as to who the team lead was, and failed to clearly identify the specific duties and responsibilities of the team members.”  GAO pointed out that NextGen’s proposal used the term “Team NextGen,” which “did not provide any indication as to what the specific duties and responsibilities of the team members were.”

Joint venture agreements and prime/subcontractor teams are very different arrangements.  As the NextGen Consulting protest demonstrates, it is important for an offeror to understand what type of teaming arrangements it is proposing, and draft its teaming documents and proposal accordingly.


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Native Hawaiian Organizations soon will be able to own HUBZone companies under a new SBA direct final rule published yesterday in the Federal Register.

The new rule implements provisions of the 2016 National Defense Authorization Act, in which Congress instructed the SBA to open the HUBZone program to NHOs.

Under current law, NHOs are unable to majority-own HUBZone companies, even though Indian tribes and Alaska Native Corporations can be HUBZone owners.  The new rule, which will amend the SBA’s HUBZone regulations in 13 C.F.R. 126.103, defines a HUBZone entity to include an entity that is:

(8) Wholly owned by one or more Native Hawaiian Organizations, or by a corporation that is wholly owned by one or more Native Hawaiian Organizations; or

(9) Owned in part by one or more Native Hawaiian Organizations or by a corporation that is wholly owned by one or more Native Hawaiian Organizations, if all other owners are either United States citizens or small business concerns.

The new regulation defines a Native Hawaiian Organization as “any community service organization serving Native Hawaiians in the State of Hawaii which is a not-for-profit organization chartered by the State of Hawaii, is controlled by Native Hawaiians, and whose business activities will principally benefit such Native Hawaiians.”

In addition to adding NHOs to the HUBZone program, the new final rule treats certain “major disaster areas” as HUBZones for a period of five years, treats certain “catastrophic incident areas” as HUBZones for a period of 10 years, and extends HUBZone eligibility for Base Closure Areas and contiguous areas.

The SBA’s direct final rule will take effect on October 3, 2016 unless the SBA receives significant adverse comment from the public.  If that happens (and it’s not expected), the SBA would withdraw and republish the rule to address the adverse comments.

NHOs have long asked that they should be treated like Indian tribes and ANCs for purposes of the HUBZone program.  Soon, that’s exactly what will happen.


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Koprince Law LLC

I’m back in the office today after a great workshop with the Kansas PTAC where I spoke about Big Changes for Small Contractors–a presentation covering the major changes to the limitations on subcontracting, the SBA’s new small business mentor-protege program, and much more.  If you didn’t catch the presentation, I’ll be giving an encore presentation next week in Overland Park.

And since it’s Friday, it must be time for our weekly dose of government contracting news and notes.  In this week’s SmallGovCon Week In Review, we take a look at stories covering the anticipated increase in IT spending, the Contagious Diagnostics and Mitigation program is moving into phase 3, the GAO concludes the VA made errors in its contracting of medical exams and more.

  • The overall rate of IT spending will be above $98 billion each year for the next six federal fiscal years. [E-Commerce Times]
  • Tony Scott, U.S. Chief Information Officer, said he will allot time trying to improve how the federal government accepts unsolicited ideas from industry during what may be his last few months as the U.S. Chief Information Officer. [Nextgov]
  • The Enterprise Infrastructure Solutions contract will reshape how agencies procure telecommunications IT starting in 2020, but agencies need to prepare now. [FedTech]
  • The Homeland Security Department and the General Services Administration put two more key pieces in place under the Contagious Diagnostics and Mitigation program. [Federal News Radio]
  • The U.S. GAO is recommending the VA rebid its contracts for conducting medical exams for thousands of vets applying for disability payments after concluding the VA made several prejudicial errors in its process. [TRIB Live]
  • GSA launches a new special item number that will make it easier for agencies to find and buy the health IT services they need. [fedscoop]
  • The SBA has launched online tutorials for entities seeking SBIR funding. [SBA]
  • Three companies have agreed to pay $132,000 to resolve allegations of falsely self-certifying as small businesses in order to pay reduced nuclear material handling fees. [DOJ]

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Koprince Law LLC

In August, I wrote about a highly unusual case in which a company–which had filed 150 protests in the current fiscal year–was suspended from filing GAO bid protests for one year. I recently spoke with Tom Temin on his radio show Federal Drive to talk about GAO’s  decision.

If you missed the live conversation, you can click here to listen to the recorded audio from Federal News Radio. And be sure to tune in to Federal Drive with Tom Temin, which airs from 6-10 a.m EST on 1500 AM in the Washington, DC region and online everywhere.


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Koprince Law LLC

The curse is broken!  For the first time in 71 years, my Chicago Cubs will play a World Series game in Wrigley Field tonight.  While I wish I could be in Wrigley to cheer them on, the ticket prices are being called “record breaking,” and not in a good way.  So I’ll be watching with my family from the comfort of my couch right here in Kansas–which, if nothing else, will offer the advantage of a better dinner than the ballpark (I’ll take chicken smoked on the Big Green Egg over a ballpark hot dog any day).

But before I head home to watch the first pitch, it’s time for our weekly dose of government contracting news and notes.  In this week’s SmallGovCon Week In Review, a judge has blocked implementation of the Fair Pay and Safe Workplaces Rule, Guy Timberlake sounds the alarm about proposed changes to small business goaling, a group of contract employees have gone on strike in protest of alleged legal violations, and much more.

  • A federal court in Texas has halted enforcement of new rules requiring many U.S. government contractors to disclose labor law violations, including workplace safety violations, when bidding for contracts. [POLITICO]
  • The GSA has introduced new initiatives to better engage small and innovative companies that aren’t traditionally government contractors. [fedscoop]
  • Our friend Guy Timberlake takes a look at what would happen if, all of a sudden, agencies didn’t have to work so hard to meet or exceed their small business goals. [GovConChannel]=
  • The team at the Office of Management and Budget have been thinking creatively on how to deal with unsolicited proposals and generate the best ways to approach the federal IT procurement process. [fedscoop]
  • Fed up truck drivers and warehouse workers employed by federal contractors are striking for 48 hours to draw attention to alleged wage theft and other violations. [workdayMinnesota]
  • Washington Technology lays out four things you need to know about new the contractor requirements for classified networks. [Washington Technology]

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