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FederalContractor

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  1. On a small business set-aside for services, the Limitation on Subcontracting clause (13 CFR 125.6) requires that the prime contractor "perform at least 50 percent of the cost of the contract incurred for personnel with its own employees." The term, Cost of contract performance incurred for personnel," is defined as, "Direct labor costs and any overhead which has only direct labor as its base, plus the concern's General and Administrative rate multiplied by the labor cost." Question 1: How should this clause be applied to a Firm-Fixed Price contract, where prime contractor's cost data is not requested by or provided to the Government. And further, the subcontractor is performing on either a Firm-Fixed Price or T&M/Labor Hour basis, where the prime contractor does not have any visibility into the subcontractor's cost data since they are providing fully-burdened labor rates to the prime contractor. Should "cost" in this instance be read as "price"? And if so, is it price paid by the Government? In other words, If the labor price of the prime contract is $5 million, and the subcontractor performs labor for which the government pays $2.5 million to the prime contractor, is the requirement satisfied? I have yet to find any reference in the FAR or otherwise where this is clearly articulated. Any assistance would be appreciated. Question 2: For certain professionals such as Physicians, it is very common for such individuals to work as independent contractors ("1099s") rather than as W2 employees of the prime contractor. The Limitation on Subcontracting clause requires the prime to perform 50 percent of the labor "with its own employees." I have read conflicting authorities and opinions on whether such independent contractors should be treated as employees or subcontractors, for purposes of compliance with this requirement. As a practical matter, where a prime contractor is responsible for providing a service contract mostly consisting of Physicians to the Government, it can be nearly impossible for a small business to staff such a requirement "with their own employees" if interpreted literally. SBA has declined to provide clear guidance on this matter, leaving it up to contractors to figure out. If others have encountered this dilemma, I would be very interesting to know how it is addressed.
  2. C Culham, that's a good link. And yes, the definition of small business is dependent on the NAICS code of a specific solicitation. A company with less than 1,500 employees could be considered "small" by some size standards, while a company with greater than $7 million in revenue could be "large" by other size standards. So it's common for growing 8(a) firms to be "small" and "large" at the same time, depending on the context. It produces a lot of complex but interesting questions. The question becomes not, "Are we still an 8(a) firm?" - the answer is yes - but "Are we a small business?" The answer is yes and no. An 8(a) firm must be small within its primary NAICS code, or it could be (but not always) subject to early graduation.
  3. Vern, I agree with you, and I just needed to confirm this. My understanding is that a company needs to be qualified as Small at the time it submits its initial offer for an FSS, in order to be eligible for task orders issued as a small business set-aside under that FSS. Small Business status is defined according to the NAICS code in the solicitation, at the time the offeror submits their initial offer (This is true for any contract). I think FAR 19.804-6 (c ) is applicable where a company is awarded an FSS as a Small Business, then subsequently graduates the 8(a) program or outgrows the applicable size standard during the 5-year award term. FAR 19.804-6 confirms that such an 8(a) firm can continue to receive task orders as 8(a) set-asides during the 5-year base period of the FSS, because their 8(a) small business status is derived from the size status representation at the time of award. After 5 years, they are required to re-certify their size status, and would no longer be eligible as a small business. However, where the 8(a) firm was Large to begin with when the FSS was awarded, FAR 19.804-6 does not authorize such a firm to receive task orders under the FSS which are 8(a) or small business set-aside.
  4. All, I apologize if the question in the original post was unclear, and I do appreciate your assistance. The scenario is an 8(a) contractor which is considered a small business under its primary NAICS code; however it is Large under the NAICS code for the FSS Schedule in question. It properly represented itself as Large at the time the FSS Schedule was awarded. There is uncertainty within our organization on whether the language at FAR 19.804-6 © authorizes an 8(a)-certified company which was awarded a FSS as a Large business, to receive task orders as a small business set-aside under this FSS. The FAR language states, "“An 8(a) concern may continue to accept new orders under a multiple award, Federal Supply Schedule (FSS), multi-agency contract or Governmentwide acquisition contract even after a concern’s program term expires, the concern otherwise exits the 8(a) Program, or the concern becomes other than small for the NAICS code assigned under the contract." Question: Can this clause reasonably be interpreted to allow an 8(a) company which represented itself as a Large business during award of the FSS, to accept new orders under the FSS which are set-aside for Small Businesses? In order words: In order to "continue to accept new orders" under this FAR clause, must the business have represented itself as Small at the time of FSS award? If so, are there any exceptions to this? Thank you all again for your assistance.
  5. napolik, my post wasn't related to the earlier post you referenced, although it's somewhat related. The most important question is No. 2 at the top. If a company represents itself as a Large Business under the applicable NAICS code at the time the FSS is initially awarded, does FAR 19.804-6 paragraph C still allow the company to receive small-business set-aside or sole-source task orders against this FSS? If so, for how long? If not, why?
  6. FAR 19.804-6 © states, “An 8(a) concern may continue to accept new orders under a multiple award, Federal Supply Schedule (FSS), multi-agency contract or Governmentwide acquisition contract even after a concern’s program term expires, the concern otherwise exits the 8(a) Program, or the concern becomes other than small for the NAICS code assigned under the contract.” In light of this clause, with regard to Federal Supply Schedules (FSS), I would like to clarify the following scenarios: 1. If a company represents itself as a Small Business under the applicable NAICS code at the time the FSS is initially awarded, may it continue to receive new task orders issued as a small-business set-aside or sole-source under that FSS after it becomes other than small for the NAICS code assigned to the contract? If so, for how long? 2. If a company represents itself as a Large Business under the applicable NAICS code at the time the FSS is initially awarded, does FAR 19.804-6© still allow the company to receive small-business set-aside or sole-source task orders against this FSS? If so, for how long? If not, why?
  7. DCarver, in the situation which I'm considering, there is no separate contract (with the same contractor or otherwise) to develop the requirements for the contract at issue. The contractor provides substantial input to the Government customer who develops the Statement of Work, and the contract is then awarded to the same contractor as a sole-source through the 8(a) program. Stipulate that the Government acted properly in awarding the contract via 8(a) sole-source rather than through competition. My understanding is that, absent competition requirements, the Government is free to seek whatever input it wishes from an 8(a) contractor it is negotiating with on a sole-source basis, and incorporate that input into the awarded contract. Is that your understanding?
  8. FAR 9.505-2, covering the "Biased ground rules" OCI, prevents a contractor from supplying the services or items on a contract in which they assisted in developing the specifications or statement of work in a "competitive acquisition." I have two questions: 1. In a situation where the Government intends to procure the item through an 8(a) sole-source, rather than a competitive acquisition, would it be correct to conclude that this OCI restriction does not apply? 2. For DOD acquisition, is there any other ethics restriction on a contractor providing input to a statement of work for a contract which the Government intends to award directly to that contractor through the 8(a) sole-source process? I believe that once the competitive aspect is removed from the scenario, it simply becomes a matter of negotiation between the contractor and the Government.
  9. C Culham, I very much appreciate your response. I agree, it would be ideal to obtain releases from SBA. The tricky issue is, if they deny the release (even if they arguably don't have the authority to do so), the contracting agency may be less likely to move forward with an FSS order, for fear of rocking the boat. I did see the previous thread, but it was written prior to the court cases and CFR revisions at issue. I am surprised that there has not been more commentary and analysis on the K-LAK decision, as it seems to have huge implications for 8(a) firms and their continued survival as they grow into large companies. Thanks again for your help.
  10. I work for an 8(a) certified small business, primarily doing business with DoD, which is quickly growing and will soon exceed the size standards for remaining Small under the applicable NAICS codes in our industry. Many of our current contracts are 8(a) sole-source awards. The 8(a) sole source route will not be an option for us in the near future, however our existing customers are would still like us to have the opportunity to compete for the work on a full and open basis. I am researching the process for removing a contract from the 8(a) Business Development, and would appreciate any insights on the following: 1. I've reviewed 13 CFR 124.504, which provides a process for releasing a requirement from the 8(a) program; however, it seems to require that the incumbent nevertheless be eligible as a small business, and that the follow-on contract be procured as a small business set-aside, WOSB, HubZone, etc. but not Full and Open. 2. I came across a 2010 Court of Federal Claims case, K-LAK Corporation v. United States, that involved an Air Force contract which was an 8(a) sole-source. The Air Force declined to exercise the option on the 8(a) sole-source award, and subsequently procured the items through a Federal Supply Schedule (FSS). The SBA provided notice to the Air Force that the requirement could not be withdrawn from the 8(a) program, but Air Force did so anyway. The court held that the small business set-aside requirements under FAR part 19 do not apply to orders made through Federal Supply Schedules, and consequently, the Air Force was not required to comply with "the rule of Two or any of the other regulations applicable to small businesses that the plaintiff relies upon..." https://interact.gsa.gov/sites/default/files/cofc_-_ok_to_use_fss_when_procurement_is_currently_set_aside.pdf This case was recently (November 27, 2012) cited and reaffirmed in Kingdomware Technologies, Inc. v. United States, where the court stated that it is "well-settled that when placing an order against the FSS, the agency is exempt from the small business set-aside programs under FAR Part 19." http://www.uscfc.uscourts.gov/sites/default/files/FIRESTONE.KINGDOMWARE112712.pdf This is fascinating, as it seems to suggest that a contract may be removed freely from the 8(a) program as long as the Government procures the follow-on contract through an FSS. I'd like to make sure that I'm interpreting this correctly, and is there anything I'm missing here? 3. If a DOD agency wishes to procure a follow-on contract to an 8(a) sole-source through an FSS using Full and Open competition, is there a process in terms of notifying the SBA, completing a J&A or anything else? Are there any special forms that need to be completed? I appreciate your assistance very much! Thanks.
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