Koprince Law LLC

Ask any attorney, and there’s a good chance they’d agree with this statement: Intellectual property is a particularly complex area of law. Dealing with property rights in things that don’t physically exist, unsurprisingly, can result in a lot of confusion. Couple this with the labyrinthine regulations and rules concerning government contracts and procurements, and even the most experienced contractor can be left confused with a pounding headache. To help clear up these murky waters, this post will be the first in a series of posts reviewing some of the basics of intellectual property rules in government contracts. We will start by going over data rights, as perhaps no subject in this field is more difficult than dealing with data rights. While I think we’re getting to the point in history where we can stop referring to computers and the internet as a novel technology (The internet as we know it is over thirty years old!), the law around data rights is still relatively new and rough around the edges. In this post, we will review the general concept and the rules regarding “unlimited rights” in data. A caveat before we begin: It is worth noting that, while many people associate “data” with computers, and for good reason, data can come from any number of sources and exist in many different forms of media. We generally discuss data rights in terms of computer data as it is the most pressing matter, but, unless the rule specifically refers to computer data, the rules of rights in such data are not dependent on the medium. As I noted above, intellectual property is a highly complex area of law. While this series will hopefully give you a decent basic understanding of how it applies to government contracts so you know what to look for, this is general guidance. If you have a specific concern about a certain matter, you should contact an attorney that specializes in intellectual property or government contracts. With that out of the way, let’s begin. General Overview FAR 52.227-14 states “data” “means recorded information, regardless of form or the media on which it may be recorded. The term includes technical data and computer software. The term does not include information incidental to contract administration, such as financial, administrative, cost or pricing, or management information.” This differs from patent and copyrights. Patents are intellectual property rights in an invention or discovery itself, per 35 U.S.C. § 101. Copyright is a property right in the particular way in which something is expressed or communicated, such as a book or recording, but doesn’t cover the underlying information itself, per 17 U.S.C. § 102. Data is basically that underlying information. Contrary to what many seem to think, the government does not have a policy of trying to take ownership in data rights regardless of the situation. FAR 27.102 notes that “[t]he Government recognizes rights in data developed at private expense, and limits its demands for delivery of that data. When such data is delivered, the Government will acquire only those rights essential to its needs.” Admittedly, the cynic might observe that what is “essential” to the government’s needs is a matter of interpretation, but, in our experience, this policy is generally taken seriously. That said, the prudent contractor should never take the agency’s word alone on what effect the provisions of a solicitation or contract have on data rights. Even assuming the contracting officer means well, as is most often the case, COs are human and can be mistaken as to what the terms of a contract can mean or are required for a procurement. We are dealing with a very complex area of law after all. So always give the provisions on data rights a fair glance. There are three general classes of rights that the government will assert for data under a government contract. They are “unlimited rights,” “limited rights,” and “restricted computer software.” There is an additional class, “government purpose rights,” which we will address later. However, that class is only for Department of Defense procurements, so for now, we’ll focus on the others first. Unlimited Rights The most straightforward of the classes is “unlimited rights,” and, for the most part, it’s what it says on the label. “Unlimited rights means the rights of the Government to use, disclose, reproduce, prepare derivative works, distribute copies to the public, and perform publicly and display publicly, in any manner and for any purpose, and to have or permit others to do so.” FAR 27.401. In effect, if the government has unlimited rights in data, it is the owner (or at least co-owner) of that data. It can do whatever it wants with it. If you see the words “unlimited rights” regarding data (or really in any context in a contract), that should set off alarm bells. However, just because the government is asking for unlimited rights in data does not mean they are making a mistake. FAR 27.404-1 notes that such rights are appropriate for: Data first produced in the performance of a contract (unless it is simply “minor modifications to data that are limited rights data or restricted computer software”);Form, fit, and function data delivered under contract;Data for manuals or training material for installing, operating, maintaining items or processes delivered under a contract (outside of those included with restricted computer software); andAll data delivered under the contract that isn’t limited rights data or restricted computer software. At first glance, that last part may seem to swallow up all the others, but, the other parts help COs determine if limited rights or restricted computer software should be applied. Let’s break these down. Data First Produced in the Performance of a Contract “Data first produced in the performance of a contract” is really what it sounds like it is: if the data did not exist until the contractor started performing on the contract, and it comes from that performance of the contract, it is data first produced in the performance of a contract. See Ervin & Assocs., Inc. v. United States, 59 Fed. Cl. 267, 295 (2004), aff’d, 120 F. App’x 353 (Fed. Cir. 2005). This makes sense, as often this data is precisely what the government is trying to obtain with the procurement. Even if it is incidental, it is clearly tied to the procurement, as it wouldn’t have been produced had the contract not been made. The language is mostly unqualified too: if it’s produced in performing a contract, it’s the government’s data. There is the “minor modifications” exception, but unfortunately, there has been incredibly little said on it. It requires the data in question to be limited rights data or restricted computer software to begin with, and reason suggests it covers cosmetic changes, corrections to bugs, and other such changes. Form, fit, and function data Helpfully, this sort of data is defined by FAR 52.227-14. Less helpfully, the definition is fairly jargony. Form, fit, and function data is really just data that defines characteristics of a part. One administrative decision noted it “is data which depicts the configuration and mating dimensions, function, and performance and qualification requirements. This data is often less detailed engineering data.” Ingersoll-Rand Co.-Reconsideration, B-230101 (June 16, 1988). One example is the dimensions and mass of say, a nail or screw. For computers, it’s the sort of stuff you need to know to operate software or troubleshoot a problem, such as what operating systems the software works on. Generally, you don’t need to worry much about this data. It’s the data that helps define the data. Data Delivered Under the Contract (except restricted computer software) Constituting Manuals or Instructional Material This class of data is straight forward: Your instruction manuals, how-to sheets, troubleshooting guides, things of that nature. Basically, if it gives the government guidance on how to use something you provided them or how to maintain or repair it, it falls under this category. All Other Data Unless Provided Otherwise This is the catch-all and the part you need to be most aware of: Unless the data in question is provided for as limited rights data or restricted computer software, the Government gets unlimited rights to it. There are requirements to follow to make sure your data is recognized by the government as limited rights data or restricted computer software, and failure to do so means the Government treats the data as theirs. For example: “Data delivered to the Government without any restrictive markings shall be deemed to have been furnished with unlimited rights. The Government is not liable for the disclosure, use, or reproduction of such data.” In the next post, we will explore this matter more in depth: What is limited rights data and, more importantly, how do I protect it? Questions about this post? Or need help with a government contracting legal issue? Email us or give us a call at 785-200-8919. Looking for the latest government contracting legal news? Sign up for our free monthly newsletter, and follow us on LinkedIn, Twitter and Facebook. The post Data Rights and the Government Contractor: An Introduction and Unlimited Data Rights first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

Happy Friday and Happy Halloween! As always, there was a lot of news in the federal government contracting world this week including an announcement from the SBA concerning a new community navigator pilot program which will provide $100 million in funding to 51 organizations to help support local community entrepreneurs. Also, the GSA announced it will be making revisions to its commercial platform initiative. You can read more about these and other federal government contracting related topics in the articles below. Have a great weekend! Investors have a new reason to worry about buying into federal contractors [FedNewsNet]Are 2 associations’ questions to GSA about cloud efforts premature or discerning? [FedNewsNet]Federal Data Strategy finally gets Year 2 Action Plan [FedScoop]State Department to set up bureau for international cyber, emerging tech [FedScoop]DISA seeks to flatten leadership structure with reorganization [FedScoop]Agency safety and reentry plans varied considerably during initial days of the pandemic, GAO finds [FedNewsNet]GSA makes course corrections with its commercial platforms initiative [FedNewsNet]DoD leaders say automation isn’t taking over any civilian jobs yet [FedNewsNet]Louisville Eyeglass Manufacturer, US Department of Labor Agreement Resolves Alleged Discrimination Affecting 654 Black, White Job Applicants [DoL]SBA Administrator Guzman, Biden-Harris Administration Announce Community Navigator Pilot Program Grantees [SBA]DoD’s commercial buying challenges [FedNewsNet]US Department of Labor Recovers $783,616 in Wages, Fringe Benefits For 14 Contract Workers, Their Union at Jamaica Federal Building [DoL] The post SmallGovCon Week in Review: October 25-29, 2021 first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

The nonmanufacturer rule is one that is commonly misunderstood in the federal government contracting realm. But it is also one we encounter quite often in our role assisting federal contractors. On November 4, please join me, Shane McCall, and my colleague, Nicole Pottroff, as we dive deep into the nonmanufacturer rule, tackling the ins and the outs and answering some of your questions surrounding it. The webinar will be hosted by our friends at Govology, and it is easy to register: just click here. The post Event: Understanding and Complying with the Nonmanufacturer Rule (2021 Update) first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

The contractor vaccine mandate is the talk of the government contracting community. As contractors scramble to understand the ins-and-outs of the new requirement, my colleagues and I are seeing some of the same misconceptions repeatedly arise. Without further ado, here are five common misconceptions about the contractor vaccine mandate, and the actual rules you should know in regards to each. 1. Misconception: the vaccine mandate automatically applied to all prime contractors and subcontractors on October 15 (or will automatically apply to all contractors and subcontractors on November 14). The vaccine mandate does not apply automatically. Instead, a contractor becomes subject to the mandate when an implementing clause is included in a prime contract or subcontract (including lower-tier subcontracts). According to the Guidance issued by the Safer Federal Workforce Task Force, unless a prime contract is exempt, an implementing clause must be included in: (1) new contracts awarded after November 14; and (2) existing contracts awarded prior to October 15. For existing contracts, the clauses apply “at the point at which an option is exercised or an extension is made.” Contracting officers are encouraged, but not requred, to include an implementing clause in contracts awarded between October 15 and November 14. Once a prime cotractor is subject to the clause, the prime must flow it down to all subcontractors, unless a subcontractor is exempt. Subcontractors must continue to flow the clause down to lower-tier subcontractors, again, unless the lower-tier subcontractor is exempt. A subcontractor becomes subject to the clause “[w]hen the clause is incorporated into a subcontract.” 2. Misconception: the vaccine mandate does not apply to employees who work from home. Some contractors assume that the vaccine mandate does not apply to work-from-home employees. In fact, unless an employee is entitled to an acccomodation or works outside of the United States and its outlying areas, the vaccine requirement applies to any employee who works “on or in connection with” a covered contract or subontract, even if the employee works from home. On its website, the Task Force explains: An individual working on a covered contract from their residence is a covered contractor employee, and must comply with the vaccination requirement for covered contractor employees, even if the employee never works at either a covered contractor workplace or Federal workplace during the performance of the contract. A covered contractor employee’s residence is not a covered contractor workplace, so while in the residence the individual need not comply with requirements for covered contractor workplaces, including those related to masking and physical distancing, even while working on a covered contract. If you would like more information, I discussed work-from-home employees at greater length in an earlier post here on SmallGovCon. 3. Misconception: the government will consider (and approve or reject) an employee’s requests for medical or religious accommodations. An employee may be entitled to an accommodation (essentially, an exception) from the vaccine mandate if required by applicable employment law, such as the Americans with Disabilities Act. Understandably, some contractors assume that if an employee seeks an accommodation, the contractor should forward the request to the government for a decision. Except in unusual circumstances, the contractor–not the government–is responsible for determining whether an employee is entitled to an accommodation. The Task Force offers the following Q&A: Q: Who is responsible for determining if a covered contractor employee must be provided an accommodation because of a disability or because of a sincerely held religious belief, practice, or observance? A: A covered contractor may be required to provide an accommmodation to contractor employees who communicate to the covered contractor that they are not vaccinated for COVID-19, or that they cannot wear a mask, because of a disability (which would include medical conditions) or because of a sincerely held religious belief, practice, or observance. A covered contractor should review and consider what, if any, accommodation it must offer. The contractor is responsible for considering, and dispositioning, such requests for accommodations regardless of the covered contractor employee’s place of performance. If the agency that is the party to the covered contract is a “joint employer” for purposes of compliance with the Rehabilitation Act and Title VII of the Civil Rights Act, both the agency and the covered contractor should review and consider what, if any, accommodation they must offer. The key sentence, of course, is “[t]he contractor is responsible for considering, and dispositioning, such requests for accommodations regardless of the covered contractor employee’s place of performance.” This is why my colleagues and I have been strongly urging clients to work with knowledgeable employment attorneys to help ensure compliance. 4. Misconception: a contractor may accept an employee’s sworn statement that the employee is vaccinated. What sort of proof of vaccination is a contractor required to obtain? A common misunderstanding is that a contractor can accept an employee’s attestation–essentially, the employee’s sworn statement that he or she is vaccinated. According to the Task Force, however, “[a]n attestation by the covered contractor employee is not an acceptable substitute for documentation of proof of vaccination.” Instead, the Task Force indicates that contractors must obtain “vaccination cards or vaccination records.” 5. Misconception: December 8 is the deadline for an employee to receive his or her first vaccine shot. The December 8 deadline has garnered considerable attention–but that is the deadline for covered employees to become fully vaccinated. The Task Force says that an individual is considered fully vaccinated “two weeks after they have received the second dose in a two-dose series, or two weeks after they have received a single-dose vaccine.” In other words, if an employee becomes “covered” before December 8 (which, as discussed in #1, would be through a contractual clause), he or she would have to receive a shot no later than November 24–two weeks earlier, assuming a one-dose vaccine. If the employee elects a two-dose vaccine, he or she would have to receive a first shot even earlier. *** The vaccine mandate is a work in progress, and the Task Force has started updating its website on occasion with new Frequently Asked Questions and additional guidance. My colleagues and I here at Koprince McCall Pottroff LLC will continue to keep the government contracting community updated. The post Five Things You Should Know: Common Misconceptions about the Contractor Vaccine Mandate first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

The House-passed version of the 2022 National Defense Authorization Act would make some significant changes for the HUBZone program. Among them are the ability to have HUBZone appeals heard by administrative judges. Below is a summary of the key changes The House version of the 2022 NDAA includes some amendments that could come about if they are all included in the final law. HUBZone Appeals The first one is HUBZone appeals. The House version of the NDAA provides authority for SBA Office of Hearings and Appeals judges to hear all appeals from formal protest determinations in connection with the status of a concern as qualified HUBZone small business concern. Currently, if a HUBZone status protest is sustained, the only “appeal” process is to request a review by the SBA’s Associate Administrator, Office of Government Contracting & Business Development. There is no opportunity to seek a decision from an administrative judge, no way to review or cite to prior published decisions to use as precedent, and no ability to review any administrative record of the decision. These appeals are considered very quickly, within 5 business days of the filing, and there is no opportunity for additional briefing after the initial filing. As we’ve discussed previously, OHA’s current lack of jurisdiction makes the HUBZone Program different from the other three major socioeconomic contracting programs (SDVOSB/VOSB, WOSB/EDWOSB and 8(a)), all of which allow OHA appeals in some circumstances. (While there are no status protests in the 8(a) program, 8(a) appeals are sometimes allowed for companies whose applications are denied). The current language in the House-approved NDAA states: Not later than 1 year after the date of the enactment of this Act, the Administrator of the Small Business Administration shall issue a rule authorizing the Office of Hearings and Appeals of the Administration to decide all appeals from formal protest determinations in connection with the status of a concern as qualified HUBZone small business concern (as such term is defined in section 31(b) of the Small Business Act (15 U.S.C. 657a(b)). We’ll have to see if this provision makes it into the final NDAA. If so, that will be a significant change to the administrative process for HUBZone appeals. HUBzone Price Preference Another proposed change to the HUBZone rules would clarify that the HUBZone Price Evaluation Preference applies to certain orders under unrestricted contracts. The legislative text, if approved, would make the HUBZone price evaluation preference applicable to “an unrestricted order issued under an unrestricted multiple award contract or the unrestricted portion of a contract that is partially set aside for competition restricted to small business concerns.” This would make clear that the price preference must be applied at the order level, not just the base contract level, for purposes of price competition. Finally, as we wrote about earlier, HUBZone contracts, along with those of other major socioeconomic preference programs, would have a higher sole source cap, up to $8 million. These changes would make some small but significant changes to the HUBZone program. Stay tuned to SmallGovCon and we will keep you posted on this initiative and other important proposals in the 2022 NDAA. Questions about this post? Or need help with a government contracting legal issue? Email us or give us a call at 785-200-8919. Looking for the latest government contracting legal news? Sign up for our free monthly newsletter, and follow us on LinkedIn, Twitter and Facebook. The post House-Approved 2022 NDAA Makes HUBZone Changes, Including HUBZone Appeals first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

Hope everyone is enjoying their fall. I’ll be doing some pumpkin carving this week after going to the pumpkin patch. It was another busy week in the federal government contracting world. The vaccine mandate has been a hot topic, this week, as well as the passing of General Colin Powell. Here are a few articles that we found to be of interest to those in federal government contracting. Enjoy and have a great weekend. Colin Powell, Who Shaped U.S. National Security, Dies at 84 [NYT]CEO of Major Defense Contractor Charged with Bribery [DoJ]Army looks to increase oversight, centralization of IT spending [FedScoop]Audit of Noncompetitive Contracts in Support of Overseas Contingency Operations in Afghanistan and Iraq [DoS]GSA expects to issue Polaris solicitation by Dec. 21 [FedScoop]GSA Wants a Real Person Associated With Every SAM Registration Before Fiscal Year’s End [NextGov]What are the top federal professional services opportunities in FY22? [FedNewsNet]Former Security Services Executives Plead Guilty to Rigging Bids for Department of Defense Security Contracts [DoD]Military Supplier to Pay $850,000 to Settle Breach of Contract and False Claims Act Allegations [D0J]NAVAIR Soliciting Proposals for $600M Product Support Management/Integration Contract [GovConWIre]Fraudster Convicted in Maryland After Seven Day Trial for Federal Money Laundering Conspiracy Charges Related to International Fraud Scheme [DoJ]Vax Rule’s ‘Gray’ Areas May Help Contractors Beat Fraud Claims [Bloomberg]When it comes to supply chain risks, agencies need to know when to hold ‘em, know when to fold ‘em [FedNewsNet]Streamlining of DOJ Acquisition Regulations [FedReg]Implementation of Executive Order 14042, Ensuring Adequate COVID-19 Safety Protocols for Federal Contractors, in Other Transaction Agreements [D0D]DoD civilians will be suspended without pay and then fired if they do not get vaccinated [FedNewsNet]Navy Department to increase accountability of primes to meet subcontracting goals [FedNewsNet]VHA begins disciplinary process for employees who haven’t responded to vaccine mandate [FedNewsNet]House oversight committee refers veterans’ records backlog to NARA inspector general [FedScoop] The post SmallGovCon Week in Review: October 18-22, 2021 first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

My colleagues and I here at Koprince McCall Pottroff have been hearing lots of questions about the new COVID-19 vaccine mandate for certain employees of federal government contractors. Perhaps unsurprisingly, given the pandemic-related rise in remote work, one of the most common questions is “are work-from-home employees required to be vaccinated?” The answer, it turns out, is “it depends.” The underlying Executive Order requires contractors to follow guidance issued by the Safer Federal Workplace Task Force. (Though it seems a little odd to me to call something “guidance” when it has the force of law). It is the guidance, not the Executive Order itself, that mandates vaccination. The current guidance, issued on September 24, generally requires vaccination for so-called “covered contractor employees.” The guidance defines that term as follows: Covered contractor employee – means any full-time or part-time employee of a covered contractor working on or in connection with a covered contract or working at a covered contractor workplace. This includes employees of covered contractors who are not themselves working on or in connection with a covered contract. For purposes of this post, let’s assume that a contractor determines that it is a “covered contractor.” (That’s a term that is also defined in the guidance, but is outside the scope of our discussion of work-from home employees). With that assumption, an employee is covered if he or she: Is working on or in connection with a covered contract; orIs working at a covered contractor workplace. Note that I emphasized the “or.” An employee is covered if either #1 or #2 applies to that employee. So in the case of an employee who works from home, the first question is whether that employee is working on or in connection with a covered contract. (“Covered contract” is also defined in the guidance, and the Task Force also provides some clarification–though perhaps not enough–about what it means to work “in connection with” a covered contract.) If an employee works from home, but is working on or in connection with a covered contract, he or she is a “covered contractor employee”! The vaccination requirement will apply to such an employee, unless he or she is entitled to an accommodation or another exception, such as the exception for employees who work entirely outside the United States and its outlying areas. In a Q&A included in the guidance, the Task Force addressed this issue directly: Q11: How does this Guidance apply to covered contractor employees who are authorized under the covered contract to perform work remotely from their residence? A: An individual working on a covered contract from their residence is a covered contractor employee, and must comply with the vaccination requirement for covered contractor employees, even if the employee never works at either a covered contractor workplace or Federal workplace during the performance of the contract. While the vaccination requirement applies to such employees, the guidance also includes other COVID-19 mitigation requirements, such as masking and physical distancing. But what about a work-from-home employee who is not working on or in connection with a covered contract? The second question is whether he or she is working at a “covered contractor workplace.” The guidance defines that term as follows: Covered contractor workplace – means a location controlled by a covered contractor at which any employee of a covered contractor working on or in connection with a covered contract is likely to be present during the period of performance for a covered contract. A covered contractor workplace does not include a covered contractor employee’s residence. As the definition makes clear, an employee’s residence is not a covered contractor workplace. Therefore, a work-from-home employee who is not working on or in connection with a covered contract should not be considered a “covered contractor employee.” One final note: although the vaccine mandate has gotten the vast bulk of the public attention, the guidance also requires other COVID-19 mitigation measures at covered contractor workplaces, such as masking and physical distancing. The Task Force says that because an employee’s residence is not a covered contractor workplace, “while in the residence the individual need not comply with the requirements for covered contractor workplaces, including those related to masking and physical distancing, even while working on a covered contract.” Questions about this post? Or need help with a government contracting legal issue? Email us or give us a call at 785-200-8919. Looking for the latest government contracting legal news? Sign up for our free monthly newsletter, and follow us on LinkedIn, Twitter and Facebook. The post Contractor Vaccine Mandate: What About Work-From-Home Employees? first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

Federal contractors often ask: “It is better to team up for government work with a prime-sub arrangement or with a joint venture?” Well, (spoiler alert) the answer is: it depends. But I won’t leave you with just that. This three-part series will provide insight on some of the major differences between these two types of “teams” that offerors should consider when making the decision between a joint venture or prime/subcontractor team in competing for and performing federal contracts. While this series will not provide a comprehensive list of all the differences between these two types of teams, it will cover some of the big ones that seem to come up more frequently in this decision-making process. The focus of this first article will be work share. Limitations on Subcontracting For any set-aside government work, both types of teams are subject to certain limitations on subcontracting, which you can read more about here. The SBA rule requires any prime contractor awarded “a full or partial small business set-aside contract with a value greater than the simplified acquisition threshold” or an 8(a), VOSB/SDVOSB, HUBZone, or WOSB/EDWOSB contract to perform a certain percentage of the contracted work. For example, for services contracts, the prime shall “not pay more than 50% of the amount paid by the government to it to firms that are not similarly situated” (which simply means, to firms that are not also small businesses or carry the same socioeconomic designation that the contract is set aside for). Check out the SBA rule for the limitations applicable to other types of contracts, including construction, specialty trade, supplies, and mixed contracts For the prime/subcontractor relationship, the application of the appropriate subcontracting limitation is typically pretty straightforward (that is, once you know the contract type, total amount paid by the government, and size/socioeconomic status of all subcontractors). Let’s look at a basic example of how the work share division could look for this type of team. Let’s say that Peach Royalty, LLC, is a WOSB prime contractor on a government services contract 100% set aside for WOSBs. Peach Royalty will subcontract to its one small business contractor, Mario Transport, LLC, to perform work under this government contract. The limitation on subcontracting here would require that Peach Royalty receive at least 50% of the total amount paid by the government on this WOSB services contract. Thus, if Peach Royalty wanted to maximize its subcontracting to Mario Transport, the parties could split the work (and thus the amount paid by the government) 50/50 here. Joint Venture Workshare Now, the work share division calculations can get a bit trickier in a joint venture relationship. The “prime” in a joint venture relationship is actually the joint venture entity itself, made up of the venturers. For example, let’s say Peach Royalty, LLC, a WOSB, forms a WOSB joint venture with Mario Transport, LLC, a small business, and calls it Peach-Mario-JV, LLC. Under the applicable limitation on subcontracting for a WOSB set-aside government contract for services, Peach-Mario (again, the joint venture entity itself) will not be able to pay more than 50% of the amount paid by the government to its one small business subcontractor, Bowser Security, LLC. But unlike the prime/subcontractor relationship, the work share requirements for most joint venture relationships do not stop there. In addition to the limitations on subcontracting, most joint ventures seeking set-aside government work (except for those between only small businesses seeking only small business set-asides) are also subject to certain performance of work requirements that require the qualifying venturer to perform a minimum of 40% of the work that the joint venture itself will perform. Taking our same example of the Peach-Mario-JV WOSB joint venture from above, this means that Peach Royalty (the WOSB venturer) will be required to perform at least 40% of the work performed by Peach-Mario JV under the WOSB set-aside services contract. Since Peach-Mario JV is also subcontracting the maximum 50% of the contract work to Bowser Security, Peach Royalty would need to perform at least 20% of the total contract work. If Peach Royalty wanted to maximize its subcontracting and perform only its minimum required amount of work, the breakdown could look like this: Peach Royalty: 20% total contract workMario Transport: 30% total contract workBowser Security: 50% total contract work And if Peach-Mario-JV decided it did not want to subcontract any part of the contract, then Peach Royalty would have to perform at least 40% of the contracted work itself, while Mario Transport could perform up to 60% of the contracted work. So, as you can see, the amount of total contract work the WOSB, Peach Royalty, must perform on its own in each type of team varies. Importantly, in the joint venture relationship, in the prime/subcontractor relationship, and in the scenario where both types of teams would perform the contracted work, Peach Royalty, the WOSB, can always perform more than the minimum required work. But if your company, like Peach Royalty, is hoping to maximize the amount of work that its small business team member(s) can perform under the prime government contract, then utilizing both a joint venture and a prime/subcontractor team would provide that avenue. This route allows you to perform the minimum percentage of work required by SBA’s joint venture rules and to subcontract the maximum amount of work to other parties. Now, if you have just one small business team member, then your decision between joint venturing–versus teaming up as prime/subcontractor–to maximize your team member’s work share should (first and foremost) consider what type of contract you will be performing. For the services contracts we have focused on in this article, joint venturing would be your best avenue, as that would allow the team member to perform up to 60% of the contracted work (instead of the 50% allowed under the limitation on subcontracting rules for services contracts). But if your contract is general construction or specialty trade construction, then the much greater limitations on subcontracting applicable to those contracts (85% and 75% respectively) would provide the avenue to maximize team member participation you are looking for. Don’t forget to keep an eye out for the second and third parts of this series, Picking Your Teams: Joint Ventures Versus Prime/Sub Teams, where we will cover some of the past performance, government relationships, and additional considerations. If you have specific questions about your work share requirements in either type of team or under certain types of government contracts, or if you need help with a government contracting legal issue? Email us or give us a call at 785-200-8919. Looking for the latest government contracting legal news? Sign up here for our free monthly newsletter, and follow us on LinkedIn, Twitter and Facebook. The post Picking Your Teams: Joint Ventures Versus Prime/Subcontractor Teams (Part One, Workshare) first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

Happy Friday, Readers! We hope you have had a great week. The leaves on the trees are starting to turn beautiful colors and the temperatures are beginning to cool here in Lawrence, Kansas. It truly feels like Fall now and the kids are getting excited about Halloween. We hope you are enjoying Fall in your neck of the woods. As usual, there was a lot of activity in the federal government contracting world, this week, such as a continuation of news concerning the Covid safety protocols for federal contractors as well as information regarding government cybersecurity issues. We hope you enjoy this edition of SmallGovCon Week in Review. Have a great weekend! Go deep, not wide: How agency-based marketing can drive results [WashingtonTech]DOJ expects whistleblowers to play ‘significant role’ in False Claims Act cases against contractors [FedScoop]GSA Needs Users to Test SAM.gov Ahead of DUNS Transition [NextGov]AbilityOne program looks to end subminimum wage for federal contract workers with disabilities [FedNewsNet]Connecticut Employment Contractor Pays $600K to Resolve Federal False Claims Act Allegations [DoJ]Class Deviation from the Federal Acquisition Regulation Regarding Implementation of Executive Order 14042, Ensuring Adequate COVID Safety Protocols for Federal Contractors [VA]JAIC thinks AI might solve DoD’s struggles with contract writing systems [FedNewsNet]Tech contractors that conceal cyber breaches could be forced to pay triple damages [FedScoop]GAO finds agencies mostly managed telework network security with a few holes [FedNewsNet]With all of the mandates and threats, should companies really “want” federal contracts? [FedNewsNet]Why the government market for artificial intelligence technology is expanding [FedTimes]COVID has flipped what government and companies expect from supply and demand, now they are preparing [FedNewsNet]Katie Arrington sues DOD and NSA over five-month suspension [FedScoop]Modernizing Federal Cybersecurity [FedScoop] The post SmallGovCon Week in Review: October 11-15, 2021 first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

The sole source thresholds for the major socioeconomic preference programs would increase significantly under the House-passed version of the 2022 National Defense Authorization Act. The House version of the 2022 NDAA includes an amendment that would raise the sole source caps for contracts awarded to qualified 8(a) Program participants, service-disabled veteran-owned small businesses, HUBZone Program participants, and woman-owned small businesses (as well as the economically disadvantaged subcagetory of WOSBs). During floor debate on the 2022 NDAA, the House considered an amendment offers by Representatives Salazar, Newman, and Evans. The amendment, if adopted, would make the following changes to the sole source thresholds for all contracts other than those for manufactured products: CURRENT (FAR)PROPOSED INCREASE8(a): $4.5 million$8 millionSDVOSB: $4 million (non-VA); $5 million (VA)$8 million (VA and non-VA) HUBZone: $4.5 million $8 million WOSB/EDWOSB: 4.5 million $8 million In addition to increasing the sole source thresholds for these contracts, the House-passed 2022 NDAA would raise the sole source thresholds for manufacturing contracts to $10 million across all four socioeconomic categories. If this amendment becomes law, the biggest winner may be “regular” 8(a) companies–that is, 8(a) Program Participants that are not controlled by Alaska Native Corporations or Indian tribes. ANC-owned and tribally-owned 8(a)s are exempt from the typical sole source cap, which can give them a tremendous competitive advantage over other 8(a) firms. Under the House-passed 2022 NDAA, ANC-owned and tribally-owned 8(a)s would continue to enjoy an exemption from the typical sole source cap, but that advantage would be narrowed because other 8(a)s would be able to receive much larger sole source awards than permitted under current law. This is a bipartisan amendment: Representative Salazar is a Republican, while Representatives Newman and Evans are Democrats. The amendment itself passed the full House on a bipartisan 362 – 59 vote. This does not mean that the amendment necessarily will become law, but its bipartisan support may be a positive sign for its prospects as it now heads to the closely-divided Senate. My colleagues and I will keep you posted on this initiative and other important proposals in the 2022 NDAA. Questions about this post? Or need help with a government contracting legal issue? Email us or give us a call at 785-200-8919. Looking for the latest government contracting legal news? Sign up for our free monthly newsletter, and follow us on LinkedIn, Twitter and Facebook. The post House-Passed 2022 NDAA Raises Sole Source Thresholds for 8(a), SDVOSB, HUBZone, and WOSB/EDWOSB Contracts first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

GSA has been hard at work on the Polaris solicitation. The goal: provide federal agencies with information technology services from qualified small businesses. GSA recently released the updated draft versions of the submission instructions and evaluation criteria for Polaris. Like CIO-SP4, which we blogged on in detail, Polaris is going to be of interest to many small business IT contractors. So, here are a few highlights from the draft sections. GSA has indicated that the changes to the solicitation include the following: Inclusion of a service-disabled, veteran-owned small business (SDVOSB) poolReduction of the minimum dollar thresholds for relevant experienceReduction to the number of potential relevant experience project submissionsRevisions to clarify proposal requirements Here are are a few more details about these changes. Small Business Issues The draft RFP now includes an SDVOSB pool. In addition, a “small business concern may participate under multiple proposals (e.g., offeror, proposed subcontractor, joint venture member)” but each Relevant Experience project can be used in only one proposal per pool. An offeror can use the same proposal for multiple pools, for instance the HUBZone pool and small business pool. “Polaris will consist of four MA/IDIQ contracts, referred to as Pools. Multiple awards shall be made in each of the four Pools. The Government intends to make awards in each pool up to the Qualifying Number (QN)”, which are: Small Business Pool: 100HUBZone Pool: 60SDVOSB Pool: 70WOSB Pool: 80 Note that “cost and pricing information shall not be considered at the Master Contract level.” Joint Ventures There are a number of requirements for submitting an offer as a joint venture. Offerors submitting as a joint venture must submit a copy of their joint venture agreement, and this would include all small business joint ventures. If submitting as part of a SBA Mentor-Protégé arrangement, the offeror must include proof of approval of the Mentor-Protégé agreement. In addition, for a “proposal from a mentor-protege arrangement, no more than three primary relevant experience projects may be provided by the mentor.” “Past performance examples may be from the joint venture or an individual member of the joint venture.”“Offerors submitting as a joint venture must provide evidence of any claimed system or certification in the name of the joint venture itself or in the name of a member of the joint venture. Any claimed clearance must be in the name of the joint venture itself or in the name of every member of the joint venture. Scoring will only be awarded for the clearance levels that are in the name of the joint venture itself or have been met/exceeded by all members.” Subcontractors There are a number of small business subcontractor requirements as well. “The Offeror and all proposed subcontractors must represent as small businesses for North American Industry Classification System (NAICS) 541512 within SAM.GOV.” Is this saying that a company cannot use large business subcontractors? Experience and “Past performance examples may be from the Offeror or any proposed subcontractor.” If using subcontractors, an offeror must submit a Subcontractor Letter of Commitment “to support Government validation of any subcontractor experience or past performance an offering prime identifies in response to this solicitation.” Requirements for these letters statements of commitment and other information about the subcontractor. Similarly, an offeror must provide a commitment letters if it wants to “utilize resources from a Parent Company, Affiliate, Division, and/or Subsidiary.” Experience and Past Performance Polaris has some specific instructions for experience and past performance. Here are a few highlights, but be sure to read up on the particulars: “Offeror must submit a MINIMUM OF THREE (3) and may submit a MAXIMUM OF FIVE (5) distinct Primary Relevant Experience Projects.”The projects must relate to certain NAICS codes and “may not be claimed more than once in the same pool.”Offerors must provide verification of projects by submitting backup documentation such as FPDS-NG Reports or other forms for non-federal projects or subcontractor experience.“A past performance assessment must be submitted for each relevant experience project submitted” based on CPARS or a Past Performance Rating Form. Feedback GSA encourages feedback, so please let them know that questions and concerns you have with the draft Polaris solicitation. GSA requests feedback by 4:00 p.m. Eastern Time on October 15, 2021, so don’t wait too long. GSA has included a specific template for providing feedback, asking offerors to comment on the following issues: 1) anything that seems unclear or requires editing, 2) recommended changes and supportive rationale, and 3) support for existing solicitation elements. Polaris is a big opportunity for small businesses. Take care to review the draft solicitation now and submit feedback if you would like clarity on any of these issues. Questions about this post? Or need help with a government contracting legal issue? Email us or give us a call at 785-200-8919. Looking for the latest government contracting legal news? Sign up for our free monthly newsletter, and follow us on LinkedIn, Twitter and Facebook. The post Polaris GWAC: GSA Issues Draft RFP Sections first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

This matter again involves NASA and a particularly interesting government procurement, this time concerning NAICS appeals. NAICS codes, or the North American Industry Classification System codes, are how both businesses are classified by their industry and procurements are classified by what they’re for. If the procurement uses an inappropriate NAICS code, a protestor can appeal this code determination. It is important to note that some NAICS codes have “exceptions” which can affect their corresponding size standards. For example, NAICS code 541330, “Engineering,” has a size standard of $16.5 million, but, if the engineering services are for military equipment and weapons, an exception applies that balloons the size standard to $35.5 million. But, just like regular NAICS codes, these exceptions have to make sense in light of the kind of solicitation in question, leading us to this matter. In Applewood Engineering, SBA No. NAICS-6119, in late July 2021, NASA issued a request for proposals seeking Support for Atmospheric Modeling and Data Assimilation II (“SAMDA II”). It set aside this procurement for small businesses, and assigned it NAICS code 541715, “Research and Development in the Physical, Engineering, and Life Sciences (except Nanotechnology and Biotechnology.” This code normally has a size standard of 1,000 employees. However, the agency stated that the procurement fit within the exception for “Guided Missiles and Space Vehicles, Their Propulsion Units and Propulsion Parts.” This exception increased the size standard from 1,000 employees to 1,250 employees. The solicitation itself was to specifically support the research and development activities of the Earth Sciences Division-Atmospheres (“Code 610AT”) and the Global Modeling and Assimilation Office (“GMAO”). Code 610AT conducts comprehensive observation and modeling of the Earth’s atmosphere, such as the science of clouds, precipitation, atmospheric chemistry, and the like. In other words, Code 610AT involves a wide range of research on the atmosphere. GMAO, for its part, does similar work regarding the atmosphere, but further develops and operates models and data systems for the Earth’s ocean and land, monitoring ocean biogeochemistry. The solicitation required much of the same sort of work from prospective offerors. It did, however, outline that it was to assist in GMAO’s Goddard Earth Observing Systems (“GEOS”), which uses space-born platforms among others to collect data. The Solicitation also noted that contractors were responsible for providing “support for project scientists and principal investigators in formulating future satellite missions, overseeing the implementation of it, managing its operation, and formulating other plans within the scope of its mission.” Applewood Engineering (“Applewood”) filed a NAICS appeal with SBA OHA on August 6, 2021. While it agreed that the correct NAICS code was 541715, Applewood disagreed with the application of the exception for Guided Missiles and Space Vehicles, stating that the procurement’s principal purpose was the development of climate modules and forecast systems, not research and development into space vehicles and guided missiles. The fact the data would come from scientific instruments on satellite platforms does not mean space vehicle research is the primary purpose of the solicitation. Therefore, the exception is inapplicable. For its part, NASA responded that the exception was appropriate as the solicitation demands contractors support “the full range of research and development activities” of 610AT and GMAO. The design, development, testing, and deployment of satellite instruments is the key aspect of the solicitation, and those instruments are the main purpose of such space vehicles. Furthermore, the contractor would design and develop orbital technologies, support the near-real time transmission of science data to and from NASA satellites, develop satellite data assimilation, develop tools for new satellite missions, and provide development and maintenance “to develop, operate, and maintain the GMAO production systems so the systems can operate in near-real time to support 20 ongoing NASA satellite missions…” NASA also pointed to the NAICS manual, noting it states “that research and development involving space vehicles includes “evaluations and simulation, and other services requiring thorough knowledge of complete…spacecraft.” As design of the satellite instruments would require knowledge of spaceflight, NASA felt the exception was proper. Additionally, NASA argued Applewood’s principal purpose argument applies only to the main NAICS code choices, not size standards or any exceptions that are used, and so the agency need not conduct a specific accounting of which size standard in the NAICS code is appropriate. OHA reviewed the NAICS code and noted it describes research and development on areas concerning the physical, engineering, and life sciences. NAICS Manual at 476. As for the exception, the size standards table stated that: “’Research and Development’ for guided missiles and space vehicles includes evaluations and simulation, and other services requiring thorough knowledge of complete missiles and spacecraft.” 13 C.F.R. § 121.201, n.11(d). Turning to the actual question, OHA noted that the burden rested on Applewood to prove the designation was erroneous, and Applewood met those burdens. While the NAICS code itself was correct, the exception was inapplicable. “OHA has long held that procurements classified under a research and development NAICS code ‘must be for research and development, and thus must look to creating new processes or products.’” (quoting Dayton T. Brown, Inc., SBA No. NAICS-5164 (2010)). OHA recognized that “the categorization of procurements as research and development is therefore not as strict as it is in other disciplines and in the complex world of missiles and spacecraft, research and development may be viewed more expansively than in traditional disciplines.” (citing Advanced Concept Enterprises, Inc., SBA No. NAICS-5968 (2018)). Further, evaluations and simulations involving missiles and similar devices may fall under the exception. However, OHA explained: “Unlike Advanced, where the procurement involved the research and development of ballistic missile defense system, falling squarely within Footnote 11(d), here, SAMDA II’s principal services do not involve evaluations and simulations involving missiles and similar devices, as well as a thorough knowledge of these technologies, in the context of Guided Missiles and Space Vehicles. While the CO identified specific SOW’s requirements involving simulations, spacecraft, satellite instruments, and spaceflight, these involvements alone do not best describe the principal purpose of the procurement, which the CO conceded to be the full range of research and development activities of NASA GSFC’s Earth Sciences Division-Atmospheres and Global Modeling and Assimilation Office.” In summary, the mere fact the solicitation involved space vehicles and satellites does not mean it called for research into those very vehicles and satellites. It calls for research into the Earth’s climate, atmosphere, and oceans. Although not outright stating such, OHA clearly rejected NASA’s argument that “principal purpose” only applies to the NAICS code designation, not size standard exceptions that may fall under those codes. While again notable for being a particularly fascinating subject for a solicitation, there is an important lesson in terms of government contracts law here: OHA will consider “principal purpose” objections to size standard exceptions even if the protestor and agency agree on the actual NAICS code designation. Need help with a government contracting legal matter? Email us or give us a call at 785-200-8919. Looking for the latest government contracting legal news? Sign up here for our free monthly newsletter, and follow us on LinkedIn, Twitter and Facebook. The post NAICS, The Final Frontier: OHA Rejects NAICS Size Standard Exception as Inapplicable to NASA Solicitation first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

Happy Friday and we hope you had a very productive week. There was a lot of discussion this week concerning the federal vaccine mandate as well as an announcement from the Department of of Justice concerning the cyber fraud. You can read more about those topics and other news in federal government contracting in the articles below. Have a great weekend! DOJ Launches Initiative to Address False Cybersecurity Fraud Claims by Contractors [GovConWire]Pentagon security agency looks to expand ‘continuous vetting’ beyond DoD, add more data sources [FedNewsNet]US Department of Labor, AECOM Reach Conciliation Agreement to Resolve Alleged Hiring Discrimination by Federal Contractor in Virginia Beach [DoL]Crane Company Agrees to Pay More Than $4.5 Million to Resolve False Claims Act Lawsuit for Non-Compliance with Military Specifications [DoJ]Federal Acquisition Regulation: Certification of Women-Owned Small Businesses [FedReg]DoD requires civilian employees to be vaccinated by Nov. 22 [FedNewsNet]What employees can expect if they’re seeking a medical or religious exception to the federal vaccine mandate [FedNewsNet] Lagging hardware could hinder US quantum ambitions [FedScoop]DOD’s AI ethics lead Alka Patel departs [FedScoop]GAO denies Tata bid protest over CIO-SP4 procurement [FedScoop]A Debt Default Could Mean Furloughs or IOUs for Federal Employees [GovExec]Made in America Office Launches Website [MeriTalk]Lawmakers directing ire at VA over another struggling IT project [FedNewsnet]DOJ to Hit Government Contractors with ‘Very Hefty Fines’ If They Fail to Disclose Data Breaches [NextGov]What employees can expect if they’re seeking a medical or religious exception to the federal vaccine mandate [FedNewsNet]Pentagon finishes research for JEDI replacement as Supreme Court dismisses final legal challenge [FedNewsNet]DoJ’s new Civil Cyber-Fraud Initiative to hold contractors accountable for cybersecurity [FedNewsNet] The post SmallGovCon Week in Review: October 4-8, 2021 first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

Local construction contractors would receive new contracting preferences for Department of Defense contracts under the version of the 2022 National Defense Authorization Act passed by the House of Representatives on September 23. During floor debate on the 2022 NDAA, the House agreed to an amendment proposed by representative Andy Kim. The amendment requires, to the extent practicable, that DOD give a preference to construction contractors who hire local employees. The amendment also requires all contractors and subcontractors for military construction projects to be licensed in the state where the work is to be performed. Representative Kim’s amendment requires that “to the extent practicable, DoD shall give preference for military construction contracts to firms that certify that at least 51 percent of employees hired to perform the contract shall reside in the same State or within a 60-mile radius.” The amendment does not establish when it might be impractical to impose such a requirement, nor does it provide additional details on implementation of the requirement, such as what documentation DOD would require to verify compliance. If the bill becomes law as-is, specifics like these will be left up to the DOD as part of a DFARS revision. The Kim amendment also “requires all contractors and subcontractors for military construction (MilCon) projects be licensed in the state where the work is to be performed.” Unlike the 51-percent requirement, the amendment does not use qualifying language like “to the extent practicable” when it comes to local licensure, indicating that this would be an across-the-board requirement. Representative Kim’s amendment was adopted on a voice vote without objection, suggesting that the new requirements enjoy bipartisan support. However, the amendment is not yet law: the 2022 NDAA now moves to the Senate, and the fate of the Kim amendment likely rests with a House-Senate conference committee. These new requirements would represent significant changes to the DOD construction contracting landscape–presumably benefitting local companies at the expense of out-of-state rivals. My colleagues and I will keep you posted as the debate over the 2022 NDAA continues. Need help with a government contracting legal matter? Email us or give us a call at 785-200-8919. Looking for the latest government contracting legal news? Sign up here for our free monthly newsletter, and follow us on LinkedIn, Twitter and Facebook. The post DOD Construction: House-Passed 2022 NDAA Establishes Preferences for Local Contractors first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

The organizational documents for a business seeking certification under a SBA socio-economic program can play an important part in a company demonstrating its eligibility under the SBA’s requirement for control by the company’s owners, such as a service-disabled veteran or disadvantaged owner. Unlike some of the SBA’s requirements for eligibility, the manner in which a program applicant or participant might run afoul of this requirement are not always obvious. Typical provisions in the organizational documents that, under “non-SBA” circumstances may seem innocuous, may unintentionally undermine the disadvantaged owner’s requirement of showing of unconditional ownership and control. In a recent OHA decision regarding Service-Disabled Veteran-Owned Small Business (SDVOSB) eligibility, (CVE Protest of: Randy Kinder Excavating, Inc. d/b/a RKE Contractors, Protester Re: E&L Construction Group, LLC), an unsuccessful bidder filed a protest of a set-aside contract award, alleging that the company was not unconditionally controlled by the disadvantaged owner. After considering a variety of arguments, OHA issued a decision based on a handful of provisions in the respondent’s operating agreement. The salient facts of the case are as follows. The VA’s Center for Verification and Evaluation (CVE) initially verified E & L Construction Group, LLC (E&L) as a Service-Disabled Veteran-Owned Small Business (SDVOSB). The CVE found E&L in compliance with applicable regulations and included the company in the Vendor Information Pages database of eligible firms, effective for three years. On March 10, 2021, the VA issued a solicitation for a construction project at Fort Sill National Cemetery in Elgin, Oklahoma (Solicitation). The Contracting Officer (CO) set aside the procurement entirely for SDVOSBs. E&L was the lowest bidder and apparent awardee. On April 29, 2021, Randy Kinder Excavating, Inc. d/b/a RKE Contractors (RKE), an unsuccessful bidder, filed a protest challenging E&L’s SDVOSB status. In the protest, RKE alleged that E&L’s Service-Disabled Veteran and majority owner, Christopher Esponge, did not fully control E&L and the company was substantially dependent on a non-veteran, and could not exercise independent business judgment without great economic risk, and was therefore ineligible for the contract award. Specifically, RKE alleged that E&L was co-located with another company, Patriot Construction and Industrial, LLC (Patriot); that E & L rented space to a division of Patriot; and that E&L and Patriot were in the same line of business and presumably share resources and office space. Patriot’s owner and Chief Executive Officer Ben LeBlanc was also the 49% owner of E&L and Mr. Leblanc provided significant financial assistance to E&L. RKE argued that because of these business relationship’s, E&L was dependent upon Mr. LeBlanc for survival, which RKE believed indicated Mr. Esponge’s lack of unconditional control of E&L. E&L responded to RKE’s protest and asserted that that the company was not affiliated or economically dependent on Patriot or Mr. LeBlanc and sought to make it clear that Mr. Esponge was the founder, manager, and majority owner of E&L. RKE submitted a supplemental protest and noted specific examples in operating agreements that support its contention that E&L did not satisfy the requirement of having unconditional ownership. The relevant issue RKE raised were in regard to provisions in E&L’s 2020 amendment to the operating agreement (2020 Operating Agreement). In particular, E&L identified several sections in the 2020 Operating Agreement that impermissibly restricted Mr. Esponge’s ability to dispose of his ownership. These sections included 1) a provision requiring Mr. Esponge to provide a right of first refusal if he decided to sell his ownership interest, 2) a section that precluded Mr. Esponge from retiring or withdrawing from E&L without written approval from the other members, 3) a section requiring Mr. Esponge to dispose of his ownership interest in certain situations, such as when filing a petition for voluntary bankruptcy, and 4) other impermissible limitations on Mr. Esponge’s ownership reflected in a section that called for a “involuntary transfer events” or “forced sale” events. RKE also argued that additional provision in the 2020 Operating Agreement limited Mr. Esponge’s ability to control the company by giving Mr. LeBlanc impermissible negative control of E&L. These provisions included a section requiring a unanimous vote of the members to amend the operating agreement, and another other provision requiring a supermajority vote to elect a successor manager. E&L disputed the specific allegations in the RKE’s supplemental response and stated that “Mr. Esponge has full control and full ownership rights and direct ownership of his 51% share of E&L pursuant to the 2020 Operating Agreement.” E&L’s supplemental response also referenced OHA precedent upon which it relied to justify granting Mr. LeBlanc apparent negative control that concluded that “situations where a minority owner may have the power to block certain extraordinary actions, do not endow the minority owner with negative control if those provisions are crafted to protect the investment of the minority shareholders and not to impede the majority’s ability to control the business.” E&L reasserted its position that Mr. Esponge was the sole manager and the principal executive officer of the company, in charge of day-to-day operations and Mr. LeBlanc, had no ability to perform duties affecting the overall operations of E&L and his say in any activities that required his vote were allowed under the regulations. OHA sustained RKE’s protest, concluding that E&L’s business conditions did not support a finding that the company was unconditionally owned and controlled by one or more Service-Disabled Veterans, and therefore was not an eligible SDVOSB. In support of its opinion OHA explained that: Unconditional ownership means ownership that is not subject to conditions precedent, conditions subsequent, executory agreements, voting trusts, restrictions on or assignments of voting rights, or other arrangements causing or potentially causing ownership benefits to go to another (other than after death or incapacity). SBA regulations require that SDVO’s have unlimited, unrestricted ownership and must have the ability to dispose of their ownership in any way the SDVO owner chooses with few exceptions. In this case, OHA found that E&L’s 2020 Operating Agreement placed significant limitations on Mr. Esponge’s ownership of the company. OHA referenced the sections in the 2020 Agreement that limited Mr. Esponge’s ability to sell his ownership interest by requiring a right of first refusal to E&L; the provision restricting his ability to retire or withdraw from the company, without written approval from other members; certain “involuntary transfer events” in the agreement which required Mr. Esponge’s to transfer his interest to E&L . Accordingly, OHA found that E&L is not at least 51% unconditionally owned by a Service-Disabled Veteran. Generally, the basic purpose of the operating agreement is to give its members protection from personal liability and to structure its members’ financial and working relationship. Limited liability companies are formed under state law and the rules regarding specific requirements of an operating agreement are controlled by state law. Adequately demonstrating the SBA’s requirements for unconditional ownership often requires special attention in drafting or modifying the standard terms found in operating agreements. Also, even operating agreements drafted by experienced practitioners may run afoul of SBA’s requirements. Provisions that may be beneficial for tax, estate planning or for protecting minority ownership interests may cause issues in gaining or retaining eligibility for SBA socio-economic programs. This case is an example as to why it’s often best that applicants seeking certification through an SBA socioeconomic program be formed as simply as possible with their organizational documents reflecting the same. The owners of such applicants might also consider consulting an attorney familiar with the specific SBA requirements for the particular program to assist in preparing organizational documents for their business. Questions about this post? Or need help with a government contracting legal issue? Email us or give us a call at 785-200-8919. Looking for the latest government contracting legal news? Sign up for our free monthly newsletter, and follow us on LinkedIn, Twitter and Facebook. The post OHA: Provisions in Operating Agreements for SBA Set-Aside Program Participants can Sink Eligibility first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

It’s already October! Can you believe it? The leaves on our trees are starting to turn beautiful shades of yellow, red and orange and the temperatures are finally starting to cool down after a very hot and humid summer. A lot has been happening this week in federal government contracting as contractors braced for a government shut down. Here are a few articles that we think are noteworthy. Have a great weekend and enjoy that fall weather! Contracting Community Braces for Possible Government Shutdown [GovExec]Government Contractor Agrees to Settle Anti-Kickback Act Allegations [DoJ]Lack of a government shutdown is not the same as a timely start to the fiscal year [FedNewsNet]GSA Online Marketplaces: Plans to Measure Progress and Monitor Data Protection Efforts Need Further Development [GAO]Senators release cyber incident reporting bill, preview FISMA reforms [FedNewsNet]As federal contractors prepare for possible shutdown, impacts from the last one still loom large [FedNewsNet]Highmark Health Subsidiary Agrees to Pay $410K to Resolve Alleged Compensation Discrimination Found in Federal Compliance Evaluation [DoL]US Department of Labor Files Complaint Against ABM Janitorial Services Alleging Systematic Racial Discrimination at Maryland, Virginia Offices [DoL]Federal Acquisition Regulation: Accelerated Payments Applicable to Contracts With Certain Small Business Concerns [FedReg]Virginia companies settle false claims, kickback allegations [AP]U.S. House approves bill to avert government shutdown [Rueters] The post SmallGovCon Week in Review: September 27-October 1, 2021 first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

The version of the 2022 National Defense Authorization Act passed by the House of Representatives on September 23 would increase the government’s small business prime contracting goal from 23% to 25%. The House-passed version of the 2022 NDAA would also increase the prime contracting goals for service-disabled veteran-owned small businesses, HUBZone small busnesses, small disadvantaged businesses, and women-owned small businssses. During floor debate over the NDAA, the House adopted an amendment offered by Representative Kweisi Mfume of Maryland. Representative Mfume’s amendment calls for the following increases in small business goals: CATEGORYCURRENT GOAL NEW GOAL Small Business23%25%SDB (including 8(a))10%15%HUBZone 3%4%SDVOSB3%4%WOSB5%7% If the House bill became law, the new small business, HUBZone and SDVOSB goals appear to kick in immediately. The new SDB goal is phased in over four years, ultimately reaching 15% in Fiscal Year 2025. The new WOSB goal phases in over three years, reaching 7 percent in FY 2023. Unlike many other amendments, which were adopted overwhelmingly, the vote on the Mfume amendment was nail-bitingly close: it passed 219 – 207. The final NDAA, though, passed with bipartisan support on a 316 – 113 vote. It is important to note that even though the House has adopted these increased goals, they are not yet law. The debate over the 2022 NDAA now moves to the Senate, and the question of whether to increase the goals ultimately could be answered by a House-Senate conference committee. My colleagues and I here at Koprince McCall Pottroff LLC will keep you updated on the progress of this legislation. Need help with a government contracting legal matter? Email us or give us a call at 785-200-8919. Looking for the latest government contracting legal news? Sign up here for our free monthly newsletter, and follow us on LinkedIn, Twitter and Facebook. The post House-Passed 2022 NDAA Raises Small Business Goal to 25% and Increases SDVOSB, HUBZone, SDB and WOSB Goals first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

Newcomers to the federal marketplace are often surprised when they learn that eligibility for the VA’s SDVOSB and VOSB preference programs are based on the status of the contractor’s owners–and have nothing to do with how many veterans the contractor employs. While the SDVOSB/VOSB eligibility rules aren’t changing, VA Contracting Officers now have authority to give preference to offeors that employ veterans on a full-time basis. A new VA Acquisition Policy Flash provides guidance to VA Contracting Officers on implementing 38 U.S.C. 8129, a statute that took effect in January 2021 and provided Congressional authority for offering such a preference. The underlying statute, 38 USC 8129, is short and sweet. Regarding the employment preference, it says: (a) Preference – (1) In awarding a contract for the procurement of goods or services, the [VA] may give a preference to offerors that employ veterans on a full-time basis. (2) The [VA] shall determine such preference based on the percentage of the full-time employees of the offeror who are veterans. The statute also include a section (b), which provides that an offeror who “willfully and intentionally” misrepresents the veteran status of its employees may be debarred for a minimum of five years. That’s a harsh penalty, so offerors will need to take care to be scrupulously honest when it comes to reporting their employment of veterans. Turning back to the preference itself, the VA released Acquisition Policy Flash 21-28 on September 9. The Policy Flash provides additional detail to allow VA Contracting Officers to effectively implement the preference. The Policy Flash makes clear that the preference is optional, not mandatory. The Policy Flash states that “[a]s the Program Office develops their evaluation criteria, they should consult with their contracting officer to determine if inclusion of this preference is appropriate for their acquisition.” The Policy Flash indiciates that the evaluation preference may be used in both FAR Part 15 and FAR Part 13 acquisitions. If the VA elects to use the preference, the Policy Flash provides sample language that can be included in solicitations to implement the preference. The sample language requires offerors to identify their total number of employees at proposal submission and total number of full-time veteran employees as of the same date. The VA may give higher ratings to companies that provide “information that allows the VA to verify the assertion independently,” such as “[p]ast or current compliance notifications from [the] Department of Labor for the offeror’s submitted [VETS-4212] compliance report.” The sample language would advise offerors that the VA reserves the right to award a higher score or rating to offerors who employ at least a certain minimum percentage of veterans. The Policy Flash does not provide a one-size-fits-all minimum percentage, however; this will be up to individual Program Offices and Contracting Officers to determine on a case-by-case basis. The sample language also addresses ongoing employment of veterans. For instance, one of the samples would include this language in contracts: The offeror, if awarded the contract, must make a good faith effort to maintain its Veterans employment numbers as provided at time of proposal submission and incorporated into the basic contract. The awarded offeror will be required in the contract to submit a periodic report to report compliance. The contractor’s efforts towards, and results in, maintaining or exceeding its Veterans employment numbers may be considered by the CO in his/her evaluation of the contractor’s past performance on future contracts. The Policy Flash advises Contracting Officers to add additional terms to the contract regarding how the contractor can show that it is compliant, such as what information to submit to the VA and how often to submit it. But the Policy Flash does not dictate the specifics; again, this is left to individual Contracting Officers to determine. The VA exists to serve veterans, which is why the VA alone has a statutory requirement to give top preference to SDVOSBs and VOSBs in its contracting. But beyond these preference programs, it makes sense that the VA should also have the right to consider how many veterans a contractor employs. My colleagues and I will be curious to see how frequently this new authority is used in upcoming VA acquistions and what individual VA Contracting Officers will decide regarding discretionary calls like the minimum percentage of veteran employees required to earn a higher score. As we see how this new authority is applied in practice, we will keep the contracting community updated. Need help with a government contracting legal matter? Email us or give us a call at 785-200-8919. Looking for the latest government contracting legal news? Sign up here for our free monthly newsletter, and follow us on LinkedIn, Twitter and Facebook. The post VA Contracting Officers May Now Use Veteran Employment Preferences in Competitive Acquisitions first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

Happy Monday, Readers. We hope you had a wonderful weekend and are enjoying the start of fall. Here are some newsworthy articles from the federal government contracting world. Enjoy and have a great week! Biden administration gives federal contractors until Dec. 8 to comply with vaccine mandate [FedNewsNet]DoD’s drug supply chain is shaky, DoD IG report adds to growing evidence of that [FedNewsNet]Labor Department Seeks Advice on Increasing Equity in Contracting, Other Programs [Govexec]DoD takes steps to protect contractor identities in Afghanistan [FedNewsNet]US troops may have left Afghanistan, but federal contracting goes on [FedNewsNet]Federal Acquisition Regulation: Amendments to the FAR Buy American Act Requirements; Extension of Time for Comments [FedReg]Regulatory Reform Initiative: Streamlining Surety Bond Guarantee Program [FedReg]Pentagon looks to cement career paths for software acquisition experts [FedNewsNet]Government Contracting Companies Agree to Settle Civil False Claims Act and Anti-Kickback Act Allegations [DoJ]OMB tells agencies to start planning for possible government shutdown [FedNewsNet]Audit of Certain Tax Division Contracts Awarded for Expert Witness Services [D0J]HUD rolls out AI risk management platform to fight fraud in grant spending [FedNewsNet] The post SmallGovCon Week in Review: September 20-24, 2021 first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

The SBA’s HUBZone program can be a confusing program to understand and comply with. Keeping on top of the regulations requires keeping up on legislative and program changes on a revolving basis. The SBA has recently frozen the HUBZone maps and changed principal office rules. In a corresponding move, the SBA has updated the Frequently Asked Questions (FAQ) section for the HUBZone program to clarify some details on HUBZone Program rules. Here are some key points you should know about this latest FAQ update. Previously, we blogged about SBA freezing the HUBZone maps through 2022, and into 2023. We also discussed the SBA shedding light on the principal office long-term investment rule. Now, the SBA has updated its FAQ’s in line with the recent changes. These latest updates . 1. When will HUBZone maps be frozen until? The SBA realized that the 2020 census data would not be available in time to update the HUBZone maps as originally planned on January 1, 2022. After making this realization, the SBA sought to freeze the current maps to allow time for the new maps to be generated. The new HUBZone map update will be realized on June 30, 2023. The SBA may grandfather in firms that demonstrate they made investments in Qualified Disaster Areas between December 26, 2019 and June 30, 2021 in reliance on prior guidance from SBA. SBA will review requests for grandfathering on a case-by-case basis. This only applies to entities residing in a both a qualifying and non-qualifying area at the time of the certification’s anniversary date. 2. Long term investment rule changes. SBA’s goal is to incentivize long-term investments in HUBZones, including purchasing buildings and executing leases of at least 10 years. The rub for current participants is that this provision only applies AFTER December 26, 2019. That means for firms which certified prior to December 26, 2019 cannot take advantage of this provision. The provision only allows for this long-term investment to last for up to 10 years, it does not extend forever. The date that matters is the date of recertification, not the date of the lease. The key here, is if the lease is executed January 1, but recertification happens in July, the July date would start the 10-year clock. Also, the entity cannot share the office with another entity to qualify for this provision. Additionally, a firm which resides in a non-qualifying area (Redesignated Area or a Qualified Disaster Area) does not qualify for this provision. However, if the principal office is in both a qualifying, and non-qualifying area simultaneously, this provision will apply. This language can be confusing, so to simplify this, so long as the principal office can show it resides in a qualifying area, the firm can take advantage of this provision. Also, “the SBA will grandfather in firms that recertified between December 26, 2019 and June 30, 2021, and had principal offices in Redesignated Areas or Qualified Disaster Areas and applied the legacy provision in order to recertify.” Should the principal office be located in one of the non-qualifying locations, the SBA has granted a grace period until December 31, 2021 to move the principal office. 3. Legacy employee residency requirement changes. The final rule allowed for so-called legacy employees to count toward the 35% HUBZone employee residency requirement. A legacy employee is one that does not currently live in a designated HUBZone area but resided in a HUBZone for at least 180 days prior to the certification or anniversary date, occurring after December 26, 2019. The legacy employee must have continued to live in a HUBZone for at least 180 days immediately after certification or anniversary date and must have remained an employee since that time. This rule only applies to employees who resided in a Qualified Census Tract, Qualified Non-Metropolitan County, Indian Reservation, Qualified Base Closure Area, or Governor- Designated Covered Area. This does not apply to employees who resided in a Redesignated Area or Qualified Disaster Area during the 360 day time period (180 days before and 180 days after certification or recertification). However, if the employee resided in both a qualifying and nonqualifying area, the provision would apply. 4. What if my company is doing things by telework due to COVID-19? The SBA, for now, considers employees placed on mandatory telework to be in compliance with the principal office employee’s requirement. The rule extends to employees hired after the start of the pandemic. In order for these new employees to count, the firm must submit a written, signed statement to the SBA stating that the employee would have worked at the principal office prior to the pandemic. Should an application be in process between March 13, 2020 and September 30, 2021, the employee rule applies. This flexibility only extends until the end of September 2021, whether this will be extended is yet to be seen. 5. Changes to the application and review process. Validating applications has been reduced from 10 to 2 business days. Requirement to upload documents was reduced from 10 to 3 business days. The non-response closure date was reduced to 5 days, which results in the application being declined. In order to avoid this fate, be sure to respond to all SBA inquiries within 5 days of receipt, unless the document specifies a different timefram. Plus, the SBA is moving toward utilizing BOX for document uploads. We have utilized BOX, and much like Dropbox or other types of uploads, it does create a relatively easy format for uploading documents. Conclusion The HUBZone program is constantly on shifting sands due to changes in maps, office locations, and employees changing homes. The hope is that, with the long-term investment rule and legacy employee rule, some stability will come to the HUBZone program. This program, by the very nature of it, requires constant upkeep and maintenance. We will keep an eye out for new guidance as 2021 draws to a close. Need help with a government contracting legal matter? Email us or give us a call at 785-200-8919. Looking for the latest government contracting legal news? Sign up here for our free monthly newsletter, and follow us on LinkedIn, Twitter and Facebook. The post HUBZone FAQ Update: Maps and Other Changes first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

For years, it had been difficult for joint ventures to get Facility Security Clearances to go after DoD contracts where a facility clearance was required. The DoD and many contracting officers had long required that the joint venture entity itself, rather than each individual joint venture member, have the FCL. SBA thought it had fixed this problem when it updated its joint venture rules in November 2020 to eliminate the need for the joint venture to have an FCL, as we wrote at that time. But DoD contracting officers had been ignoring this rule, setting up a showdown at GAO to decide if the SBA’s rule did actually apply to the DoD. The decision, InfoPoint LLC, B-419856 (August 27, 2021), involved an Air Force procurement for command and control, intelligence, surveillance, and reconnaissance (C2ISR) support services. The Solicitation stated: “Offerors shall possess or acquire a facility clearance equal to the requirement on the DD254 (Attachment 2) without additional authorization (i.e. National Interest Determination (NID)) by the proposal due date. If an Offeror does not have the required clearance at the time of proposal submission, the proposal will not be evaluated and is not eligible for award.” Plus, the Air Force noted in response to a question that “[t]he individual partners to the [joint venture] having the [facility clearance] is not sufficient.” InfoPoint, a joint venture, protested that the solicitation requirement that a small business joint venture offeror hold a facility clearance was inconsistent with SBA’s recent rule change. SBA joined the argument and noted that the solicitation term was inconsistent with the National Defense Authorization Act (NDAA) for fiscal year 2020, which specifically prohibits requiring a joint venture to have an FCL separate from its members. Here is a little background on SBA’s rule change regarding joint venture FCL requirements. In the commentary to the final rule, SBA stated that: SBA understands that some procuring agencies will not award a contract requiring a facility security clearance to a joint venture if the joint venture itself does not have such clearance, even if both partners to the joint venture individually have such clearance. SBA does not believe that such a restriction is appropriate. The SBA rule allows a joint venture to rely on the security clearances of its members. The rule states: 4) Facility security clearances. A joint venture may be awarded a contract requiring a facility security clearance where either the joint venture itself or the individual partner(s) to the joint venture that will perform the necessary security work has (have) a facility security clearance. (i) Where a facility security clearance is required to perform primary and vital requirements of a contract, the lead small business partner to the joint venture must possess the required facility security clearance. (ii) Where the security portion of the contract requiring a facility security clearance is ancillary to the principal purpose of the procurement, the partner to the joint venture that will perform that work must possess the required facility security clearance. The 2020 NDAA provision in section 1629 stated: TERMINATION OF REQUIREMENT FOR DEPARTMENT OF DEFENSE FACILITY ACCESS CLEARANCES FOR JOINT VENTURES COMPOSED OF PREVIOUSLY-CLEARED ENTITIES. A clearance for access to a Department of Defense installation or facility may not be required for a joint venture if that joint venture is composed entirely of entities that are currently cleared for access to such installation or facility. GAO held that “section 1629 of the NDAA specifically states, and the plain meaning of the statute leads us to conclude, that it unambiguously prohibits DOD from requiring that a joint venture hold a facility clearance if the members of the joint venture hold the required facility clearances.” GAO also confirmed that: The SBA regulation at section 121.103 is consistent with the 2020 NDAA, where the regulation states that joint ventures may be awarded contracts requiring facility clearances where either the joint venture itself or the individual partners to the joint venture hold a facility clearance. The SBA regulation therefore provides how procuring agencies should evaluate whether small business joint ventures are eligible for the award of contracts that require facility security clearances. Under the regulations, the relevant inquiry is whether the joint venture itself, or the individual partners that make up the joint venture, hold a facility security clearance The Air Force argued, among other things, that GAO “should give deference to the statutory delegation of authority to DOD concerning security clearances” and that “the plain language of the 2020 NDAA” would conflict with existing regulations and policies. GAO rejected the Air Force’s arguments, noting that “the plain language of the 2020 NDAA states that DOD ‘may not’ require that a joint venture hold a facility clearance where the members of the joint venture hold the required facility clearances.” Similarly, SBA’s rules allowing the joint venture to not hold an FCL is SBA “is consistent with the 2020 NDAA with regard to the issue raised by the protester–whether DOD may require a joint venture to hold a facility clearance even where the members of the joint venture individually hold the required facility clearances.” Thus, SBA’s rules constitute an additional reason to grant the protest. Bottom line, GAO affirmed that a joint venture does not have to hold the facility clearance where its members do hold the required facility clearance. This is a strong affirmation of SBA’s rules and Congressional intent regarding joint ventures. It should make it easier for small businesses joint ventures to go after awards requiring facility clearances, which is a good result for small businesses. Need help with a government contracting legal matter? Email us or give us a call at 785-200-8919. Looking for the latest government contracting legal news? Sign up here for our free monthly newsletter, and follow us on LinkedIn, Twitter and Facebook. The post GAO Affirms SBA Rule: Only Joint Venture Members, not the JV, Need Facility Clearance first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

The nonmanufacturer rule is one that is commonly misunderstood in the federal government contracting realm. But it is also one we encounter quite often in our role assisting federal contractors. On September 21, please join my colleague, Steven Koprince, and me as we dive deep into the nonmanufacturer role, tackling the ins and the outs of the rule and answering some of your questions surrounding it. The webinar will be hosted by our friends at the Iowa State University CIRAS PTAC, and it is easy to register: just click here. The post Event: The Ins & Outs of the Nonmanufacturer Rule first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

Happy Friday, Readers. It’s sad that summer is coming to an end but the good news is that fall is upon us which means it is time for cool weather, falling leaves, and football! It seems everyone is filled with optimism at the start of the season. Here’s hoping your favorite team is victorious and in between games here’s a few interesting articles on what’s going on in federal government contracting this week. Have a great weekend! Go Team! Class Deviation—Limitations on Subcontracting for Small Business [DoD]2021 Growth Accelerator Fund Competition and SBIR Catalyst Competition Result [SBIR]Defense Wants to Know More About Potential Barriers for Small Businesses Contracting [NextGov]Where does waste, fraud and abuse in the military stand after Afghanistan? [FedNewsNet]Minimum Wage for Federal Contracts Covered by Executive Order 13658, Notice of Rate Change in Effect as of January 1, 2022 [FedReg]Five Ways 9/11 Changed the Defense Industry [GovExec]Questions Linger on Vaccine Mandate for Federal Contractors [GovExec]Pentagon official says CMMC changes will be finalized ‘very soon’ [FedNewsNet]Industry’s patience wearing thin with DoD’s CMMC, GSA’s follow-on to OASIS [FedNewsNet]Air Force software platform expansion stalled by cybersecurity concerns [FedScoop]Parkville Man Pleads Guilty to $335 Million Fraud, $615,000 Tax Violations [DoJ]One contractor learned that it’s a bad idea to bribe federal officials [FedNewsNet]Former Walter Reed department head pleads guilty to federal charge [FedNewsNet]SBA Announces Entrepreneur, Investor, and Award-winning Entertainer Jennifer Lopez to Headline National Small Business Week Virtual Summit 2021[SBA] The post SmallGovCon Week in Review: September 13-17, 2021 first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

In February 2017, the SBA announced that applications for its new All Small Mentor-Protégé Program were being processed, on average, in just eight days. Fast forward four-and-a-half years, and the SBA’s mentor-protégé application processing timeline has gotten just a wee bit longer. As in, 105 days. Unfortunately, that’s no typo. If you’re looking to establish an SBA-approved mentor-protege relationship, you better be willing to wait more than three months for your application to be approved. I recently sent an email to the SBA’s main Mentor-Protege Program email address. The automatic response I received included this nugget: The application process takes 105 days – 15 days for screening and 90 days for processing. In fairness, the SBA was never going to maintain an eight-day pace. (And, in hindsight, it probably shouldn’t have set lofty expectations by touting that initial blistering pace back in 2017). But 105 days is . . . not good. Among other problems, such a long wait makes it much more difficult for potential mentors and protégés to establish compliant joint ventures in advance of key solicitations, like the upcoming Polaris vehicle. And for 8(a) companies–who, following a November 2020 rule change, no longer have access to a separate 8(a) mentor-protégé program–the delay is especially troublesome. After all, 8(a) Program participation is strictly limited to nine years. Every extra day that an 8(a) company has to wait for its mentor-protégé agreement to be approved is one less day that the 8(a) protégé is eligible to use that mentor-protégé relationship to help it bid 8(a) contracts. I don’t have any inside knowledge as to why the application processing timeline has expanded so dramatically in just a few years. I suspect the consolidation of the 8(a) and All Small Mentor-Protege Programs has played a role, as did the addition of new screening questions regarding affiliation. Nevertheless, the application itself is not terribly lengthy or complex–certainly far less lengthy and complex than the VA’s SDVOSB/VOSB application, which the VA says is processed in an average of 34 days. If I had to guess, I’d speculate that the major culprit is likely a staffing/funding issue. Whatever the cause, I hope SBA works to address it, and soon. I don’t expect we’ll ever return to a world of eight-day application processing. But 105 days is far too long to force qualified applicants to wait to access this important program. Need help with a government contracting legal matter? Email us or give us a call at 785-200-8919. Looking for the latest government contracting legal news? Sign up here for our free monthly newsletter, and follow us on LinkedIn, Twitter and Facebook. The post From Eight Days to 105 Days: The Incredible Lengthening of the SBA’s Mentor-Protégé Program Timeline first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

You may recall a post of ours back in April 2021, where we discussed a little-known change to SBA’s size determination rules that occurred in October 2020. SBA created an exception, at 13 C.F.R. § 121.404(g)(2)(iii), to the usual “size is determined at offer date” rule. Now, prior to award, when a small business is part of a merger or acquisition after it makes an offer on a solicitation, the business has to recertify its size, and depending on when that acquisition occurred, if the business is now large, it may lose its award. However, the rule is for better or worse not that straightforward, as a small business learned in a recent GAO decision. Because a part of the rule says that task order awards in such cases may not be treated as small business awards, GAO concluded that such awards are still allowed. Here’s the necessary background. In December 2020, GSA issued a solicitation under its One Acquisition Solution for Integrated Services (OASIS) small business pool contract for a fixed-price task order for engineering, program management, and technical support services for the Rocket Systems Launch Program at the Space and Missile Systems Center at Kirtland Air Force Base, which is undoubtedly one of the coolest solicitations I’ve ever seen. In any event, GSA received 5 proposals by the closing date. One was from Millennium Engineering and Integration Company (“Millennium”), and another was from Odyssey Systems Consulting Group, Ltd. (“Odyssey”). GSA eventually awarded the task order to Millennium. The thing is, 38 days after submitting its proposal, Millennium (now “Millennium Engineering and Integration LLC”) was acquired by QuantiTech, LLC. Upon recertification, it would no longer qualify as a small business. In light of this information (and on other grounds), Odyssey protested the award. In its protest, Odyssey noted the new exception in 13 C.F.R. § 121.404(g) states: If the merger, sale or acquisition occurs after offer but prior to award, the offeror must recertify its size to the contracting officer prior to award. If the merger, sale or acquisition (including agreements in principal) occurs within 180 days of the date of an offer and the offeror is unable to recertify as small, it will not be eligible as a small business to receive the award of the contract. If the merger, sale or acquisition (including agreements in principal) occurs more than 180 days after the date of an offer, award can be made, but it will not count as an award to small business. Millennium was acquired only 38 days after it submitted its proposal. Therefore, Odyssey reasoned, Millennium must recertify and, because it would not recertify as small, Millennium would be ineligible for award. However, GSA noted that the above rule only applies to recertification under the “master contract” (in this case, the original OASIS contract). 13 C.F.R. § 121.404(g)(4) provides: The requirements in paragraphs (g)(1), (2), and (3) of this section apply to Multiple Award Contracts. However, if the Multiple Award Contract was set-aside for small businesses, . . . then in the case of a contract novation, or merger or acquisition where no novation is required, where the resulting contractor is now other than small, the agency cannot count any new orders issued pursuant to the contract, from that point forward, towards its small business goals. This, GSA argued, meant that Millennium remained eligible for award; the only effect is that GSA now couldn’t count the task order award towards meeting its small business goals. GAO invited SBA to comment on the matter. SBA stated that 121.404(g)(2)(iii) does apply to task orders as well. But SBA said this interpretation didn’t control in this case, considering the circumstances. Siding with GSA, SBA explained 121.404(g)(4) is an applicable exception, as the underlying contract is a multiple award contract set aside for small businesses. This seems like an odd finding, considering 121.404(g)(4) doesn’t say anything about the eligibility of the awardee. GAO agreed, noting: The regulation at issue here is not a model of clarity. On the one hand, the result identified by section 121.404(g)(2)(iii) could apply here just as easily as the result outlined in section 121.404(g)(4). In attempting to reconcile the applicability of these two provisions, we note that the SBA has expressly identified a rule that would result in ineligibility of an entity under section 121.404(g)(2)(iii), but has not expressly revoked that rule under section 121.404(g)(4). On the other hand, while section 121.404(g)(4) is silent on a firm’s eligibility for award, its express indication–that new orders issued under a multiple award contract to firms that are other than small cannot count against an agency’s small business contracting goals–implies (or seems to assume) that the agency is permitted to issue task orders to firms when the procurement is set aside for small businesses. In short, because 121.404(g)(4) says that new orders issued cannot count towards the agency’s small business goals, this must imply the agency can still order those issues. GAO continued: “In our view, the protester’s contention that section 124.404(g)(4) only repeats the rules already set forth in section 121.404(g)(2)(iii) would render much of the language in (g)(4) surplusage.” (Surplusage is one of those odd lawyer terms which basically means that rules should be interpreted in a way that doesn’t leave extra unused provisions lying around with no purpose, and judges and the GAO equivalent of judges don’t like surplusage). GAO empathized with Odyssey, noting it was “not convinced that SBA’s interpretation is the only reasonable interpretation of the regulation at issue.” But, it would defer to SBA as SBA’s reading is also reasonable. After rejecting the other grounds for Odyssey’s protest, GAO dismissed the protest. So, for now, it appears that even if you are acquired within that 180 day time frame after offer, if it’s a task order under a multiple award contract, you’re off the hook, at least on size grounds. However, we agree with GAO that the regulation in question could use a little supplementing for clarity’s sake. This case is also a great reminder of the power an agency’s interpretation of a regulation can have on a decision. Had SBA agreed with Odyssey, things may have been completely different. Need help with a government contracting legal matter? Email us or give us a call at 785-200-8919. Looking for the latest government contracting legal news? Sign up for our free monthly newsletter, and follow us on LinkedIn, Twitter and Facebook. The post Small Business Being Acquired by a Large Business? For Multiple Award Contracts, the 180-Day Rule Doesn’t Apply to Task Orders, says GAO first appeared on SmallGovCon - Government Contracts Law Blog.View the full article