Jacques

Ignoring the language "equitable adjustment," assuming the contract doesn't have any delay-related clauses (like the ones in Part 42), everyone who has been mentioning the Disputes clause [incorporated by reference via paragraph (d) of the clause at FAR 52.212-4] is right on the money IMHO. The Contractor may believe the delay associated with 2 & 4 above represent compensable delays. Again, assuming the only language in the contract related to delay is the standard language at paragraph (f) of FAR 52.212-4 (relating to excusable delay), then the contractor's theory will likely involve an allegation of Government breach of an implied duty not to hinder or interfere with the contractor's performance or Government breach of its implied duty to cooperate with the contractor. See Cibinic, Nash, & Nagle, Administration of Government Contracts (4th Ed. 2006), at 577. Near as I can tell based on my understanding of the Contract Disputes Act, each theory is one "relating to" the contract--rather than "arising under" the contract--as each is based on an implied duty.

I'm not sure what your point is, @cds. The scenario in the original post had as its assumption that only one SDVOSB was potentially capable, and that one other potentially capable vendor was a "vanilla" small business. The question was whether the effort might be set aside for competition among small businesses under FAR Subpart 19.5. Fortunately, 38 U.S.C. 8127(d) and Kingdomware Techns., Inc. v. U.S., 136 S.Ct. 1969 (2016) aren't involved. Neither the statute nor the case would impact what clauses would be included in a solicitation set aside under FAR Subpart 19.5. There may be other VA-unique issues related to Subpart 19.5, but those issues wouldn't relate to Kingdomware.

At the extreme, the provision at FAR 52.215-23, the clause at FAR 52.215-23, and agency steps at FAR 15.404-1(h) related to excessive pass-through are relevant to the extent to which an effort can be subcontracted.

@General.Zhukov Just as a general observation, you may want to review the Contract Pricing Reference Guides, Vol. 4, chapter 6, "Pricing Equitable Adjustments and Settlements." The Guides are referenced at FAR 15.404-1(a)(7). They are also apparently available at DAU, though I couldn't get the page to load.

On the cost analysis requirements surrounding insourcing, see DoDI 7041.04. To support my conclusion above that insourcing and outsourcing are different, you'll see that the linked memo references Pub. L. 111-84, NDAA'10, sec. 325. Subsec. (a) of that section reads: (emphasis added).

Insourcing and outsourcing are different. The prohibition on outsourcing remains in place. See the FY19 Update here. Authorities related to insourcing include 10 USC 2463 & DFARS 237.102-79.

Notwithstanding the prevalence of fraud, waste, and abuse in government contracting, the theft would NOT be a transaction governed by the FAR. I wouldn't even call it an "Other Transaction."

Just to be clear, generally the clause at 52.219-27 only applies if the acquisition is set aside for competition among SDVOSBs. If the solicitation is set aside for “regular” (FAR Subpart 19.5) small businesses and a SDVOSB happens to win, that contractor would only have to comply with the clause at FAR 52.219-14.

@ji20874 is absolutely right, but you don't want to ground your decision on flawed logic, either.

Forgive me as I pretend I am your small business specialist and play devil's advocate: When SDVOSB "B" stated the quote above, which clause did the vendor have in mind? Is it possible that SDVOSB "A" has different subcontractors in mind for providing the "large IT component," where SDVOSB "A" intends to use more small businesses? (This may be relevant if your agency uses 13 CFR 125.6 in lieu of 52.219-14.) Is the "large IT component" supplies, services, or both? If supplies, could you reasonably characterize the overall effort as one primarily for supplies? If so, and if there is an exception to the nonmanufacturer rule, then it may potentially be appropriate for set-aside under FAR Subpart 19.5. How is the non-SDVOSB small business vendor meeting the limitations on subcontracting?

Sorry if you have already answered this, but is this a contract for supplies or services? I can't find your reference to "maintain 50% of the revenue" so I couldn't it figure out from that. The limitations on subcontracting are slightly different under FAR 52.219-14 than under FAR 52.219-27, so I'm not sure whether SDVOSB "A" was answering for -27 or for -14. Conversely, I'm not sure SDBOSB "B" was answering for -27 or for -14. Presumably, if this were a set-aside under FAR Subpart 19.5, the clause at FAR 52.219-14 would be the one in the contract. If the VHA is the Veterans Health Administration, it wouldn't surprise me if you have agency clauses that are used in lieu of clauses like FAR 52.219-27, so sorry if this isn't helpful.

SDVOSB "B" admits it is not capable. Your current market research SUGGESTS SDVOSB "A" is not capable, considering Limitations on Subcontracting: So it all seems to hinge on the strength of your analysis. You haven't described your rationale on WHY you can conclude one vendor's lack of capability from another's. I don't know how much stock to put in your statement, "[A]ll these small businesses state they will have to partner with a large business in order to meet this requirement." This obviously isn't the same thing as not complying with the Limitations on Subcontracting clause.

Renting equipment shares elements of both a service and a supply, so it ends up being treated differently in different contexts or for different purposes. On one hand, from a Product Service Code perspective, it falls under Category W, which suggests a service. In the context of a delivery schedule, rentals more closely resemble a service than a supply, as the item must be furnished across a range of dates, much like a severable service, and generally unlike a simple supply contract, which typically would have only a delivery date. On the other hand, you have the examples in this thread and the following. 2 Federal Contract Management ¶ 12.09. @Lionel Hutz's reference to Part 8 seems consistent with Blue Ridge. Another fun decision is Anchorage Telephone Utility, GSBCA No. 7030, 84-1 BCA ¶ 17,020, where the Board seems almost frustrated by the whole issue: "We are not persuaded that this contract can fairly be characterized as either a supply contract or a service contract for the purposes of this appeal. Sometimes we have no choice but to pick one of two almost equally unappealing alternatives."

C Culham, At the risk of beating a dead horse, paragraph 2 of OFPP Policy Letter 11-01 begins, "Authority. This policy letter is issued pursuant to section 6(a) of the Office of Federal Procurement Policy Act, 41 U.S.C. 405(a)..." Section 405(a) is now 41 U.S.C. 1121(b). The Policy Letter does not cite to former 41 U.S.C. 405(b) or present-day 41 U.S.C. 1121(d). Paragraph 6 of the Policy Letter notes, "It is intended only to provide policy guidance to agencies in the exercise of their discretion concerning Federal contracting." See, e.g., Systems & Programming Resources Inc., B-192190, Aug. 16, 1978, 78-2 CPD ¶ 124 (stating that OFPP Policy Letters represent "expression of executive branch policy rather than requirements established by law or regulation"), followed by Johnson Controls World Servs., Inc.; Meridian Mgmt. Corp., B-281287.5 et seq., June 21, 1999, 2001 CPD ¶ 3 at 5 n.2. I don't understand why you put so much stock in an unimplemented OFPP Policy Letter, seemingly elevating it as somehow superior to a properly issued section of the FAR.

FAR 7.503(c)(20) remains authority because it remains in the FAR. Even if it conflicted with OFPP Policy Letter 11-01, it would remain authority until it was either removed from the FAR or a deviation was issued. By its own words, Policy Letter 11-01 anticipated it would be implemented in the FAR. Near as I can tell, it has not. That the Policy Letter anticipated it would be implemented in the FAR is entirely consistent with 41 U.S.C. 1121(b), which provides: