Posts posted by ohnoudidnt14
Fed Reg Vol 81 No 104, May 31, 2016 finally implemented the “Similarly Situated Entity“ rule of the 2013 NDAA. Specific updates to 13CFR125 change the overall tenor of the Limitations on Subcontracting to a true limit on the amount that can be subcontracted rather than a prime performance requirement.
Based on much of the reasoning included in that Fed Reg, the intent was to bring parity to the various programs, including the Limitations on Subcontracting. The Reg however did not change 48 CFR 52.219 and the various FAR clauses -3, -14, -27, -29, and -30 that implement the limitations on subcontracting requirements. Vern will be disappointed to see that in the 13CFR125 revision they REMOVED the definition of “Cost of contract performance incurred for personnel”, yet that term is still used in the aforementioned FAR clauses.
Of particular concern, the new 13CFR125.6(a)(3) requirement identifies the limitations on subcontracting for general construction as “not pay more than 85% of the amount paid by the government to it to firms that are not similarly situated”. Similarly (a)(4) requires not more than 75% for special trade contractors. Yet the current FAR 52.219-3 (Notice of HUBZone set-aside) requires that for both types, 50% of “the cost of personnel for contract performance be spent for employees of the concern or employees of other HUBZone small business concerns” (e.g. similarly situated entities) AND requires at least 15% (general) or 25% (trade) performance by employees of the prime. So there is an inherent contradiction between the two.
The 50% requirement is very difficult for HUBZone construction and trade contractors and I personally know of at least two former HUBZone contractors that have given up maintaining their HUBZone certification on that basis. It was thought that the new revised rule would bring the requirement back to 15% (general) or (25%) trade consistent with the other programs.
So, 1) is there any reason why one would have precedence over the other (13CFR125 vs 48CFR52) as they are contradictory, and 2) is anyone aware of any pending changes to the FAR clauses to reconcile the discrepancies (not just this one) and bring it in-line with the new regulation?
All, thanks for the help on this. I hope you can see my frustration whereas, just like the bond premium, the prime contractor pays this up-front, it seems that it's an "allowable" cost, yet we can't invoice for it (other than progress payments over the life of the contract). Is there really no arguement that this is "coinsurance" since it lowers the prime's premium?
Joel, the liquidation of the bond premium is an interesting methodology, but my experience with most agencies of-late is to pay the bond premium and separate it out completely from the progress calculation. Also, your comment regarding modifications is generally correct, however if the government is on-the-ball and asks for a "consent of surety" associated with the modification, then the contractor is billed right away...but we don't usually seek payment for the additional premium under (g).
ji, thanks for the quick response.
I understand what you are saying, but ultimately the contractor/subcontractor agreement identifies that the contractor is going to reimburse the subcontractor for the bond premium just the way the government is to reimburse the contractor...so it is a cost to the prime regardless of who "paid" it.
What if this were a contract mod. Are you saying the cost of the increased subcontractor's bond is an unallowable cost even though it is a requirement of the bonding company and ultimately reducing the cost of the prime contractor's bond premium?
FFP construction contract in SC.
Competitive IFB, SDVOSB set-aside.
Question on behalf of the prime contractor.
The government is required to promptly reimburse a contractor the cost of performance and payment bond premiums per FAR 52.232-5(g). Bonding companies generally require prime contractors also obtain bonds from subcontractors for subcontracts over a certain threshold (usually $250k for small-midsize companies).
The prime contractor has several instances of where the subcontractor bond premium was reimbursed by the government along with the prime’s own bond premium AND several instances (from the same agency no less) where the pay application was denied on the basis of the subcontractor’s bond not being a government requirement.
In my opinion, the subcontractor bond (required by the bonding company of the prime contractor) qualifies as “coinsurance” as stated in FAR 52.232-5(g) because without the subcontractor bond, the bond premium rate applied to the prime (for the entire value of the contract) would have been higher.
Is anyone aware of any case history or regulatory references that substantiate or refute my position? Thanks in advance.
Just a quick observation...continuing the language from your quote "no longer count the options or orders issued pursuant to the contract, from that point forward, towards its small business goals". Therefore any task orders already issued can be completed with full accounting to the small business status of the company at the time of award. It is only new orders or option (e.g., contract option years) that can no longer count. Some agencies have chosen to ignore the "orders" part and only apply this restriction to "options". Others have found innovative work-arounds (circumventing the intent of the regulations IMO) by issuing modifications to prior task orders rather than new task orders then weaseling a justification as to why it is a "change". I don't think they are correct, but understand their frustration after completing a sometimes exhaustive acquisition process only to NOT get credit toward their intended goals.
ISSUE No. 1 – Yes, I think I’m clear on the requirement. I guess at this point I’m just pointing out the inconsistency between the various socio-economic programs for the benefit of the readers of this forum. I’m hoping it’ll be a point of discussion as to WHY the discrepancy???
ISSUE No. 2 – Yes, there are several inherent problems with the 180 (and often more) day acceptance period.
- Generally, economic adjustment clauses are not included unless a large percentage of the contract price is based on the price of a highly fluctuating precious metal, fuel, etc. Therefore, the result is a higher price to the government as the contractor is absorbing all of the risk of escalation.
- The extended acceptance period eats up a contractors bonding capacity, possibly for multiple pending awards that may or may not ultimately be funded. Picture the poor SB contractor who is local to an agency that regularly publishes these unfunded solicitations (check out FBO 1 SOCONS-Hurlburt Field, FL for example), eats up their entire bonding capacity on successful low bids for unfunded solicitations, then waits until the end of the FY only to find that none of them are funded and he/she has no work.
- Worse still, there is a growing concern that some agencies might be using the “unfunded requirement” tactic to be able to decide if they “like” the contractor that is the apparent low bidder, THEN decide whether to seek funding or re-solicit or sole-source 8(a) the following year.
- Regarding the socio-economic categories – If, for example, a HUBZone certification is lost after time of bid (on a HUBZone set-aside), for whatever reason and possibly only the day before the intended award, the government can no longer award to the apparent low bidder. In the meantime, the government may have obtained the necessary funds…but not sufficient funds for the NOW lowest qualified bidder (the 2nd or possibly 3rd lowest bidder). The government can’t credibly go after the low bidder’s bid bond because they offered in good-faith, are (presumably) “willing” to do the work, but are no longer eligible for award based on what may be very normal business changes. A scenario like this is much more likely on a 180+ day acceptance period.
So I guess my real conclusion here is that the practice of repeatedly publishing unfunded solicitations is convenient for the government, but driving up contractors' overhead rates (increased B&P costs), increasing prices, and disproportionately punishing (by tying up bonding capacity) the smallest of the small businesses that the government claims to be attempting to help the most.
How’s that for drumming up some discussion here?
PS I didn’t mean to pick on the USAF 1 SOCONS folks, they are just one example of an agency that has recently published a lot of unfunded solicitations.
For a SDVOSB or 8(a) set-asides, offerors must be so classified as of the date a bid is submitted, regardless of the resulting actual date of award. Do I understand correctly, however, that for HUBZone, WOSB, or EDWOSB set-asides the offeror must also still be so classified on the day of award of the contract (not sure where Total Small Business would fall, but I assume the former)?
An increasing number of agencies are performing solicitations for contracts prior to any funding being available. These solicitations require that the offers confirm XXX calendar days for government acceptance, but since there is no funding, rather than 30 or 60 days, agencies are inserting the number of days amounting to the end of the current FY (often more than 180 days).
I think I might throw a wrench into all of this, but in the end, simplify it for all. The Maersk Line decision ultimately concluded that since one small portion of the project was being performed in the US, that FAR Part 19 applied. Buried in the SBA’s rebuttal arguments, they point out that the newly revised regulation states that FAR Part 19 applies "regardless of the place of performance" 13 CFR 125.2(a); 78 Fed. Reg. 61,114 (Oct. 2, 2013)...and the GAO acknowledges it, even though it wasn't necessary to apply in this case.
Therefore, in the SBA’s eyes, FAR Part 19 has been modified so that it now applies irrespective of place(s) of performance. How long is it going to be before a few large businesses catch-on to this, team with key small businesses, and start lobbying for previous unrestriced contracts to be set-aside on recompete?
As a long-time Government contractor for large and small businesses, my experience with Government contracting officers has been mostly positive. I have had a situation for the last couple of years however where I have encountered a very abusive contracting specialist that is relatively new to the government contracting arena. I don’t blame her completely as her contracting officer has left her mostly unsupervised and, when he did provide any guidance, it was usually wrong.
That said, she has been continually NOT acting in good faith (although my lawyer, while agreeing, always stops short of actually using those words), driving small businesses nearly out of business, and costing the government a significant amount of money. I have several documented examples of her bad-faith and am disappointed that she (and her CO boss) are ruining an otherwise noble profession tasked with assuring the public trust.
This young contract specialist is power-hungry, ambitious, and attempting to quickly advance her career. I have no doubt that she is, or soon will be, seeking promotion to a Contracting Officer.
All that said, my questions are:
1. Where can I find out if/when this person is applying for a warrant to be entrusted as a contracting officer?
2. Is there some platform where I can provide input (including documented evidence) to the evaluating officials demonstrating that this individual has not acted in the Government’s best interest and cannot be considered as a trustworthy steward of the taxpayer dollars?
I apologize that there is such a negative spin to this. I have provided references for individuals seeking licensure and/or certifications in many disciplines/careers over the last several decades. I’m now to the point that I feel it is my DUTY to prevent an individual that has repeatedly demonstrated such moral turpitude and questionable ethics from gaining any credibility to be granted a position in defense of the public trust. How do I go about this?
She has seen most of this already, but I will make sure it gets another thorough review. The problem with this one is that there was an initial evaluation, 14 days contractor comments, then it was revised by the contracting officer (adding the UNSAT and not addressing any of the other disputed issues) and finalized by the "level above the contracting officer" without any chance to comment or refute the revisions.
Thanks for the tips, I'll pass them on.
She sent a strongly worded letter to the head of the contracting agency, no response yet (chalk it up to the holidays). I suggested to her that the next step is an official request for final ruling from the contracting officer, then a Court of Federal Claims or Board of Contract Appeals filing. Meanwhile, that CPARs with an UNSAT is out there possibly preventing her from getting more work and there'll likely be no recovery of legal fees...which will just about put her SB out of business.
Any other ideas?
Just to rekindle this a bit...a colleage of mine (contractor) on the east coast had a CO rate them as "unsatisfactory" in CPARs for failure to satisfy the limitations on subcontracting.
The problem is that they DID satisfy the applicable requirement. Worse, it was a construction contract and, like Joel mentioned, the CO had the certified payrolls that demonstrated compliance. Worse still, the CO worked this in a final revision to the CPARs rating, so the contractor didn't even get the opportunity to comment or rebut.
Happy New Year
(4.5 hrs early, central time zone)
Thanks. To Ji - I don't believe your last sentence is the case. From their perspective, the change makes sense based on geography.
To Vern, I have plenty of examples that might be a good basis for my "private talk" with the chief of the contracting office as Ji suggested, but not likely anything that would meet the government's standard of proof. I just know now that what small profit margin I had is going to be eaten up satisfying unnecessary administrative requests.
Frustrating, but all part of the game of life.
I am a contractor working on a FFP electrical construction project for the Navy in SE Georgia. The contracting office is planning to change the CO and ACO. I know this is fully within their right, but the CO and ACO they are planning are individuals that I have worked with before. They are abusive, don’t act in good-faith, and would basically be considered “high maintenance”. Do I, as the contractor, have any right to object to the change? Had these individuals been identified in these roles from the beginning, my price may have been different or I may not have bid the project in the first place.
Nebraska: Welcome back. I have to say that your SBA PCR is grossly misguided (that's the nicest way i could think of to say it). He/she obviously doesn't understand basic business types, rules, etc.
I go back to my original post #2. Whether these independent contractors are sole proprietors, LLCs, S-Corps, or C-Corps, they can get a D&B number, register in SAM, Complete Reps & Certs. In your case, they wouldn't even need to upload their documents into the WOSB repository since they are not proposing as a prime. Get them to provide you a copy of their reps & certs for the file. Now, assuming your independent contractor vs employee issues are taken care of, I don't see where the SBA would have a leg to stand on.
As a side note, I would suggest that they get a TIN/EIN, but "technically" a sole proprietor or single-member LLC does not HAVE to. Also, Vern's suggestion for your independent contractors to obtain an "occupational license" ("business license", "business tax receipt", different states/jurisdictions call them different things) is a good one. They are usually not very expensive. Make sure they don't list YOUR business address as their business address (this goes for D&B and SAM too).
Sap: An interesting question and I'm sure you will get very thoughtful responses from the experts here. A couple of quick observations from this layman however:
- FAR 15.403-1( c) includes the term "or" between (ii) and (iii), but not between (i) and (ii). I guess we should read that to read (i) and either (ii) or (iii). Worse yet, (ii) also requires (A)(1) AND (2) AND ( B ). ( B ) contains the "OR"...so is (iii) okay in lieu of (ii)( B ) only or (iii) okay in lieu of (ii)?
I'm sure you (Sap) are the only one that dissected that bullet enough for it to make sense. The experts here will admonish me (kindly) for getting caught up in the words and not the meaning behind the regs. They are right, but keep in mind that the front-line of lawyers (of which I am not) will read the words.
My second layman observation:
- Just because this seller is indicating they sell to other Government entities, does not in-of-itself validate that those sales are based on adequate price competition...were those sales also sole-sourced? If they ARE selling to other government entities based on adequate price competition, it may make your job easier to confirm competition, pricing, and negotiate applicable adjustments (including regional).
Good luck and please keep us posted.
Sorry Vern...when in doubt, I always go back and read the original post. I agree that at this point we need to hear from Nebraska again for more data. Very useful info in this thread for anyone looking at the employee vs. independent contractor issue. Plenty of businesses (i.e., Microsoft) have gotten in a lot of trouble over this issue.
If they really are independent contractors in this case, I would definitely question the SBA's judgement. A SB (or any other socioeconomic SB category) CAN'T include the 1099 independent contractors toward their self-performance goals (Ref. GAO decision, Midpoint Group, LLC 5/8/14: http://www.gao.gov/assets/670/663099.pdf). Now they are saying they can't include 1099 employees towards subcontractor goals either???? They can't have it both ways. GRRRRRR!!!!
I think we have veered far of course from the original question and have turned this into a posting of employee vs. independent contractor. An important issue I confess, but I'll assume that the original poster knows what he/she is doing regarding this and that they have bona fide independent contractors. It seems reasonable that a woman independent contractor should qualify as a WOSB.
If I got all that right, I stand by my original response (#2). Even a sole-proprietorship can pull a D&B number (may be based on SS# instead of EIN/TIN), register in SAM.gov, and upload the documents to the SBA repository. Then there would be little reason to disallow any of the independent contractor's performance as performance by a WOSB towards their small business goals.
Disregarding the dictionary definitions for a minute, as a contractor we would like to know as soon as possible, especially as we are approaching the end of the FY. Such information may free up some bonding capacity (if construction) or may impact our go/no-go decisions on possibly bidding other contracts.
I know your example may have been a hypothetical and not your "real" situation, but exceeding page count is not a reason to throw a proposal out. The proposal should be evaluated up to the number of pages permitted and the excess disregarded. The proposal will likely end up deficient on some ground, but I would think that you would have to go through the process just the same.
Vern, you were very helpful in answering the question, thank you very much. I think you can understand my hesitation as I was attempting to apply the definition in 13 CFR 125.6(e)(2) to my "cost of contract performance incurred for personnel" of my subcontractor(s). Your way is definitely easier and I hope this helps others out there with a similar question.
When the FAR is ultimately updated to included "similarly situated entities" for SDVOSB, EDWOSB/WOSB, and Total-SB set-asides (like it reads now for HUBZones) this will be increasingly important as some sub-contractors will be counted as satisfying the applicable performance requirement.
As for all of the other discussions here regarding the application of G&A, etc. to the calculation, I encourage you all to go read the “Is this Professor right?” thread started by contractor100 on 3/23/12. It's a long thread, so be sure to read all the way to the end. There is a lot of very good information and (as I mentioned in the initial post here) I have gone with Vern's alternate method in Post #25 of that thread.
Cheers and a safe 4th of July holiday to all.
Woah...slow down that horse!!!
Interesting exchanges here to say the least. Keep in mind that MOST of the limitations on subcontracting requirements apply to the entire contract and not to any particular arbitrary time in contract performance. I am making every effort to comply, so If I can lead you all back to the original question: How can I credibly account for the personnel cost for professional services when the only data I have is the fully burdened labor rate from that entity?
That said (and now just to stir the pot a bit), absent any other information (e.g. certified payroll) in the Singleton case, how would you know that the Singleton individuals on the contract weren't compensated at a much higher DLR than their subcontractor personnel, thus possibly meeting the applicable percentage of "cost incurred for personnel"? That is, say four performing subcontractor personnel are making $20/hr and one prime contractor superintendent is making $80/hr. The prime is, thus, incurring 50% of the cost of personnel (simplifying for the point of argument and not considering indirect cost, etc.).
Beer and Prosciutto, count me in.
I don't know of any such requirement, but I would caution to be consistent. If your agency redacted the information for five similar consecutive procurements, but then for some reason did not on the sixth, I can see it come to question as to "why?". Was there a contractor in that sixth acquisition that 'someone" wanted to make sure their identity was known?
I would say, to protect yourself, have your independent contractor(s) 1) get a D&B no., 2) Register in SAM.gov, 3) follow the regs to register as a WOSB (including uploading the required documents to the WOSB repository (see sba.gov/wosb)), 4) complete their Reps & Certs in sam.gov identifying themselves as a WOSB, and 5) Provide you a copy of their final Reps & Certs. I know it's a lot of work, but it would CYA and the SBA wouldn't have credible reason to deny you at that point. If you have someone in your organization that is familiar with all of these steps that could walk all of your (women) independent contractors through it, it may ease the burden a bit and help them all in the long run.
I hope this helps.
Yes, FAR 52.219-14 (or the similar clauses for HUBZone, SDVOSB, WOSB/EDWOSB set-asides) are an "agreement" that a prime contractor commits to with a bid. As a part of the "responsibility", I track this during performance. As work inevitably changes (whether incorporated by contract modifications or not), these percentages vary and in some cases need to be closely tracked. In my case, I have professional service providers (accountants, lawyers, etc.) that may be direct cost to the contract. I don't anticipate being able to get a DLR from these providers, but want to include them in the calculations since they are direct cost "incurred for personnel". I was just hoping that there is some precedence out there somewhere as to how the SBA would figure this...but haven't found anything yet.
"What were they thinking?" Discussions:
in Contract Administration
Hello Wifconers and happy 4th of July. A friend and I are considering starting a “what were they thinking” series relating to government contracting. I would love to hear from you on particular instances, scenarios, protests, or court decisions that left you just scratching your head. The field is wide open…these could be matters so egregious as to be criminal (bribery, fraud, kickbacks, debarment) or a bit more subtle like obvious affiliation or conflict-of-interest issues. As much as we would love to be able to shoot-the-breeze with every one of you and just share stories, we are really looking for the basis to be documented in protest decisions, court decisions, board decisions, or other referenceable government record.
Not looking to be one-sided here, it could be a contractor that tried to get away with something that was exposed once the robe was opened (i.e., after a protest), a government contracting officer run amok, or a protest decision that was so unbelievable that it was quickly overturned (hopefully) on appeal.
I know this audience has a lot of stories, so this should be fun. Let’s keep it recent…say 5 years. I’m especially looking forward to hearing from some of the long-time/regular contributors here.