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  1. SmallGovCon Week In Review: October 16-20, 2017

    My Cubs couldn’t pull off the World Series repeat, losing badly to the Dodgers last night in the National League Championship Series. And you know what? I’m okay with it. We Cubs fans are a different breed: after 108 years, many of us thought we’d never see a title. So after the amazing championship last year, all of 2017 felt like playing with house money. Yankees fans might be grumbling that it’s been a whopping eight years since their last title, but Cubs fans like me will always have 2016. Enough baseball–time to move on to what’s really important on your Friday, the SmallGovCon Week In Review! This week, we bring you articles ranging from government employees taking illegal gratuities, a sharp decrease in the number of successful small business contractors, investigators find major problems with many of the Census Bureau’s sole source contracts, and more. A 40-month prison sentence was handed down to the former comptroller of the Norfolk Ship Support Activity for conspiring with others to essentially force a government prime contractor to use a specified subcontractor. [United States Department of Justice] Federal agencies met the governmentwide small business goal for the fourth straight year in fiscal 2016, but the number of small business prime contractors has gone down by 25% since 2010. [Federal News Radio] After helping to steer millions of dollars in contracts to a North Carolina defense contractor, a former employee of the Navy has now been sentenced to three years and four months in prison for his role in the scheme. [The Virginia Pilot] Listen to Larry Allen on Federal Drive with Tom Temin as he discusses what GSA has in store for contractors this year. [Federal News Radio] A whistleblower suit has led to a False Claims Act settlement of $2.6 million to resolve civil allegations that the company submitted false claims for payment to the DoD for unqualified security guards. [wtop] Government investigators found problems with 90% of the no-bid contracts awarded by the Census Bureau, resulting in overpayment to contractors by about $9 million. [New York Post] Congressional members have submitted a request for information on data security vetting for government contracts. [Homeland Preparedness News] GSA Administrator nominee Emily Murphy wants the GSA to make it easier for new companies to do business with the government so competition remains robust. [Federal News Radio] The Indian Health Service agency has come under fire for awarding a contract to a company that had previously paid $10 million to settle allegations of submitting false claims to the government. [Bristol Herald Courier] View the full article
  2. A self-certified woman-owned small business was ineligible for a WOSB set-aside contract because the woman owner’s husband held the company’s highest officer position and appeared to manage its day-to-day operations. A recent SBA Office of Hearings and Appeals decision highlights the importance of ensuring that a woman be responsible for managing the day-to-day business of a WOSB–and that the woman’s role be reflected both in the corporate paperwork and in practice. OHA’s decision in Yard Masters, Inc., SBA No. WOSB-109 (2017) involved an Army solicitation for grounds maintenance services. The solicitation was issued as a WOSB set-aside under NAICS code 561730 (Landscaping Services), with a corresponding $7 million size standard. After evaluating competitive proposals, the Army awarded the contract to Yard Masters, Inc. A competitor then filed a WOSB protest, alleging that Yard Masters was ineligible. The protester contended that a man, Bryce Wade, was Yard Masters’ majority owner and President until recently and that he still exercised control over the company. In response to the protest, Yard Masters admitted that Bryce Wade had previously been the majority owner, but that he had recently sold stock to his wife, Sally Wade, making her the 51% owner. Yard Masters also produced Sally Wade’s resume and meeting minutes, showing that Sally Wade was the Chief Executive Officer. The SBA Area Office examined Yard Masters’ bylaws, and determined that the bylaws “do not create a CEO position” or assign any duties to the CEO. Instead, the bylaws identified the President (a position held by Bryce Wade) as the “chief executive and administrative officer of the corporation.” The SBA Area Office also noted that “Bryce Wade signed [Yard Masters’] proposal and its contract documents for the instant procurement,” as well as the company’s tax returns. The tax returns “identify Bryce, and not Sally, Wade as a compensated officer.” The SBA Area Office found that Sally Wade did not control Yard Masters, and issued a determination finding the company ineligible for the Army WOSB set-aside contract. Yard Masters appealed to OHA. Yard Masters argued, in part, that the corporation’s meeting minutes made clear that Sally Wade had ultimate direction and control of the company. Yard Masters “argues that Sally Wade is its CEO,” OHA wrote. “The problem is that the Board did not formally create a position of CEO.” OHA continued, “[t]he Bylaws were never changed to add the position of CEO. The Bylaws clearly state that the President is the corporation’s ‘chief administrative and executive officer.’ Bryce Wade holds that position.” OHA concluded that Yard Masters’ “highest officer position is President, and Bryce Wade, not Sally Wade, holds it.” OHA also noted that “all actions taken on [Yard Masters’] behalf were taken by Bryce Wade.” Even after Sally Wade “supposedly had taken control” of the company, “Bryce Wade signed [Yard Masters’] offer” and was listed as the point of contact. And incredibly, after the WOSB protest was filed, “t was Bryce Wade, not Ms. Sally Wade, who communicated with SBA on [Yard Masters’] behalf.” OHA denied the appeal and upheld the SBA Area Office’s decision. The Yard Masters case offers at least three important lessons for WOSBs. First, corporate paperwork matters. I can’t count how many times, in my practice, I’ve seen a situation like Yard Masters’, where a company officer is using a title that isn’t established in the governing documents. In order for a woman to hold the highest officer position in the company, the governing documents need to establish that her role is, in fact, the highest. Even small, family-owned companies like Yard Masters need to ensure that their corporate documents are up to snuff. Second, perception matters. Although there’s not necessarily anything inherently wrong with a man signing contracts and other documents on behalf of a WOSB, it does tend to suggest that the man has outsize influence within the company. WOSBs ought to be careful about who signs contracts, checks and other corporate documents–as well as who is listed as points of contact in SAM and in proposals. And third, as a corollary to the previous item, if you’re getting protested for WOSB eligibility, don’t have a man be in charge of communicating with the SBA. Talk about not sending the right signals. The SBA is still working in the long-awaited rules that will require all WOSBs to be formally certified. But in the meantime, Yard Masters is a good reminder self-certified WOSBs need to do their due diligence to ensure that they comply with all WOSB requirements. View the full article
  3. If you’re a small business owner interested in government contracts, you’ve probably heard about the SBA’s 8(a) Business Development Program. The 8(a) Program itself is complex, but its potential benefits are tremendous. In this post, I’ll break down some of the very basics about the 8(a) Program, leaving some of its complexities for upcoming posts. Let’s get to it: here are five things you should know about the 8(a) Program. What is the 8(a) Program? Like SBA’s other contracting programs, the 8(a) Program is a business development program—its purpose is to assist eligible disadvantaged small businesses compete in the American economy through business development. What are the benefits to participating? Participating in the 8(a) Program opens several doors to success. Each year, the federal government’s goal is to award at least 5% of all prime contracts to small disadvantaged businesses, which include 8(a) Program participants. To meet this goal, the government issues billions of dollars of awards annually to 8(a) Program participants through sole-source awards and set-asides. Participants are also allowed to join in mentor/protégé and joint venture relationships to further increase their ability to participate in the American economy. Additionally, the SBA provides targeted business development counseling to 8(a) participants. Is your business eligible to participate? Given these incentives, the desire to participate in the 8(a) Program is obvious. But can your business participate? SBA has laid out detailed eligibility requirements. A future post will discuss them in greater detail but, in general, a business typically must be small under its primary NAICS code, and be unconditionally owned and controlled by one or more socially- and economically-disadvantaged individuals who are of good character. (There are some separate requirements for businesses owned by Indian Tribes, Alaska Native Corporations, Native Hawaiian Organizations, and Community Development Corporations.) The business, moreover, must maintain its eligibility throughout the course of its participation. One more thing: 8(a) Program participation is a one-time thing. So if your business has previously participated in the 8(a) Program, or if you’re a disadvantaged individual that has already participated, the SBA won’t allow you to participate again—although Tribes, ANCs, NHOs and CDCs have some different rules. How long can your business participate in the 8(a) Program? The presumptive term is 9 years. But this term can be shortened by the participant or the SBA—if, for example, the concern is successful enough to graduate from the Program or fails to maintain its eligibility. The term cannot be lengthened, although it can be temporarily suspended in rare instances. How can your business apply? Applications must be submitted electronically to the SBA and must include any supporting information requested by the SBA (like corporate organization documents and personal and business tax returns). Your local SBA office should be able to provide a list of all required documents. *** Participating in the 8(a) Program can be a great way to grow your small business. Look for additional 5 Things posts discussing its requirements and benefits in greater detail. In the meantime, please call me if you have any questions about eligibility or applying for the Program. View the full article
  4. In a big victory for proponents of the 8(a) program, the Supreme Court of the United States has denied the Petition for Certiorari filed by Rothe Development, Inc. Consequently, the decision of the Court of Appeals for the D.C. Circuit finding the statutes establishing 8(a) program to be constitutional will be allowed to stand. For those of you who are new to the Rothe Development case, it is a long-running constitutional challenge to the SBA’s 8(a) Business Development program. Rothe argued that the statutes implementing the 8(a) program establish a racial classification in violation of the equal protect rights afforded by the Due Process clause of the Fifth Amendment. Rothe contended the statute should be struck down as unconstitutional, which would mean the end of the 8(a) program–or at least the 8(a) program as we know it. Rothe Development has been making its way through the federal court system since 2015. In an earlier decision, the District Court for the District of Columbia upheld the 8(a) program despite subjecting the statutes to the Supreme Court’s most intense level of legal scrutiny. Rothe subsequently appealed the decision of the Court of Appeals for the D.C. Circuit. As we covered, the D.C. Circuit concluded that a less demanding level of scrutiny applied, which the 8(a) statutes comfortably passed. Accordingly, the 8(a) statutes were allowed to stand. After its loss at the D.C. Circuit, Rothe development filed a petition for Certiorari, which we also covered. A Petition for Certiorari is the formal process by which a party not entitled to an appeal as a matter of right may nevertheless request the Supreme Court decide its case. The Supreme Court, however, grants a very limited number of petitions each year. Rothe Development’s Petition for Certiorari was not granted by the Supreme Court. As a result, the decision reached by the D.C. Circuit finding the 8(a) program to be constitutional will stand. While Rothe Development ends with the 8(a) program’s survival, the decisions do leave the program open to further legal challenge. Most notably, the difference in legal scrutiny applied between the District Court and the Court of Appeals indicates that there may be more than one reasonable interpretation of the 8(a) programs statutes, which could result in further litigation down the road. Additionally, Rothe (apparently for strategic reasons), challenged only the underlying statutes–not the SBA’s regulations implementing them. A separate constitutional challenge to the regulations remains a possibility. For now, however, the 8(a) program stands unscathed–and 8(a) supporters can breathe a big sigh of relief. View the full article
  5. An agency was allowed to assign a Native Hawaiian-owned prime contractor a weakness for its experience because the NHO prime lacked relevant experience–even though the prime’s proposal indicated that it would rely in part on the resources of an experienced NHO sister company. A recent GAO bid decision demonstrates that while a procuring agency is entitled to consider the experience and past performance of a prime contractor’s affiliates under certain circumstances, the agency is not precluded from considering the prime’s own experience (or lack thereof). The GAO’s decision in Dawson Enterprises, LLC, B-414591.2 (July 24, 2017) involved a Navy solicitation for construction projects on Guam. The solicitation, which was set aside for small businesses, was issued under the two-step design-build procedures of FAR 36.3. The phase 1 evaluation called for the consideration of four factors: technical approach, experience, past performance, and safety. With respect to the experience factor, offerors were to provide between three and five relevant construction projects that were similar in size, scope and complexity, as well as three to five relevant design projects for the lead design firm. The past performance evaluation was to consider how well the offeror performed on the relevant contracts submitted under the experience factor. Dawson Enterprises, LLC submitted a proposal. In its proposal, Dawson Enterprises explained that it was a subsidiary of Hawaiian Native Corporation, an NHO. Dawson Enterprises’ proposal stated that HNC owned several other subsidiaries, including Dawson Technical LLC and Dawson Federal Inc. The proposal stated that Dawson Enterprises would be the general contractor and would perform the work using several subcontractors, including Dawson Technical and Dawson Federal. The proposal included teaming agreements between Dawson Enterprises, on the one hand, and Dawson Technical and Dawson Federal, on the other. Dawson Enterprises submitted five construction projects. Of the five projects, all five were performed by subcontractors: Dawson Technical and another (non-NHO) entity. The Navy assigned Dawson Enterprises a significant weakness for its experience, because of the prime’s lack of experience. On the past performance factor, the Navy assigned Dawson Enterprises a middle-of-the-road “satisfactory confidence” rating. After learning that its proposal had been excluded from phase 2, Dawson Enterprises filed a GAO bid protest. Dawson Enterprises primarily challenged the agency’s evaluation under the experience and past performance factors. Dawson Enterprises contended that it was unreasonable for the Navy to assign a significant weakness under the experience factor because, “as a wholly owned subsidiary of an NHO, the firm may rely on the experience of its parent or affiliated companies”. Dawson Enterprises pointed out that, as discussed in prior GAO bid protest decisions, an agency may attribute the past performance of an affiliated company to an offeror where the firm’s proposal demonstrates that the resources of the affiliate will affect performance. Here, of course, the proposal indicated that Dawson Technical and Dawson Federal would be meaningfully involved as subcontractors. GAO acknowledged that, in a case like this, an agency may consider the past performance of affiliated companies. But, “the protester points to no statute, regulations or prior precedent that precludes the agency from considering an [NHO] prime contractor’s lack of experience merely because the prime contractor has proposed to use affiliates with relevant experience.” In this regard, the GAO, “has recognized that the weight to be assigned to a prime contractor’s experience–or lack thereof–is a matter of contracting agency discretion.” The GAO denied the protest, writing, “[c]onsequently, we find nothing improper about the agency’s assignment of a significant weakness for Dawson’s lack of experience because the firm proposed to perform the contract using affiliated companies with relevant experience.” When it comes to past performance and experience, contractors often focus on whether the agency will consider projects performed by a teammate or affiliate. It’s an important question. But the question of what weight the agency will assign those projects can be just as important. And, as the Dawson Enterprises case demonstrates, the contracting agency typically has the discretion to downgrade an offeror based on the offeror’s own lack of experience–even if the offeror proposes experienced teammates. View the full article
  6. Patent ambiguities present in the solicitation for an Indefinite Delivery/Indefinite Quantity procurement must be protested prior to the close of proposal submission for the base contract—waiting to protest at the task order level may be too late. A recent GAO decision shows that when an IDIQ solicitation contains an obvious ambiguity, the rule is “speak now or forever hold your peace.” By the time task order competitions get rolling, the chance to protest will likely be gone. In Draeger, Inc., B-414938, __ CPD ¶ __ (Comp. Gen. Sept. 21, 2017), the Defense Logistics Agency was conducting an IDIQ procurement for various medical monitoring devises, including anesthesia monitoring systems. The base contract was originally awarded in 2007, but provided an open season at the end of each contract period where DLA would consider products from new offerors. Draeger was awarded a base contract during the 2013 open season. Before submitting its proposal, Draeger expressed uncertainty as to whether it had the capacity to provide anesthesia equipment to meet the agency’s needs due to ambiguities in the RFP. Nevertheless, Draeger was awarded a base contract and later received task order awards. On July 12, 2016, DLA issued a new task order to offerors for anesthesia machines. After reviewing proposals from offerors, including GE and Draegar, DLA awarded the task order to GE. Draeger filed a GAO bid protest challenging the award. Draeger alleged the task order was outside the scope of the IDIQ Base Contract. According to Draeger, an anesthesia monitor is different from an anesthesia machine. Since the base contract did not expressly mention anesthesia machines, Draeger alleged that the DLA could not order those machines off the Base Contract. GAO dismissed Draeger’s protest as untimely. Under 4 C.F.R. § 21.2(a), “[p]rotests based upon alleged improprieties in a solicitation which are apparent prior to bid opening or the time set for receipt of initial proposals shall be filed prior to bid opening or the time set for receipt of initial proposals.” In the unique context of open season contracts that reopen based on contract amendments, GAO explained that “a protest based upon alleged improprieties apparent on the face of the solicitation must be filed no later than the time set for receipt of proposals under the amendment.” According to GAO, Draeger identified ambiguities regarding the anesthesia equipment in the RFP for the Base Contract; therefore, it should have protested the alleged ambiguities prior to the close of proposals for the Base Contract. GAO was particularly unimpressed with Draeger’s arguments because Draeger had previously received task order awards under the RFP for anesthesia machines. Accordingly, GAO concluded that “Draeger should have protested any apparent ambiguity regarding the type of anesthesia equipment contemplated under the ID/IQ RFP, prior to the January 6, 2014, deadline . . . for submission of proposals for the 2013 open season.” GAO’s decision in Draeger is a cautionary tale to offerors—if there are ambiguities apparent on the face of an IDIQ RFP, the proper time to challenge those ambiguities is prior to proposal submission for the base contract. Challenges at the task order level regarding patent ambiguities present in the RFP for the base contract will likely be untimely. View the full article
  7. SmallGovCon Week In Review: October 9-13, 2017

    My heart rate has finally come down after the exciting finish to Game Five of the Cubs-Nationals playoff series last night. I caught the first few innings waiting for my flight in Salt Lake City, and the game (which clocked in at more than 4 1/2 hours) was still going when I landed in Kansas City a couple hours later. Thanks in part to the magic of instant replay, my Cubs were victorious, and will continue their World Series title defense against the Dodgers this weekend. Clearly, my mind is on sports–but I’m also closely watching developments in government contracts. In this week’s SmallGovCon Week In Review, the GAO reminds agencies that they have the power to override the automatic stay, the SBA updates the WOSB/EDWOSB NAICS codes, a bill to improve the SBIR and STTR programs passes the House unanimously, and much more. Can one contract change the way the government buys IT? How EIS will spur federal IT modernization. [FedTech] The Centers for Medicare and Medicaid Services signed a memorandum of understanding to use the GSA’s OASIS vehicle. [fedscoop] The government may soon buy based more on best value considerations, and less often using lowest price as its main, or sometimes only, focus. [Bloomberg Government] An Ohio senator has asked the Treasury Department to review whether the Equifax breach could constitute grounds for debarment, which would prevent the company from winning or renewing contracts with the government. [Washington Examiner] The GAO released a statement rebuking comments by the IRS, which had stated that it was forced award a bridge contract to Equifax during the course of a bid protest. The GAO noted that agencies have the power to override the automatic stay in appropriate circumstances. [Nextgov] The SBA has updated the NAICS codes authorized for use in the WOSB program; the updates apply to all solicitations issued on or after October 1, 2017. [Federal Register] Language in the 2018 NDAA would make it more difficult for companies to protest contract awards, particularly those made by defense and military agencies. [Nextgov] (And click here for my take on why this is a really bad idea). It was with unanimous support this week that H.R. 2763, The Small Business Innovation Research and Small Business Technology Transfer Improvement Act of 2017, passed the House of Representatives. [scvtv] View the full article
  8. Ahh, fall. A time for football, hay rides, and returning to campus. Being in a college town, we are always reminded that students are back on campus due to the increased traffic, the homecoming parade, and the increased buzz (no pun intended) around the town. The onset of fall sometimes dredges up unwanted memories about turning in term papers and meeting all the inane requirements insisted upon by the professor. A recent GAO opinion also brought me back to my college days. Specifically, what happens when the government (kind of like a college professor) sets a requirement for a certain type of file format for a solicitation, but the offeror submits a proposal in a different file format? A recent GAO opinion answers that question in the contractor’s favor–although GAO’s ruling isn’t a blanket permission slip for contractors to ignore file format requirements. In McCann-Erickson USA, Inc., B-414787 (Comp. Gen. Sept. 18, 2017), McCann-Erickson USA, Inc. had submitted a proposal to provide advertising services to the Army on an IDIQ basis for a potential 10-year contract worth up to $4 billion. The Army would evaluate proposals “on a best-value basis, considering cost/price, along with several non-cost/price evaluation criteria.” The solicitation set up a two-phase evaluation process. Phase one would be based on written proposals while phase two would involve an oral presentation for all proposals that were deemed acceptable. Phase one involved “a substantive evaluation of written proposals considering cost/price and the non-cost/price evaluation factors with a focus on the adequacy of the offerors’ response–and the feasibility of their approach–to fulfilling the requirements of the RFP.” But instead of following the two-phase review process, the Army conducted what it termed a “compliance review” of proposals, consisting of reviewing and eliminating proposals based on “informational deficiencies” in what GAO described as a “superficial, perfunctory review of the ME proposal to identify instances where ME allegedly did not fully comply with the instructions for proposal preparation.” What were these “information deficiencies” identified by GAO? The wrong file format was one of them. The Army rejected ME’s proposal, in part, “for submitting its cost/price proposal as a portable document file (pdf) rather than as a Microsoft Excel spreadsheet.” Per the GAO, “[t]he record shows that the agency did not substantively evaluate the ME cost/price proposal, choosing not to calculate the firm’s total evaluated cost/price; performing no meaningful cost realism evaluation; and not evaluating the proposal for balance, fairness or reasonableness, as specifically contemplated by the solicitation’s cost/price evaluation factor. The agency also did not afford ME an opportunity to submit its cost proposal as a Microsoft Excel file.” GAO rejected the Army’s interpretation of its submission requirements because the solicitation’s evaluation criteria did not place offerors on notice that the agency simply would reject proposals without first performing a substantive evaluation. In addition, the record does not establish why the Army is unable to evaluate ME’s cost/price proposal using the pdf version of the proposal that it submitted, as opposed to a Microsoft Excel version of the cost/price proposal. Although a Microsoft Excel version of the proposal would include the underlying formulae used to arrive at the cost/price proposed by ME, the agency has not explained how the lack of such information would necessarily lead to its inability to evaluate the MS cost/price proposal. In addition, GAO held that allowing ME to submit an Excel version of its cost/price proposal would be prudent, as long as no changes were made in the pricing, because this would amount to a mere clarification of the proposal. In the end, GAO sustained the protest and advised the Army to reevaluate ME’s proposal and awarded costs to ME. It’s important to note that the GAO’s decision was based on the specific circumstances of the case. GAO did not hold that it is always okay for an offeror to submit its proposal in the wrong electronic file format. In fact, in a case decided a few years back, the GAO reached the opposite conclusion–holding that an offeror was properly excluded from award when it submitted its proposal in PDF instead of Excel. The difference? In the prior case, the agency argued that it needed to manipulate offerors’ cost data to complete the price evaluation, and the GAO agreed that doing so would be “unduly burdensome” without an Excel file. Perhaps a college student may come across this blog after turning in a paper in the wrong format and be able to argue that, if it’s good enough for the GAO, it should be good enough for you, professor. Regardless, this decision is noteworthy because it points to limits on an agency’s discretion in rejecting a proposal based on the file format of the submission. View the full article
  9. Thank You, Utah!

    I am back from a great trip to Salt Lake City, where I spoke at the Utah PTAC Symposium. My talk at the symposium centered on prime/subcontractor teams and joint ventures–topics of ever-increasing interest for small and large contractors alike. It was wonderful to see so many clients and old friends at the Symposium and meet so many new people, too. A big “thank you” to Chuck Spence and his team at the Utah PTAC for organizing this event and inviting me to speak. And thank you, also, to everyone who attended my seminar and stopped by the Koprince Law LLC booth to talk about government contracts. I’ll be sticking around Kansas for a few weeks, although I’ll be making a short trip down to Wichita on Tuesday to give a half-day session on the SBA’s All Small Mentor-Protege Program, sponsored by the Kansas PTAC. If you’re a Kansas contractor, I hope to see you there. View the full article
  10. Ah, joint ventures. Few topics in government contracting these days seem to cause as much confusion. And that’s due, in large part, to some common misunderstandings I hear repeated over and over. Recently, I joined host Michael LeJeune on the “Game Changers” podcast to talk about some of the most common areas of confusion regarding joint ventures. What is the relationship between joint ventures and the SBA’s new All-Small Mentor-Protege Program? How do the rules for joint venture work share operate? What are some frequent mistakes companies make when they draft joint venture agreements? And so on. My podcast is available now on the Federal Access website. Click here to give it a listen, and while you’re there, check out the many other great podcasts featuring a range of government contracts thought leaders. View the full article
  11. Like many, I enjoy a good meal out on the town. I tend to order strictly from the menu without any additions or substitutions. Perhaps, it is from all my years of waitressing prior to attending law school. In a recent GAO decision, however, the Navy attempted to order items not on the vendor’s menu only to have GAO determine that the order was beyond the scope of that menu. In Bluewater Management Group, LLC, B-414785, Bluewater protested the Navy’s award of lodging and transportation services to DMC Management Services, LLC, alleging the award was improper because DMC’s GSA Schedule contract did not include transportation services. By way of background, the Department of Navy, Military Sealift Command, issued an RFQ to small business holders of GSA Schedule 48 for lodging and transportation services. The RFQ was issued pursuant to FAR Subpart 8.4, Federal Supply Schedules, whereby GSA directs and manages the FSS program and federal agencies can utilize a simplified process for obtaining commercial supplies and services at bulk prices. Key to the RFQ’s scope of work, offerors were to not only provide an average of 120 extended-stay hotel rooms within 25 miles of the naval base, but daily round trip transportation to the naval base. The RFQ identified the lodging and transportation services as separate CLINs and instructed vendors that all products and services were to be included in their current GSA Schedule contract. While DMC was a holder of a Schedule 48 contract, its contract only listed pricing for lodging and housekeeping services. It did not disclose transportation or corresponding pricing for transportation as an additional service. Nevertheless, the Navy awarded DMC the task order for an evaluated price of $38,009,781. Bluewater protested, arguing that the award was improper because the Navy was procuring transportation services from DMC that were outside the scope of its Schedule 48 contract. The Navy counter-argued that the transportation services were ancillary to complete the task order lodging requirement. In rejecting the Navy’s argument, GAO wrote, “[t]he Navy provides no legal authority for this assertion, nor does it provide any evidence that DMC’s schedule contract listed these services or otherwise explain why the transportation services are not required to be listed and priced on the FSS contractor’s schedule.” Similarly, GAO found unavailing the Navy’s argument that the transportation services were “other direct costs,” because DMC did not offer a description or established price for transportation services. GAO explained that “[n]on-FSS products and services may not be purchased using FSS procedures; instead, their purchase requires compliance with the applicable procurement laws and regulations, including those requiring the use of competitive procedures. GAO sustained the protest, affirming that “[w]here an agency orders from an existing FSS, all items quoted and ordered are required to be on the vendor’s schedule contract as a precondition to receiving an order.” Bluewater is a good reminder that for Schedule contracts, the government is not permitted to order items not listed or priced on the vendor’s menu. Doing so could result in not obtaining any of the items on the menu. View the full article
  12. SmallGovCon Week In Review: October 2-6, 2017

    The baseball playoffs are back, and tonight I’ll be watching my Cubs begin their quest for back-to-back titles. (If you’re not a lifelong Cubs fan, you may not realize how strange it feels to write that previous sentence). Before the games begin, it’s time for our weekly dose of government contracting news. In this week’s edition of the SmallGovCon Week in Review, the DOJ charges four men with participating in a bribery and kickback conspiracy, the GAO publishes a report finding that many contracts weren’t closed on time, a court reverses a contractor’s debarment, and more. You don’t see this every day: four men are charged in a bribery and kickback conspiracy scheme–involving a DoD Office of Inspector General contract. If true, that’s pretty brazen. [U.S. Department of Justice] The SBA has adopted the 2017 NAICS code revision as the basis of its small business size standards. [Federal Register] The GAO published a report showing that contracts were not closed on time at several agencies. [U.S. Government Accountability Office] A federal court ruled the GSA unfairly debarred a government contractor because GSA did not give the contractor notice of all grounds prior to the agency’s final debarment determination. [Federal News Radio] Several defendants in a New York SDVOSB False Claims Act case have agreed to pay $3 million to resolve allegations that they improperly obtained SDVOSB contracts. [U.S. Department of Justice] A retired Army colonel whose business company reportedly was used to commit bribery to obtain more than $20 million in government contracts has been charged with conspiracy. [The Augusta Chronicle] A new website consolidates federal Inspector General reports in one place. [Oversight.gov] Reverse auction provider FedBid has been acquired but will continue to operate under its own brand. [Compusearch] View the full article
  13. So you’ve teamed with an ineligible incumbent contractor to bid on some government work and, to try and maintain continuity, the incumbent would like to retain project management functions. “No big deal,” you think, “I’ll just create a management position to oversee the project manager.” Actually, it could be a big deal if you’re trying to avoid ostensible subcontractor affiliation. Among the four key factors for determining ostensible subcontractor affiliation is whether the management previously served with the subcontractor under the incumbent contract. And according to a recent SBA Office of Hearings and Appeals decision, creating a figurehead management position to oversee the project manager won’t negate this indicia of ostensible subcontractor affiliation. By way of background, ostensible subcontractor affiliation exists when a prime contractor relies on a subcontractor to perform the contract’s primary and vital requirements or if the prime contractor is otherwise “unusually reliant upon” its subcontractor. Though it’s a fact-specific inquiry, OHA has identified four key factors for determining unusual reliance: First, the proposed subcontractor was the incumbent contractor, and was not itself eligible to compete for the procurement. Second, the prime contractor planned to hire the large majority of its workforce from the subcontractor. Third, the prime contractor’s proposed management previously served with the subcontractor on the incumbent contract. And fourth, the prime contractor lacked relevant experience, and was obliged to rely upon its more experienced subcontractor to win the contract. An important consideration, then, is contract management—if the subcontractor is providing project management, or if the managers previously served on the subcontractor’s incumbent contract, OHA is more likely to find ostensible subcontractor affiliation. That brings us to Automation Precision Technology, LLC, SBA No. SIZ-5850 (Sept. 6, 2017). In that case, Automation Precision Technology (“ATS”) teamed with Serco, Inc. (the incumbent contractor, and a multi-billion dollar company) to bid on undersea surveillance systems support services solicited by the Department of Navy’s Space and Naval Warfare Systems Command. The work was solicited under NAICS code 541614 (Process, Physical Distribution, and Logistics Consulting Services), which carries a $15 million size standard. Though ATS’s revenues alone fell under the size standard, the SBA Area Office found that ATS’s relationship with Serco violated the ostensible subcontractor rule based on the four key factors. As part of the determination, the Area Office noted that nearly all of the contract employees were former Serco employees that would transition over to ATS, including the key personnel and management employees (like the Program Manager). Serco’s size was aggregated with ATS’s and, as a result, ATS was found to be ineligible for the SPAWAR contract. ATS appealed the determination to OHA, saying, in part, that the Area Office erred by finding ATS unusually reliant on Serco for project management. According to ATS, its proposal included a Contract Manager who would serve as “the absolute lead for the Contract team” and would ensure that ATS firmly manages the contract. Thus, ATS said the Area Office erred by finding ATS reliant on Serco for project management. OHA rejected ATS’s arguments, noting that the solicitation identified the Program Manager as the contract’s top management official and charged her “with the responsibility of accomplishing the overall efforts of the contract.” The Contract Manager position created by ATS was not required under the solicitation. And though ATS said its Contract Manager would oversee the entirety of the contract, its proposal indicated otherwise: under ATS’s proposal, the Program Manager was “responsible for day-to-day contract management with the authority to obligate Team [ATS] within contract terms,” while the Contract Manager “provides leadership, guidance, and resources to support the Project Manager in management and execution of the contract.” According to OHA, “the Contract Manager appears to be more of a liaison and an advisor than a manager . . . [who] does not work directly on and has no major role in performing the contract.” OHA found ATS’s Contract Manager did not exercise sufficient management over the Program Manager, thus supporting a finding of ATS’s unusual reliance on Serco. OHA denied ATS’s appeal. Automation Precision Technology confirms that, when evaluating ostensible subcontractor affiliation, project management matters. A company cannot avoid the sting of affiliation simply by creating a figurehead manager that lacks firm authority. View the full article
  14. The SBA has proposed rules to enable contractors to file protests with the SBA Office of Hearings and Appeals challenging the SDVOSB or VOSB status of a company included in the VA’s CVE VetBiz database. The same set of proposed rules would allow a contractor to appeal to OHA if the VA denies the contractor’s application for inclusion in the CVE database, or cancels an existing verification. The proposed rules, once finalized, will offer important new protections for SDVOSBs and VOSBs and are the first official step in implementing Congress’s mandate that the SBA and VA consolidate their SDVOSB eligibility requirements. The SBA’s proposed regulations were published in the Federal Register on September 28, 2017. The proposed rules fall into two broad categories: CVE protests and CVE appeals. CVE Protests – Proposed Rules The SBA proposes to give OHA jurisdiction to decide SDVOSB and VOSB eligibility protests for VA procurements. These rules don’t apply to SDVOSB protests for non-VA procurements, which will continue to be evaluated under the SBA’s existing rules. Here are some of the highlights of the SBA’s proposed rules governing CVE Protests: Who can file CVE Protests? The proposed rules allow “the Secretary of the VA, or his/her designee” to file what the SBA calls a “CVE Protest.” Additionally, if a small business is awarded a VA contract, “the contracting officer or an offeror” can file a CVE Protest. When are CVE Protests due? The VA can file a CVE Protest at any time. If a protest is filed in connection with a VA contract, “[a]n offeror must file a CVE Protest within five business days of notification of the apparent awardee’s identity.” A contracting officer, on the other hand, “may file a CVE Protest at any time during the life of the VA contract.” Where are CVE Protests filed? Protests by private parties must be filed with the appropriate contracting officer, who will refer the protest to OHA. Contracting officers and the VA may file protests directly with OHA. What are the contents of a CVE Protest? A CVE Protest “must be in writing.” While there is no required format, the protest must contain the solicitation or contract number, if applicable, the name and contact information and signature of the protester and/or its attorney, and pecific allegations supported by credible evidence that the [protested] concern does not meet the eligibility requirements for inclusion in the CVE database.” OHA will dismiss a protest that fails to meet this “specificity” threshold. When must the protested company respond? The protested concern, the VA, the contracting officer and “any other interested party” may respond to a protest or supplemental protest. The response is due “no later than 15 days from the date the protest or supplemental protest was filed with OHA.” What is the burden of proof? Once OHA has determined that the protest is timely, specific and within OHA’s jurisdiction, “[t]he protested concern has the burden of proving its eligibility, by a preponderance of the evidence.” What about discovery? Nope. “Discovery will not be permitted in CVE Protest proceedings.” However, “the Judge may investigate issues beyond those raised in the protest and may use other information or make requests for additional information to the protester, the protested concern, or VA.” OHA will only hold an oral hearing in “extraordinary” circumstances. What happens if OHA sustains a CVE Protest? If OHA sustains a protest before award of a contract, the contracting officer cannot follow through with the award. If the protest is sustained after award, “the contracting officer shall either terminate the contract or not exercise the next option.” Additionally, the VA must immediately remove the company from the CVE database, and the company “may not submit an offer on a future VA procurement until the protested concern reapplies to the Vendor Information Pages Verification Program and has been reentered into the CVE database.” Can OHA’s decision be appealed? No. OHA’s decision is “final agency action,” and can only be formally challenged in federal court. However, there is a process to request reconsideration of the decision. A request for reconsideration “must clearly show an error of fact or law in the decision.” An OHA judge “may also reconsider a decision on his or her own initiative.” For those familiar with the SBA’s size, SDVOSB and WOSB protest processes, these rules will look rather familiar. Most of the proposed rules for the CVE Protest process don’t vary too much from that of SBA’s other protest processes. Perhaps the most significant difference is that CVE Protests will be decided directly by OHA rather than another SBA office. Under current law, size protests are decided by SBA Area Offices; WOSB and non-VA SDVOSB protests are decided by the SBA’s Director of Government Contracting. OHA serves an appellate function for these protests but will decide CVE Protests directly. CVE Database Appeals – Proposed Rules For years, veteran-owned firms have complained that they cannot appeal to an administrative judge if their CVE application is denied or cancelled. The SBA’s proposed rules would allow those companies to appeal directly to OHA. Here are some highlights of the SBA’s proposal for CVE Appeals: Who can file a CVE Appeal? According to the proposed rule, “[a] concern that has been denied verification of its CVE status or has had its CVE status cancelled may appeal the denial or cancellation to OHA.” When are CVE Appeals due? A CVE Appeal must bee filed “within 10 business days of receipt of the denial or cancellation.” OHA will dismiss an untimely CVE Appeal. Where are CVE Appeals Filed? CVE Appeals are filed directly with OHA. (The proposed rule, oddly, doesn’t seem to explicitly say so, but instead refers to another OHA regulation, 13 C.F.R. 134.204, regarding filing). Copies of the appeal must be served on the VA. What are the contents of a CVE Appeal? Like a CVE Protest, a CVE appeal must be in writing, but there is “no required format.” However, the CVE appeal must contain: (1) a copy of the denial or cancellation and the date the appellant received it; (2) a statement of why the denial or cancellation is in error; (3) “any other pertinent information the Judge should consider,” and the contract information and signature of the appellant and/or its attorney. Who can respond to a CVE Appeal? The VA may respond to a CVE Appeal. The VA has 15 days after OHA files a “notice and order” acknowledging the appeal in which to file a response. What is the burden of proof? To win a CVE Appeal, the appellant has the burden of proving, by a preponderance of the evidence, that the denial or cancellation “was based on clear error of factor law.” What about discovery? Like CVE Protests, there is no discovery in CVE Appeals. OHA will not hold oral hearings. When is the decision due? OHA “shall decide a CVE Appeal, insofar as practicable, within 60 calendar days after close of the record.” The record closes on the date the VA’s response is due, meaning that OHA judges will attempt to issue their decisions within 75 days of acknowledging the appeal. But this isn’t a hard deadline. What happens if OHA grants a CVE Appeal? If OHA grants a CVE Appeal, the VA “must immediately reinstate or include the appellant, as the case may be, in the CVE database.” Can OHA’s decision be appealed? No. As is the case for CVE Protests, OHA’s decision is “final agency action,” and can only be formally challenged in federal court. However, there is a process to request reconsideration of the decision. A request for reconsideration “must clearly show an error of fact or law in the decision.” An OHA judge “may also reconsider a decision on his or her own initiative.” What Happens Next Don’t lose sight of the fact that these are proposed rules, not final rules. Until the rules become final, contractors won’t be able to file CVE Protests or CVE Appeals with OHA. And, of course, the final rules may vary from the proposed versions. The public is invited to comment on the proposed rules. Comments are due by October 30, 2017. To comment, follow the instructions at the beginning of the Federal Register entry. View the full article
  15. It’s a sad day here at Koprince Law. Molly Schemm, who has been my fantastic legal executive assistant since before the firm’s doors even opened, is leaving to pursue new adventures in Alabama. All of us here at the firm will miss Molly dearly–and we won’t be the only ones. Molly’s warmth and professionalism have earned her many friends among our clients, too. We wish Molly the very best. Before the weekend begins (and Molly begins her drive South), it’s time for your weekly dose of SmallGovCon Week In Review. In this edition, a provision commonly known as the “Amazon” amendment is garnering renewed attention, an Alabama contractor is sentenced for defrauding the government, SAM is getting a makeover, and much more. A recent DoD memo provides guidance regarding the implementation of DFARS Clause 252.204-7012, which governs safeguarding covered defense information and cyber incident reporting. [Office of Under Secretary of Defense] Some in the House of Representatives want to make federal procurement less complex and more competitive. But is the so-called “Amazon Amendment” the way forward? [Federal News Radio] A contractor was ordered to repay the full amount of contracts awarded after he was found guilty on criminal charges of falsely obtaining Small Business Innovation Research contracts with the DoD and NASA. [United States Department of Justice] The GAO released a length report regarding agencies’ compliance with OSDBU requirements. [GAO] The GSA is working on a new look for SAM. You can now check out the beta version of the website and provide your feedback on what will eventually become the permanent site. [fedscoop] Recent studies show that the percentage of overall research and development spending sponsored by the government has dropped sharply over the last 50 years. [National Defense] Check out the four changes in the 2018 NDAA that contractors need to know about. [Federal News Radio] With a great deal of uncertainty about the 2018 federal budget, Edge 360 takes a look at what October will hold for federal IT contractors. [Edge 360] View the full article
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