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  1. According to USASpending.gov, the government spent $472,158,562,285 last year through contracting for services and products with large and small companies nationwide. This was a $34 billion increase over the previous year, and 2017 is anticipating another increase, especially in Department of Defense spending. None of the noted totals include entitlements, grants or non-contract obligations. The real questions most contractors ask are what does the government really want, and how does it decide who wins what contract? As an initial requirement, most government agencies must follow the Federal Acquisition Regulation (FAR) and agency FAR supplements, such as the Defense Federal Acquisition Regulation Supplement (DFARS). These extensive legal rules are available online for anyone who is interested in learning about them as the relevant portions become part of every federal contract as stated in the contract paperwork. Some agencies such as the Smithsonian Institution, the Federal Aviation Administration, and the U.S. Postal Service have their own rules and regulations outside of FAR and typical FAR supplements. It is wise to educate oneself regarding targeted agencies’ contracting rules. Many contractors think that lowest price is always the deciding factor. While the federal government is mandated to spend our tax dollars wisely, lowest price does not always win. Most often, the decision-makers are looking for the best deal. Often, the best deal includes a very competitive price, balanced with several other factors such as proof of abilities, clear capacity to perform and strong references. The challenge for all contractors is how to avoid the “chasing the bid” mentality and instead determine how to identify and reach decision-makers early enough in the purchase process to effectively and legally influence and educate those decision-makers in the best way to write the requirements. The answer to this conundrum is taken directly from a government source, the United States Air Force, in its industry outreach process. Other government entities have been proven to follow similar if not exactly alike guidelines. The Air Force states that these five processes must be incorporated into any company’s business development tactics: Market Research, Business and Financial Plan, Network, Communication & Relationships, Past Performance and Continuous Marketing. Market research seems to be obvious but it is surprising how many businesses fail to complete this first requirement. Instead they wait until they meet with the target and at that point ask them for opportunity recommendations. This is a huge mistake and will result in the decision-maker closing the door on future opportunities. One would be better served checking FBO.gov for sources sought notices, solicitations and records of previously-awarded contracts through the Federal Procurement Data System as well as the target agency’s business forecast and budget. The business and financial plan is a mystery to most businesses regarding federal contracting. In this case, the decision-maker is NOT asking the contractor for its entire business plan, but rather what the plan is to finance the targeted opportunity should it be awarded. This little-known step will go a long way in mitigating perceived risk for businesses of all sizes, especially for any business that may be pursuing opportunities which are larger than ever won in the past. Elements to include in the opportunity financial plan include projections of anticipated contract-oriented costs (payroll, overhead, products, legal, accounting, subcontracting, etc.), the timeline of those costs, anticipated invoicing and payment dates, and a letter from the bank of the or other financial institution stating that a line of credit is available to finance at least the first two billing cycles, until payment is received. When the Air Force states that it wants a contractor to network, communicate and build relationships, it means that no matter what it takes, one should network by attending all possible in-person events, communicate regarding sources sought notices, participate in industry days for specific opportunities and make recommendations to improve services and products used by the agency. By being consistent in these efforts the contractor will benefit by building a strong relationship with all decision-makers. This is difficult to do and requires a commitment of time, effort and money. One must determine the short list of targets with whom to make this financial and time commitment as it is impossible to perform this level of effort for every possible federal target. The fourth element, Past Performance, is a legal term as defined in FAR Part 42.15 Contractor Performance Information and elsewhere in the FAR. Essentially, the FAR states that “past performance information (including the ratings and supporting narratives) is relevant information, for future source selection purposes, regarding a contractor’s actions under previously awarded contracts or orders. It includes, for example, the contractor’s record of: (1) Conforming to requirements and to standards of good workmanship; (2) Forecasting and controlling costs; (3) Adherence to schedules, including the administrative aspects of performance; (4) Reasonable and cooperative behavior and commitment to customer satisfaction; (5) Reporting into databases (see subpart 4.14, and reporting requirements in the solicitation provisions and clauses referenced in 9.104-7); (6) Integrity and business ethics; and (7) Business-like concern for the interest of the customer. Most losing bids do not address these seven elements of past performance and instead serve only as a record of describing projects similar to the targeted opportunity. Winning contractors take into account and describe at least all seven elements and further offer proof of differentiators and the value add for the project. The final recommendation of continuous marketing is lost on most contractors. This marketing, when successful, targets all decision-makers and incorporates both a corporate messaging process performed throughout the year as well as ongoing an individual effort of the business development or capture person assigned to that target. Rarely do companies perform both processes simultaneously. And it is even more rare that this is done well, with appropriate messages crafted for each layer of decision-maker. This translates to different messaging for the program layer, other messaging for the contracting layer and yet different messaging for the small business representatives. To see success, listen to the customer and give them what they want, what they really really want and even outright ask for. Gloria Larkin, CEO and Founder Gloria Larkin, President of TargetGov, is a nationally-recognized government contracting marketing and business development expert. She has been interviewed on MSNBC, and quoted in the Wall Street Journal, Forbes, USA Today, INC Magazine, Entrepreneur Start-ups Magazine, and Government Executive magazine. Gloria Larkin serves as the Educational Foundation Chairman of the Board of Directors and is the past National Procurement Committee Co-Chair for Women Impacting Public Policy (WIPP), a non-partisan organization representing over 6,200,000 women nationwide. She is the author of the book, “The Basic Guide to Government Contracting” and “The Veterans Business Guide: How to Build a Successful Government Contracting Business” now in its fourth printing. She has spoken at international, national, regional and local conferences including recently University of Oxford Saïd Business School Power Shift Forum for Women in the World Economy 2013, the Annual National Veteran’s Conference, and the OSDBU Procurement Conference regarding practical, bottom-line focused business development best practices. She has received numerous accolades including: The U.S. Small Business Administration’s Women in Business Champion for Maryland 2010, Enterprising Women magazine’s 2010 Enterprising Women of the Year honoree, one of Maryland’s Top 100 Women in 2010, 2007 and 2004, and Maryland’s Top 100 Minority Business Enterprises in 2008 and 2006. TargetGov: www.targetgov.com Phone: 1-866-579-1346 Email: glorialarkin@targetgov.com GovCon Voices is a regular feature dedicated to providing SmallGovCon readers with candid news, insight and commentary from government contracting thought leaders. The opinions expressed in GovCon Voices are those of the individual authors, and do not necessarily reflect the opinions of Koprince Law LLC or its attorneys. View the full article
  2. Wednesday marked the official start of summer, and I’ll be spending the next few months taking full advantage–grilling out on the deck, enjoying a family beach trip, and more. Whether you’re at the beach, on the deck, or sitting in an office cubicle, it’s always nice to have some good reading material. And if you’re here at SmallGovCon, you’re among those who consider government contracting articles to be good reading material. In this edition of SmallGovCon Week In Review, Bloomberg Government takes a look at how “mid-tier” contractors can get squeezed out of government work, the House Small Business Committee approves a bill to get some small contractors paid faster, the Army wasted as much as $28 million on “pretty” uniforms for Afghan soldiers, and more. Two of the federal government’s most important contracts are squeezing out mid-tier companies, according to Bloomberg Government analysis. [Bloomberg Government] The number of multiple award contracts has been dropping since 2012. Can the Office of Management and Budget implement their new streamlined process to continue the trend? [Federal News Radio] NOAA released a special notice declaring ‘there is no draft or final solicitation available at this time” regarding the highly anticipated computing contract draft solicitation worth up to $500 million. [Nextgov] According to one commentator, a recent procurement fraud settlement highlights a need to get tougher on fraudsters. [Townhall] After a series of bid protests from Northrop Grumman dating back to 2015, Raytheon has been re-awarded a $1 billion cyber contract to protect government networks. [Nextgov] Three memos trying to bust contracting myths weren’t enough, as four agencies try to reverse years of industry/government communication problems. [Federal News Radio] Small businesses could be paid faster for work done on some federal contracts under a bill approved by the House Small Business Committee. [SFGATE] Preliminary moves by the White House to ease the moratorium on reviewing federal jobs for outsourcing under the guidelines in Circular A-76 have drawn some skepticism with the Office of Management and Budget. [Government Executive] The Pentagon wasted as much as $28 million over the last decade on Afghan soldier’s camouflage uniforms despite the fact that forests make up only a small fraction of the country’s landscape. [Government Executive] View the full article
  3. In its evaluation of past performance, an agency was permitted to disregard a past performance reference prepared by an offeror’s sister company–which also happened to be in line for a subcontracting role. In a recent bid protest decision, the GAO upheld the agency’s determination that the sister company’s reference was “inherently biased” and need not be considered in the agency’s past performance evaluation. The GAO’s decision in PacArctic, LLC, B-413914.3; B-413914.4 (May 30, 2017) involved a DoD Washington Headquarters Services solicitation for advisory and assistance services. The solicitation, which was set-aside for 8(a) participants, called for the award of a single IDIQ contract. Proposals were to be evaluated on a best value basis, considering three factors: technical capability, past performance, and price. With respect to past performance, the agency was to evaluate recent and relevant past performance. The solicitation required offerors to submit past performance questionnaires from their customers for evaluation. PacArctic, LLC submitted a proposal. In its proposal, PacArctic included a PPQ completed by the president of PacArctic’s sister company, which shared “common ownership and control” with PacArctic. The sister company, which was the incumbent contractor, said that PacArctic had performed subcontract work on the incumbent contract. The sister company’s president rated PacArctic’s past performance as “exceptional.” PacArctic proposed the sister company as one of its subcontractors for the project. In its evaluation of past performance, the agency elected not to consider the sister company’s PPQ. The agency explained that, because the companies shared common ownership, and because the sister company would be a subcontractor to PacArctic, the sister company was “inherently biased” in PacArctic’s favor. The agency assigned PacArctic a “Moderate Confidence” past performance score. The agency then awarded the contract to a competitor, which had received a “High Confidence” score. PacArctic filed a GAO bid protest. Among its arguments, PacArctic contended that it was improper for the agency to ignore the sister company’s PPQ. PacArctic pointed out that nothing in the solicitation precluded a sister company from serving as a past performance reference. The GAO agreed that the RFP did not prevent a sister company from serving as a reference. Nevertheless, under FAR 15.305(a)(2)(i), the agency was to consider the “source of the information” as part of its evaluation. The GAO continued: Here, where the source of the PPQ was PacArctic’s sister company, which was proposed as a subcontractor in PacArctic’s proposal, we find that the agency reasonably concluded that the PPQ lacked sufficient credibility, given the sister company’s obvious stake in the evaluation. Accordingly, we find nothing unreasonable regarding the agency’s decision to disregard the PPQ. The GAO denied PacArctic’s protest. PacArctic is a subsidiary of an Alaska Native Corporation. It’s not uncommon for companies falling under the same ANC, tribal, or NHO umbrella to work together, as PacArctic and is sister company did on the incumbent contract. Even outside of the ANC, tribal and NHO context, many small businesses have affiliates or close working relationships with other entities. For contractors like these, it’s worth remembering that in a past performance evaluation, the “source of the information” must be considered. As PacArctic demonstrates, when the source is a sister company, other affiliate, and/or proposed subcontractor, the agency may disregard the information provided. View the full article
  4. Contractors would be wise to keep a close watch on FedBizOpps.gov, otherwise they run the risk missing the chance to protest a sole source award. When an agency decides to make an award without competition, it often must publish a Justification and Approval (referred to simply as a “J&A”) on FedBizOpps explaining why a competition would not meet the agency’s needs. A potential competitor seeking to protest such an award at the GAO must file the protest before 10 days have passed from publication of the J&A, otherwise the protest may be untimely. A competitor that is not paying attention could be out of luck. GAO dismissed a protest of a sole source award earlier this month where the protestor missed the cutoff by just one day. The protest, Western Star Hospital Authority, Inc., B-414198.2 (June 7, 2017) involved an Army procurement for ambulance services for the U.S. Army at Fort Dix, New Jersey. The work was originally competed, and Western Star Hospital Authority, Inc. submitted a proposal. The Army rejected Western Star’s proposal, saying that Western Star had not proposed pricing for all CLINs, as required by the solicitation. Western Star protested the evaluation, saying that the Army had not correctly evaluated its CLIN pricing. The Army told GAO it was going to take corrective action, readmit Western Star to the competition, evaluate its proposal, and make a new award decision. After receiving the Army’s notice of corrective action, Western Star withdrew its protest. It may have figured the Army would quickly evaluate the omitted CLINs and award the contract. But nearly two months passed without a word. Meanwhile, the incumbent contractor, Logistical Customer Service, Inc., had been performing a five-month bridge contract that the Army had awarded on a sole source basis when Western Star’s initial protest activated a stay. In March, the bridge contract was set to expire. So, on March 24, the Army posted a J&A on FedBizOpps, saying that it was going to award another short-term, sole-source contract to the incumbent to prevent a break in services while the corrective action was completed. Around that same time, the 120-day acceptance period of all proposals expired. The Army asked Western Star to extend the acceptance period another five months. But Western Star balked and said that it was going to involve GAO. Without an acceptable proposal, the Army excluded Western Star from further consideration. Western Star filed a second GAO protest on April 4, challenging, among other things, the second sole-source contract to the incumbent. The Army argued that the protest should be dismissed as untimely. The GAO agreed. It wrote, “nder our Bid Protest Regulations, a protest based on other than alleged improprieties in a solicitation must be filed no later than 10 calendar days after the protester knew, or should have known, the basis for protest, whichever is earlier.” In this case, “as the Army correctly points out, [Western Star’s] protest is untimely because it was filed on April 4, or 11 days after the agency posted the notice and J&A to issue the sole source contract.” GAO agreed and dismissed this aspect of Western Star’s protest. (It denied the other claims on the basis that Western Star had expressly refused to extend the time for acceptance of its proposal and the proposal could not be revived.) While Western Star apparently didn’t raise the issue, it’s worth noting that it wouldn’t have made any difference if Western Star had not actually seen the FedBizOpps posting until sometime after March 24. The GAO has previously held that contractors are “charged with constructive knowledge of procurement actions published” on FedBizOpps. In other words, under the GAO’s timeliness rules, a contractor “should have known” of an item published on FedBizOpps, even if it didn’t have actual knowledge. Thus, Western Star lost the protest and the chance to perform the work because of a document that it may or may not have even known existed. This goes to show that there is little room for error when it comes to GAO bid protests. In the case of a sole source award, a contractor must keep a close watch on FedBizOpps or risk losing out on the chance to file a GAO bid protest. View the full article
  5. To federal construction contractors, the true legwork may seem to begin only after the government has accepted a proposal and performance has begun. However, a recent Armed Services Board of Contract Appeals decision reinforces that federal construction contractors’ work often should begin long before contract award. In Zafer Construction Company, ASBCA No. 56769 (2017), the ASBCA rejected a construction contractor’s allegations of unilateral mistake, unconscionability, and differing site conditions (among other claims for additional costs). The problem? The contractor did not attend a government scheduled site visit, conduct an independent site visit, review technical drawings, submit any inquiries during the proposal stage, or otherwise take reasonable steps necessary to better ascertain the nature of the work prior to submitting a multimillion dollar proposal on a complex project. By way of background, the contract in Zafer involved the U.S. Army Corps of Engineers’ procurement of renovation work at the Afghanistan National Military Hospital in Kabul, Afghanistan. In 2004, the buildings at this site had fallen into varying states of disrepair. In preparation for issuing the solicitation, the government employed an assessment team (called the Baker team) to survey the site, assess the condition of the buildings and infrastructure, and prepare a report for the government’s use in budgeting and defining the scope of work. The solicitation used the Baker report and designated certain building as part of a “base bid” and other buildings under “option bids.” The solicitation and Baker report both referenced “Russian drawings” (voluminous, highly-detailed, and specific drawings of the buildings created by the Soviet Union in the 1970s), which were available at the facility’s engineering office for inspection by prospective offerors. The Solicitation incorporated both FAR 52.236-2 (Differing Site Conditions) and FAR 52.236-3 (Site Investigation and Conditions Affecting the Work). These FAR provisions placed affirmative duties on the contractor in submitting a proposal and during contract performance. Specifically, the Differing Site Conditions clause required: (a) The Contractor shall promptly, and before the conditions are disturbed, give a written notice to the Contracting Officer of (1) subsurface or latent physical conditions at the site which differ materially from those indicated in this contract, or (2) unknown physical conditions at the site of an unusual nature, which differ materially from those ordinarily encountered and generally recognized as inhering in work of the character provided for in the contract. Additionally, the Site Investigation and Conditions Affecting the Work clause states in relevant part: (a) The Contractor acknowledges that it has taken steps reasonably necessary to ascertain the nature and location of the work, and that it has investigated and satisfied itself as to the general and local conditions which can affect the work or its costs, including but not limited to… (4) the conformation and conditions of the ground; and (5) the character of equipment and facilities needed preliminary to and during work performance. The Contractor also acknowledges that it has satisfied itself as to the character, quality, and quantity of surface and subsurface materials or obstacles to be encountered insofar as this information is reasonably ascertainable from an inspection of the site…as well as from the drawing and specifications made a part of this contract. Any failure of the Contractor to take the actions described and acknowledged in this paragraph will not relieve the Contractor from responsibility for estimating properly the difficulty and cost of successfully performing the work, or for proceeding to successfully perform the work without additional expense to the Government. Despite not attending any site visit, obtaining technical drawings, or inquiring about site conditions, Zafer submitted a proposal at a firm-fixed price of $16,508,725, which was roughly 28 percent lower than its chief competitor and 43 percent less than the total independent government estimate. After confirming Zafer’s proposed price, the Corps awarded the contract to Zafer. Following contract award, Zafer conducted a preconstruction site assessment visit and discovered it had significantly miscalculated its estimated work area, including failing to account for basements and above-grade areas. Zafer proceeded to perform the work, but following contract completion, Zafer submitted a certified claim for $4,104,891 for renovation work in basements and above-grade areas that was alleged to be beyond the scope described in the solicitation. Following the government’s denial of the claim, Zafer submitted a timely appeal to the ASBCA. Among the claims alleged, Zafer argued unilateral mistake, unconscionability, and differing site conditions. The ASBCA methodically denied each of these arguments. With respect to the unilateral mistake argument, the ASBCA outlined the five elements necessary for establishing such a mistake occurred, but concluded Zafer had failed to establish at least three of the elements. Specifically, Zafer had not established: (1) a mistake in fact occurred prior to contract award, (2) the mistake was a clear-cut clerical or mathematical error or a misreading of the specifications and not a judgment error, or (3) proof of the intended bid. First, Zafer did not establish its proposal was based on or embodied a mistake rather than a business decision to assume the risks of a lower-priced proposal. Second, a misreading of specifications imposes a duty to inquire where there are gaps, inconsistencies, or insufficient information. Here, Zafer’s mistake resulted from “gross negligence in failing to read and consider the specifications thoroughly, and the contract made assumptions without any attempt of verification with the government.” Finally, Zafer failed to show any evidence of the basis of its price proposal other than a listing of the lump-sum prices it had proposed for each building. The Board rejected Zafer’s unconscionability argument for similar reasons. In assessing this argument, the Board noted, “an unconscionable contract is ‘one which no man in his senses, not under a delusion, would make, on the one hand, and which no fair and honest man would accept on the other.’” Disparity in proposal prices alone is insufficient to establish such a claim. In this case, the government had confirmed Zafer’s price proposal prior to award. Additionally, the contracting officer reasonably believed that the price disparity arose because the next lowest offeror proposed using a subcontractor based in the United States, whereas Zafer had proposed a local (and presumably, cheaper) workforce. The Board also entertained Zafer’s claim for differing site conditions, but noted that it was not entirely clear whether Zafer intended to pursue relief under this theory. Regardless, the Board explained that the FAR’s Differing Site Conditions clause allows contractors to submit more accurate bids by eliminating the need for contractors to inflate their bids to account for contingencies that may not occur. “Differing site conditions can arise in two circumstances: (1) the conditions encountered differ from those indicated in the contract (Type I), or (2) the conditions encountered differ from those normally encountered (Type II).” The Board rejected both types, finding Zafer faced the same impediments to satisfying a claim for differing site conditions as a claim for unilateral mistake. In assessing Type I, the Board found the information provided by the government, including the Baker sketches and Russian drawings, clearly indicated the existence of basements and above-grade areas, and Zafer furnished no evidence that it even attempted to obtain this information until after contract award. As for Type II, Zafer presented no evidence that the basements and above-grade areas were “unknown conditions” or of an “unusual nature.” The Board denied all of other Zafer’s arguments, too, and rejected its appeal. Zafer ultimately provides words to the wise federal construction contractor – do some legwork upfront, when that’s what circumstances suggest a reasonable bidder would do. This may include, as appropriate, conducting a pre-award site visit, reviewing the solicitation specifics in depth, asking questions where the solicitation is unclear, and otherwise taking steps to ascertain the full nature of the work. Such pre-award steps are particularly important when submitting a proposal on a multimillion dollar complex construction project, because the government isn’t to blame if a contractor’s failure to do its due diligence results in an underpriced proposal – an expensive and hard-learned lesson for Zafer. View the full article
  6. Contrary to common misconception, a contractor’s small business status under a receipts-based size standard ordinarily is based on the contractor’s last three completed fiscal years–not the last three completed fiscal years for which the contractor has filed a tax return. In a recent size appeal decision, the SBA Office of Hearings and Appeals confirmed that a contractor cannot change the relevant three-year period by delaying filing a tax return for the most recently completed fiscal year. OHA’s decision in Teracore, Inc., SBA No. SIZ-5830 (2017) involved the major DHS PACTS II solicitation for IT support services. The solicitation was set aside for SDVOSBs and contemplated the award of numerous IDIQ contracts. Functional Category 1, which pertained to program management and technical services, was assigned NAICS code 541611 (Administrative Management and General Management Consulting Services), with a corresponding $14 million size standard. On July 11, 2014, Teracore, Inc. submitted a proposal, self-certifying as an SDVOSB. At that time, Teracore’s 2013 fiscal year had ended, but Teracore had not yet filed its 2013 tax return. In February 2017–about two-and-a-half years after Teracore submitted its proposal–the DHS announced that Teracore would be awarded a contract under Functional Category 1. Two competitors subsequently filed protests challenging Teracore’s size under the $14 million size standard. The SBA Area Office asked Teracore to produce its 2013 tax return, even though that tax return had not yet been filed on July 11, 2014. The SBA Area Office then calculated Teracore’s size using Teracore’s 2011, 2012, and 2013 tax returns. The SBA Area Office determined that Teracore exceeded the $14 million size standard, and was ineligible for award. Teracore filed a size appeal with OHA. Teracore argued that the 2013 tax return was not available until October 2014, several months after Teracore self-certified as small for the PACTS II solicitation. Teracore argued that the SBA Area Office should have calculated Teracore’s receipts using the company’s 2010, 2011, and 2012 tax returns. Under the SBA’s regulations at 13 C.F.R. 121.104(b)(1), “[a]nnual receipts of a concern that has been in business for three or more completed fiscal years means the total receipts of the concern over its most recently completed three fiscal years divided by three.” Further, 13 C.F.R. 121.104(a)(2) specifies that where a company has not yet filed a tax return for a particular year, “SBA will calculate the concern’s annual receipts for that year using any other available information,” such as books of account, financial statements, or even “information contained in an affidavit by a person with knowledge of the facts.” In this case, OHA wrote that because Teracore self-certified as small in July 2014, “the proper period of measurement for computing [Teracore’s] receipts is from 2011 to 2013–‘the most recently completed three fiscal years’ immediately preceding self-certification.” Although Teracore’s 2013 tax return had not yet been filed when Teracore submitted its proposal, “the unavailability of a tax return does not alter the period of measurement, but instead requires the consideration of ‘other available information.'” Of course, by the time the SBA evaluated Teracore’s size in 2017, Teracore had filed its 2013 tax return. OHA held that it was appropriate for the SBA Area Office to consider the tax return, even though it had been filed after the July 2014 self-certification. “At a minimum,” OHA wrote, “the Area Office could properly consider a tax return filed after the date of self-certification to be ‘other available information’ which can be used to calculate size.” OHA denied Teracore’s size appeal, and affirmed the SBA Area Office’s size determination. In my experience, contractors who are approaching a size standard ceiling often think–like Teracore–that they can affect the relevant three-year period by delaying filing a tax return. Nope. As the Teracore size appeal demonstrates, the SBA doesn’t decide which three-year period to use based on whether tax returns have been filed, but rather based on whether the fiscal year has been completed. View the full article
  7. This Sunday we celebrate Father’s Day. I’m looking forward to celebrating with my kids, my father, and my brother (himself the father of three). Happy Father’s Day to all the other dads out there! In this mid-June edition of SmallGovCon Week In Review, about 500 new small business partners were added to the GSA 8(a) STARS II vehicle , a USAID Deputy Director pleads guilty to procurement fraud charges, new SBA Administrator Linda McMahon wants to implement more efficient processes for contractors to obtain socioeconomic certifications, and much more. An Army Colonel and his wife have been charged in a bribery scheme, accused of accepting $60,000 in payments from a contractor. [FOX 54] Sometimes, through no fault of a contractor, a contract is terminated anyway. Here are some steps to prepare for that possibility. [Washington Technology] The DHS has had a tough couple weeks, having lost one major bid protest and canceling a second large procurement–but one commentator writes that the DHS is still an example of an agency “getting strategic sourcing right.” [Federal News Radio] A USAID Deputy Director has pled guilty to charges alleging that he engaged in cronyism and contract-steering, choosing to reward a friend with federal money instead of actively seeking the most qualified and cost-effective bidder. [United States Department of Justice] The Civilian Agency Acquisition Council released a memorandum that temporarily retracts the Fair Pay and Safe Workplaces final rule, pending a final change removing these provisions from the FAR. [GSA Office of Governmentwide Acquisition Policy] The two highest-ranking officials in the GSA’s acquisition service are resigning after a shakeup in the service’s structuring that includes new leadership. [fedscoop] A contracting dispute is delaying the OPM’s background investigations processing after the GAO sustained a protest of the award. [Government Executive] SBA Administrator Linda McMahon wants to make SBA’s certification programs “more user-friendly,” saying that the application forms are complex. Amen to that–but McMahon more ominously says that if SBA can’t make the programs more effective and efficient, “those programs have to go.” [Government Executive] The GSA 8(a) STARS II GWAC recently added approximately 500 qualified industry partners during an Open Season. [General Services Administration] View the full article
  8. It’s been more than a year since the SBA issued a final rule overhauling the limitations on subcontracting for small business contracts. The SBA’s rule, now codified at 13 C.F.R. 125.6, changes the formulas for calculating compliance with the limitations on subcontracting, and allows small businesses to take credit for work performed by similarly situated subcontractors. But the FAR’s corresponding clauses have yet to be changed, and this has led to a lot of confusion about which rule applies–especially since many contracting officers abide by the legally-dubious proposition that “if it ain’t in the FAR, it doesn’t count.” Now, finally, there is some good news: the FAR Council is moving forward with a proposed rule to align the FAR with the SBA’s regulations. By way of quick background, way back in January 2013, former President Obama signed the 2013 National Defense Authorization Act into law. The 2013 NDAA made major changes to the limitations on subcontracting. The law changed the way that compliance with the limitations on subcontracting is calculated for service and supply contracts–from formulas based on “cost of personnel” and “cost of manufacturing,” to formulas based on the amount paid by the government. And, importantly, the 2013 NDAA allowed small primes to claim performance credit for “similarly situated entities.” Interestingly, about a year later–well before either the SBA or the FAR Council had amended the corresponding regulations–the GAO issued a decision suggesting (although not directly holding) that the similarly situated entity concept was currently effective. But most contractors and contracting officers continued to apply the “old” rules under the FAR and SBA regulations. On May 31, 2016–about three and a half years after the 2013 NDAA was signed into law–the SBA published a final rule implementing the changes. The SBA’s regulation took effect on June 30, 2016. Less than a month later, the VA issued a Class Deviation, incorporating by reference the new SBA regulations for VA SDVOSB and VOSB acquisitions. But for many other procurements, contracting officers continued to include FAR 52.219-14, which uses the old formulas and makes no mention of similarly situated entities. (FAR 52.219-14 applies to small business, 8(a) and WOSB contracts. For HUBZone and non-VA SDVOSB procurements, the subcontracting limits are implemented by other clauses, which use the old formulas but allow the use of similarly situated entities). This, of course, has led to a lot of confusion. Does a contractor comply with the SBA regulation? The FAR clause? Both? Some contracting officers have taken the position that the FAR clauses govern until they’re amended. But the SBA, of course, wants contractors to follow the SBA regulations. Indeed, a joint venture formed under the SBA’s regulations must pledge to comply with 13 C.F.R. 125.6. It’s a mess. Now, it seems, the FAR Council seems to be making progress on eliminating the FAR/SBA discrepancy. (The FAR Council is a shorthand term for the body of defense and civilian agency representatives who propose and implement changes to the FAR. If you’re interested in how this works, FAR 1.2 is chock full of fun and exciting details). In its most recent list of “Open FAR Cases,” published on June 9, 2017, the FAR Council says that it is working on a “Revision of Limitations on Subcontracting.” Specifically, the new FAR rule “mplements SBA’s final rule” from last year, and “[a]lso implements SBA’s regulatory clarifications concerning the application of the limitations on subcontracting, nonmanufacturer rule, and size determination of joint ventures.” As of June 5, the CAAC–that’s the civilian side–has concurred “with draft interim FAR rule.” FAR Council staff are “preparing to send to OFPP after DoD approval to publish.” This is important news for a couple reasons. First, this means that the draft rule is well along in the process. Review by the Office of Federal Procurement Policy is one of the final steps before a rule or proposed rule is published in the Federal Register. Second, it appears that the FAR Council intends to adopt an interim rule, rather than a proposed rule. An interim rule takes effect immediately (or very soon) after publication, and then can be adjusted after receipt of public comments. A proposed rule, on the other hand, doesn’t take effect until public comment is received and a final rule is published. In other words, if the FAR Council uses an interim rule, the changes will take effect a lot sooner. It likely will still be a few months until an interim rule is published, but it appears that an end to the confusion is on the horizon. Stay tuned. View the full article
  9. An agency has been caught creating fake source selection documents to pad its file in response to several GAO bid protests. A recent GAO bid protest decision shows that, after award, the agency created new source selection documents and revised others, then pretended those documents had been part of the contemporaneous source selection file. And although the agency’s conduct resulted in the cancellation of a major procurement, it’s not clear whether the agency employees who created the fake documents will face any punishment. The GAO’s decision in EDC Consulting et al., B-414175.10 et al. (June 9, 2017) involved the DHS solicitation for the Flexible Agile Support for the Homeland or “FLASH” procurement. The solicitation was to result in 8 to 12 IDIQ contracts, with an estimated value of $1.54 billion. The solicitation called for a “best value” tradeoff considering technical merit, staffing, past performance, and price. DHS made initial award decisions in November 2016, but after several GAO bid protests were filed, the agency elected to perform a reevaluation. The reevaluation involved a technical evaluation team and price evaluation team, each of which prepared consensus reports. The TET chair and contracting officer conducted a best value analysis and recommended awards; the ultimate award decisions were made by a source selection authority. On March 6, 2017, the SSA made award to 11 offerors, all of which had been recommended by the TET chair and contracting officer. The March 6 source selection decision document stated that the best value decisions were based on the documents in the source selection file. Nine unsuccessful offerors, including EDC Consulting, LLC, filed protests at the GAO. During the course of the protest “a question was raised as to whether the documents supporting the agency’s source selection decisions, filed with the agency reports (AR), had been prepared or revised after the March 6 decisions were made.” The GAO asked the DHS to respond. On May 1, the DHS’s counsel admitted that the price evaluation report was “incorrect” and that “some of the information provided in the AR . . . was prepared or changed after award.” These post-award changes involved “the insertion of a multi-page table, as well as the creation of several memoranda regarding the price realism evaluation and findings.” Additionally, “[a]fter award, the agency revised the Technical Evaluation Report and [the] Best Value Tradeoff Analysis.” The GAO, obviously, was deeply concerned. After a series of conference calls, it informed the parties that it intended to conduct a hearing to address various matters, “including the agency’s preparation and submission of the altered documents.” This, itself, is rather unusual, as most GAO bid protests are resolved without hearings. (The GAO held hearings in 2.5% of cases in Fiscal Year 2016). The DHS apparently had no desire to be cross-examined about its conduct. On May 26, just a few days before the hearing was to occur, the DHS announced that it would terminate all of the awards and cancel the procurement. In its notice of corrective action, the DHS stated that because documents had been created and revised after award, “DHS has determined that the evaluation process and documents do not meet DHS’ standards for award.” DHS also said that there were other pieces of the solicitation that needed to be resolved to meet “DHS’ evolving mission needs.” There must be something in the water, because this is the second time in less than two months that an agency has been caught creating fake “contemporaneous” documents to defend against a bid protest. As I wrote in late April, the Court of Federal Claims sharply criticized the U.S. Special Operations Command for creating backdated market research to support a set-aside decision. Judge Thomas Wheeler’s comments in that case apply equally to DHS’s conduct here. Judge Wheeler said: The integrity of the administrative record, upon which nearly every bid protest is resolved, is foundational to a fair and equitable procurement process. While the Government has accepted responsibility for its misconduct, the importance of preventing a corrupted record cannot be overstated. The Court encourages USSOCOM to take all reasonable steps to ensure that its contracting office appreciates the necessity of conducting a well-documented, well-reasoned procurement and producing a meticulous and accurate record for review. The Court will not tolerate agency deception in the creation of the administrative record. I’ve said it before, and I’ll say it again–in my experience, the vast majority of agency officials are honest, honorable people. But the integrity of the competitive contracting process is harmed when agency officials don’t live up to those standards. Indeed, the mere perception that the game might be rigged is extraordinarily harmful–what reason is there for a company to participate in the process if it appears that the agency won’t play fair? The GAO’s decision doesn’t mention what sanctions, if any, the DHS employees responsible for the misconduct might face. DHS has a chance to send a strong message by terminating, or otherwise severely punishing, those responsible. We’ll see what happens. For now–and I can hardly believe I’m saying this–contractors and their counsel who receive source selection documents as part of a protest might want to check when those documents were created. Just in case. View the full article
  10. A company bidding to replace an incumbent service contractor cannot presume incumbent workers will take major pay cuts without setting itself up for a potentially successful protest. FAR 22.12 generally requires successor service contractors to give a right of first refusal to qualified employees under the previous contract. And even when these nondisplacement rules don’t apply, many offerors’ proposals tout their efforts to retain incumbent employees. But asking incumbent employees to take significant pay cuts–and expecting them to accept–is unreasonable and can torpedo a proposal. Case in point: GAO sustained a protest recently against an awardee who had proposed high retention rate of incumbent workers, but lower pay for those positions. The GAO decision, A-P-T Research, Inc., B-413731.2 (Apr. 3, 2017) involved a NASA solicitation seeking a contractor to provide safety and mission assurance support services. A-P-T Research, Inc. was the incumbent contractor. The solicitation envisioned awarding a single cost-plus-fixed-fee contract to the offeror judged the best value to the government. It asked offerors to propose costs related to five safety and mission assurance engineer labor categories, three specialist labor categories, and an analyst labor category. One of the evaluation factors asked offerors to specify an incumbent capture rate and to justify the methods used to achieve it. The same factor included an assessment of the employee compensation plan. The cost factor indicated that the government would perform a realism analysis. Alphaport, Inc. submitted a proposal. Alphaport proposed to retain a large percentage of the incumbent workforce (the precise percentage was redacted from GAO’s public decision). Alphaport’s proposed direct labor rates were considerably lower than APT’s. In its final evaluation, NASA found that Alphaport’s most probable cost was $48.1 million, versus $57.0 million for APT. NASA compared Alphaport’s proposed direct labor rates to date from salary.com and the Economic Research Institute. NASA determined that the rates were “within an average range (in some cases slightly below average)”. Although it initially expressed doubts about Alphaport’s ability to retain incumbent staff, NASA was satisfied with Alphaport’s explanation in discussions, and did not assign Alphaport a weakness for its total compensation plan. NASA picked Alphaport for award on December 23, 2016, in part because of its lower-evaluated cost. APT filed a bid protest challenging, among other things, the evaluation of Alphaport’s compensation from both a technical factor standpoint and a matter of cost realism. GAO agreed, finding that “the record contains no meaningful explanation of how the agency concluded that Alphaport would be able to retain . . . the incumbent employees at the compensation offered.” GAO continued: Our review of the contemporaneous record here reveals only conclusory and general statements that the agency’s earlier concerns about the realism of Alphaport’s compensation were addressed during discussions. Specifically, there is no explanation of how the agency has reconciled its earlier concerns about the apparent inconsistency between Alphaport’s claims that it would retain a high percentage of incumbent personnel, despite the significant decreases it had proposed in compensation. The record does not, for example, suggest that NASA had identified specific reasons that SMA engineers would agree to lower-than-average compensation levels, such as the work being perceived as relatively simple, an abundance of eligible candidates in the market keeping compensation levels low, or counterbalancing fringe benefits. GAO sustained the protest. GAO’s decision in A-P-T Research is in keeping with a similar decision last year, in which GAO held that an offeror’s proposal to retain incumbent workers while asking them to take a pay cut was an obvious price realism concern. As both cases indicate, expecting professionals to stick around when their salaries are slashed, at least without a good explanation as to why the employees would accept those cuts, seems naive–and calls into question whether the offeror can deliver what was promised in the proposal. View the full article
  11. I’m not sure what the weather is going to be like in your neck of the woods, but we are ready for a few 90+ degree days here in Lawrence. It’s a great weekend for sitting in the shade with a cold lemonade and some good reading material. And if you need something to read, we’ve got you covered with the latest in government contracting news. In this week’s SmallGovCon Week in Review, a Texas contractor has made nearly $2.5 million to settle procurement fraud allegations, the SBA’s administrative judges gain authority to hear size standard appeals, the last protest of the GSA’s EIS contract has ended, and much more. The new Air Force Secretary is placing emphasis on expanding the fleet of planes to meet worldwide demands and to do so more quickly. [Government Executive] The company with the last bid protest on General Services Administration’s long-delayed $50 billion Enterprise Infrastructure Solution contract folded its cards. [Nextgov] Allegations claiming a North Texas contractor violated the False Claims Act and Anti-Kickback Act in connection with federal contracts obtained form the U.S. Bureau of Prisons has resulted in a $2.475 million settlement. [Department of Justice] A comedy of errors led the Department of Homeland Security to cancel its $1.5 billion agile contract vehicle. [Federal News Radio] The SBA is amending the rules of practice of its Office of Hearings and Appeals, which authorizes OHA to decide Petitions for Reconsideration of Size Standards. [Federal Register] Nextgov looks at what exactly went wrong with the DHS’s contracting vehicle that pre-approved certain vendors selling agile software services. [Nextgov] The GSA is planning a major reorganization by moving the Technology Transformation Service into the Federal Acquisition Service. [Federal News Radio] View the full article
  12. Last month, I wrote that the SBA shouldn’t have awarded the government an “A” for its FY 2016 small business goaling achievement. Even though the government exceeded the 23% small business goal, it missed the WOSB and HUBZone goals (the latter by a lot). In a different context, a recent U.S. Army Corps of Engineers proposal evaluation offers a grading lesson for the SBA. In that case, the Corps assigned a large prime offeror a middling “Acceptable” score for small business participation where the offeror proposed to meet the contract’s overall small business subcontracting goal, but not the SDB, WOSB, HUBZone, VOSB and SDVOSB goals. The evaluation came to light in a recent GAO bid protest decision, Pond Constructors, Inc., B-414307; B-414307.2 (May 1, 2017). The Pond Constructors protest involved a Corps solicitation for recurring maintenance and minor repair services. The solicitation was issued on an unrestricted basis, and award was to be based on four factors: technical approach, past performance, small business participation, and price. With respect to small business participation, the solicitation set forth various small business goals, including goals for subcontracting to SDBs, WOSBs, HUBZones, VOSBs, and SDVOSBs. The solicitation stated that offerors would be assigned adjectival ratings of outstanding, good, acceptable, or unacceptable for the small business participation factor. Pond Constructors, Inc. submitted a proposal. In its proposal, Pond committed generally to subcontracting 36 percent of the work to small businesses. However, it did not commit to meeting the goals for SDBs, WOSBs, HUBZones, VOSBs and SDVOSBs. The Corps assigned Pond a middle-of-the-road “acceptable” score for the small business participation factor, and awarded the contract to a competitor (which scored “outstanding” for its small business participation). Pond filed a GAO bid protest. Among its allegations, Pond contended that the Corps should have assigned it a higher score under the small business participation factor. The GAO noted that Pond had committed to subcontracting 36 percent of the work to small businesses. However, “Pond’s proposal, on its face, committed to subcontract 0 (zero) percent to small disadvantaged businesses; 0 percent to WOSBs; 0 percent to HUBZone small businesses; 0 percent to VOSBs, and 0 percent to SDVOSBs.” Accordingly, “the agency’s rating was reasonable because the protester failed to meet any of the solicitation’s small business subcategory participation goals . . ..” The GAO denied Pond’s protest. Pond got the adjectival equivalent of a “C,” which is about right (and perhaps even a little generous) for a company that proposed to satisfy the overall small business subcontracting goals, but not the individual socioeconomic goals. At the national level last year, the government hit its small business target, but missed two of the four socioeconomic goals. Maybe that deserves a B or B-minus, but in my book, it ain’t A-level achievement if you don’t hit all of the socioeconomic goals. SBA, I hope you’re taking notes. View the full article
  13. I am very pleased to announce that Jennifer Tucker has joined our team of authors here at SmallGovCon. Jennifer is an associate attorney at Koprince Law LLC, where her practice focuses on federal government contracts law. Before joining Koprince Law LLC, Jennifer practiced contracts law with the Kansas Department of Transportation and the University of Kansas. Jennifer also had the fortune (or is that misfortune?) of being classmates with a certain other government contracts attorney in the 2015 Leadership Lawrence program. You can check out Jennifer’s biography on the Koprince Law LLC website, and her first SmallGovCon post (about the GAO’s very strict rules for electronic proposals) right here. Be sure to check back regularly for more legal news and notes from Jennifer and our other great SmallGovCon authors. View the full article
  14. You’ve hit send on that electronic proposal, hours before the deadline and now you can sit back and feel confident that you’ve done everything in your power – at least it won’t be rejected as untimely – right? Not so fast. If an electronically submitted proposal gets delayed, the proposal may be rejected–even if the delay could have been caused by malfunctioning government equipment. In a recent bid protest decision, the GAO continued a recent pattern of ruling against protesters whose electronic proposals are delayed. And in this case, the GAO ruled against the protester even though the protester contended that an agency server malfunction had caused the delay. Western Star Hospital Authority, B-414216.2 (May 18, 2017) involved an Army RFP for emergency medical services. The RFP required that proposals be submitted no later than 4:00 pm., EST on January 30, 2017, to the Contracting Officer’s email address. The RFP incorporated FAR 52.212-1 (Instructions to Offerors-Commercial Items). Paragraph (f)(2) of that clause provides that any “offer, modification, revision, or withdrawal of an offer received at the Government office designated in the solicitation after the exact time specified for receipt of offers is ‘late’ and will not be considered.” On the date the proposals were due, Western Star emailed four proposal documents to the CO’s email address. The emails were sent at 2:43 p.m., 2:57 p.m., 3:01 p.m. and 3:06 p.m., well before the 4:00 p.m. deadline. For reasons unknown, the emails did not arrive at the initial point of entry to the Government infrastructure until after 6:00 p.m., well after the deadline. The Army rejected the proposal as late. Western filed a GAO bid protest challenging the Army’s decision. Western argued that it was “guilty of no fault” and that it was “completely unfair and unreasonable to reject its bid because of factors beyond its control.” Western argued that the agency’s servers were “not accessible,” and furnished a mail log from its service provider supporting its position. The Army disputed Western’s position. The Army provided a statement from its Information Assurance Manager, who said that the emails were “delayed by the protester’s servers” and that the delay “was not the fault or responsibility of the Government, which has no control over commercial providers used by the Protester.” The GAO declined to resolve the question of whose servers had malfunctioned. Instead, the GAO indicated that Western’s proposal would be considered late regardless of whose equipment had malfunctioned. Citing its own prior authority, the GAO wrote, “[w] have repeatedly found that it is an offeror’s responsibility to ensure that an electronically submitted proposal is received by–not just submitted to–the appropriate agency email address prior to the time set for closing.” Because Western’s proposal “was not received at the agency’s servers until after the deadline for receipt of proposals,” the proposal was late. The GAO also cited FAR 52.212-1(f)(2)(i)(A), which states that a late proposal, received before award, may be accepted if it was transmitted electronically and received at the initial point of entry to the Government infrastructure no later than 5:00 p.m. one working day prior to the due date. But Western did not submit its proposal by 5:00 one working day prior to the due date, so it could not avail itself of that exception. The GAO declined to discuss any of the other exceptions to FAR 52.212-1(f)(2), such as the important “government control” exception, stating that the exceptions were “not pertinent” to the issue in Western. As we’ve written before, the Court of Federal Claims disagrees with the GAO when it comes to the question of whether these exceptions apply to electronic proposals, and we think the Court has the better position. For now, though, Western Star Hospital Authority stands as an important warning to contractors who submit proposals electronically. Under the GAO’s current precedent, a late-submitted electronic proposal is late–even if the lateness was due to malfunctioning government equipment. The only exception recognized by the GAO under FAR 52.212-1 is the “5:00 p.m. one working day prior” exception, and contractors would be wise to take that into account when determining when to submit electronic proposals. View the full article
  15. The government’s use of specifications within a contract carries an implied warranty that the specifications are free from errors. When a contractor is misled by the erroneous specifications, the contractor may seek recovery through an equitable adjustment to the contract. But what happens when the government seeks services through a requirements contract and is simply negligent in estimating its needs? A recent Federal Circuit decision, Agility Defense & Government Services, Inc., v. United States, No. 16-1068 (Fed. Cir. 2017) finds that a contractor may be able to recover damages in such instances under a negligent estimate theory. The underlying contract at issue in Agility Defense was a requirements contract whereby Agility agreed to dispose of as much surplus military property as required by the DLA Defense Reutilization and Marketing Service (“DRMS”). While DRMS had historically performed the underlying services, in 2007, DLA determined it needed help to sustain the workload, and decided to solicit outside contractors. During the solicitation period, DRMS issued several amendments relevant to the anticipated workload and costs. Amendment 002, issued in February 2007, directed offerors to a website containing DRMS workload history and inventory levels. DRMS updated its website biweekly to reflect line items received, scrap weight, and scrap sales during the prior weeks. Amendment 004, issued in June 2007, stated, “[w]e anticipate an increase in property turn-ins.” The amendment also added clause H.19, which notified contractors of possible significant workload increases or decreases and provided a process for the contract to renegotiate the price in the event of a 150% workload increase when compared to the previous three months. The following month, DRMS issued Amendment 007, which projected a stable workload for the first two years and then workload decreases for option years three through five. Agility, one of three offerors, received notice of award in November 2007, and was issued its first task orders in early 2008. These task orders incorporated a workload baseline derived from the same website referenced in Amendment 002. Upon starting performance, Agility quickly fell behind after inheriting a backlog of approximately 70,000 line items and a larger volume of line items than anticipated. In response to DRMS’s performance concerns, Agility increased its staffing by 50%. After issues arose concerning the increased workload and interpretation of clause H.19, the parties modified clause H.19 to allow for a price adjustment if the workload increased by more than 25% above monthly averages. The contract was terminated for convenience in June 2010, and Agility filed a claim to recoup the increased costs of performing the contract. After DRMS awarded only a fraction of costs claimed, Agility pursued its claim in the Court of Federal Claims. The court denied Agility’s claim, finding DRMS’s conduct was acceptable because it provided Agility with “reasonably available historical data.” Upon appeal, the Federal Circuit court disagreed. In finding DRMS’s estimates unrealistic, the court noted that to prove the government negligently estimated its requirements contract needs, “the contractor must show by preponderant evidence that the government’s estimates were ‘inadequately or negligently prepared, not in good faith, or grossly or unreasonably inadequate at the time the estimate was made.’” By way of background, for requirements contracts, FAR 16.503 requires contracting officers to provide offerors with a “realistic estimate” of the workload. The FAR caveats this requirement with the following terms: This estimate is not a representation to an offeror or contractor that the estimated quantity will be required or ordered, or that conditions affecting requirements will be stable or normal. The contracting officer may obtain the estimate from records of previous requirements and consumptions, or by other means, and should base the estimate on the most current information available. In Agility Defense, the court held that the Court of Federal Claims’ decision was “clearly erroneous” because it ignored that DRMS had provided both historical data and requirements estimates in Amendment 007, and the historical data was not “the most current information available.” Since Amendment 007 projected stable and then declining scrap weight, DRMS estimated that property turn-ins would be constant and then decline. Furthermore, the court found that providing historical data was not per se reasonable. Since DRMS possessed not only is historical requirements, but also information concerning its anticipated requirements, DRMS was aware of an anticipated surge in workloads. Thus, DRMS could not rely on the fact that it provided historical workload data to satisfy the requirements of FAR 16.503. While “DRMS was not obligated to guarantee the accuracy of its estimates or perfectly forecast its requirements,” DRMA was negligent in not providing Agility was a realistic estimate. Agility Defense shows that the government is given much latitude in estimating its needs under a requirements contract. However, this is latitude is not unlimited. Where the government’s estimates are unrealistic and not based on the most current information available, a contractor is not left to bear the risk. View the full article