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Koprince Law LLC

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  1. An offeror’s apparent attempt to engage in a little proposal gamesmanship has resulted in a sustained GAO bid protest. In a recent case, an offeror attempted to evade a solicitation requirement that proposals be no more than 10 single-spaced pages, by cramming its proposal into less than single-spacing. The GAO wasn’t having it, sustaining a competitor’s protest and holding that the “spacing gamesmanship” had given the offeror an unfair advantage. The GAO’s decision in DKW Communications, Inc., B-412652.3, B-412652.6 (May 6, 2016) involved a Department of Energy RFQ seeking three fixed-price task orders for various support services. The task orders were to be awarded under a RFQ issued to blanket purchase agreement holders under multiple federal supply schedules, including Schedule 70. The RFQ stated that quotations should be submitted in three volumes: technical, past performance, and price. With respect to the technical volume, the RFQ informed vendors that quotations would be limited to 10 pages and that material in excess of 10 pages would not be evaluated. The RFQ further provided that “the text shall be 12 point (or larger) single-spaced, using Times New Roman Courier, Geneva, Arial or Universal font type.” After evaluating competitive quotations, the agency awarded the task orders to Criterion Systems, Inc. DKW Communications, Inc., an unsuccessful competitor, then filed a GAO bid protest challenging the award to Criterion. During the course of the protest, DKW apparently received Criterion’s technical proposal (I assume, although it is not stated in the decision, that the proposal was provided only to DKW’s outside counsel, under a GAO protective order). DKW then filed a supplemental protest arguing that Criterion had violated the 10-page limit by compressing the line spacing of its technical proposal to be less than the single-spacing required by the RFQ. The GAO wrote that “[a]s a general matter, firms competing for government contracts must prepare their submissions in a manner consistent with the format limitations established by the agency’s solicitation, including any applicable page limits.” Consideration of submissions that exceed established page limitations “is improper in that it provides an unfair competitive advantage to a competitor that fails to adhere to the stated requirements.” The GAO noted that Criterion “used different spacing for both volumes 1 and 3, which had no page limitations, than it did for the technical volume, which had a 10 page limit.” In volumes 1 and 3, “Criterion used spacing that yielded approximately 44 lines per page.” However, for the technical volume, Criterion “used dramatically smaller line-spacing for each of the 10 pages, resulting in approximately 66 lines per page.” (The GAO’s PDF decision provides a visual comparison of the spacing differences between the volumes). The GAO continued: Accordingly, it appears that Criterion implemented compressed line-spacing in a deliberate and intentional effort to evade the page limitation imposed by the RFQ, especially when compared to the other parts of its quotation. Criterion’s significant deviation from the other two volumes of its quotation effectively added approximately three to four pages to the 10-page limitation. In our view, this was a material change from the RFQ’s instructions that gave Criterion a competitive advantage. The GAO sustained DKW’s protest. Offerors faced with tight page limitations can be tempted to try to fit as much in those pages as possible. But as the DKW Communications protest shows, attempting to evade a page limit can have serious (and negative) repercussions. View the full article
  2. Women-owned small businesses are increasingly seeking to become certified through one of four SBA-approved third-party WOSB certifiers. But which third-party certifier to use? There doesn’t seem to be any single resource summarizing the basics about the four SBA-approved certifiers, such as the application fees, processing time, and documents required by each certifier. So here it is–a roundup of the key information for three of the four SBA-approved WOSB certifiers (as you’ll see, we’ve had some problems reaching the fourth). First things first: why should WOSBs and EDWOSBs consider third-party certification? As part of the 2015 National Defense Authorization Act, Congress eliminated self-certification for WOSB set-asides and sole sources. Despite the statutory change, the SBA continues to insist that WOSB remains a viable option indefinitely while the SBA figures out how to address Congress’s action. But can the SBA legally allow WOSBs to do the very thing that Congress specifically prohibited? I certainly have my doubts, particularly since the SBA has never explained the legal rationale for its position. For WOSBs and EDWOSBs, third-party certification (which is still allowed following the 2015 NDAA) may be the safest option. There are currently four entities that the SBA has approved as third-party certifiers: the National Women’s Business Owners Corporation (NWBOC), Women’s Enterprise National Council (WBENC), the U.S. Women’s Chamber of Commerce (USWCC), and the El Paso Hispanic Chamber of Commerce (EPHCC). This post summarizes the cost, time, and application fees associated with three of those organizations. After researching and speaking with three of the WOSB certifiers, we found that all three require a written application, and that the required supporting documents are largely similar. Anticipated processing times vary (and probably should be taken with a grain of salt, as no certifier wants to admit that it is slow). For all certifiers, the anticipated processing time from application to certification begins when a completed application is received. This point was reiterated time and again at each of the three certifiers we were able to reach. To facilitate the prompt consideration of an application, prospective WOSBs should make sure to submit all of the required documents and information the first time around; and to respond promptly if additional information is requested during the application process. National Women’s Business Owners Corporation (NWBOC) The NWBOC offers third-party certification to both WOSBs and EDWOSBs. All application information and documents needed are listed in the NWBOC’s application form, which is available on its website. The NWBOC also offer the option for potential WOSBs and EDWOSBs to purchase a tailored application kit to guide applicants through the process of applying. The fee to apply for certification is $400 at a minimum, and an applicant may be charged more if requests for more information are not met in a timely fashion. According to the NWBOC, the current processing time for certification is between 6-8 weeks. A completed application and all required documents must be mailed into the NWBOC before processing will begin. Women’s Business Enterprise National Council (WBENC) WOSB Certification through WBENC is free and very quick—for WBENC members. For companies that are already members of WBENC—especially those that are already certified as Women’s Business Enterprises (WBEs)—this option could be both the quickest and cheapest. For companies that are not members of WBENC, the cost for WBENC Membership starts at $350, and can go up based off of the applying company’s revenue. And although WBENC says that WOSB certification for its members is “virtually instant,” the process of becoming a member can take up to 90 days—which means that if a non-member elects to use WBENC, the application process could take 90 days or more. WBENC offers a WOSB application checklist on its website to aid in document production, as well as a guide to completing the application. WBENC suggests that the application be completed after document production, as it is done online and has a 90-day deadline from start to finish—and once it is submitted, no changes can be made. All documents required for the application, including the fee, must be provided before the application will be processed. WBENC only offers WOSB certification, not EDWOSB certification. Prospective EDWOSBs will need to look at another option. The U.S. Women’s Chamber of Commerce The USWCC offers WOSB and EDWOSB third-party certification, to both its members and non-members. According to the USCWCC’s website, certification takes between 15-30 days and costs $275 for Business and Supplier members and $350 for non-members. A possible bonus (or deterrent, for some) is that the entire application and document submission is completed online. The USWCC offers both a certification and document checklist and sample application on its website to aid applicants in document production and prepare them to answer the questions on the application, but it cannot be submitted in lieu of the online form. The USWCC also requires the application be completed in one sitting—it cannot be completed partially and saved to be completed later. This means that the applicant should be completely ready to apply prior to starting, or else risk getting almost done and being interrupted and then having to restart from the beginning. The El Paso Hispanic Chamber of Commerce (EPHCC) Unfortunately, we found that the EPHCC was difficult to contact, and we were unable to speak with any staffer regarding the EPHCC’s WOSB certification process. If we obtain information about the EPHCC, we will update this post to include it. These four entities are currently the only ones approved by the SBA for third-party WOSB/EDWOB certification. While the SBA remains adamant that third-party certification remains viable indefinitely, women-owned businesses should decide for themselves whether they are comfortable with the SBA’s position. For women-owned businesses that decide to play it safe while the SBA addresses the 2015 NDAA, third-party certification is the way to go. Molly Schemm of Koprince Law LLC was the primary author of this post. View the full article
  3. June seems to have crept up on us, but here we sit enjoying warm temperatures and sunshine. Hopefully you are making plans for some summer rest and relaxation. While you kick back this weekend by the pool, we are happy to bring to you some weekend reading material in this edition of SmallGovCon Week In Review. This week’s top governing contracting stories include an inquiry on DoD Buy American Act waivers, the continued push to “dump the DUNS,” False Claims Act allegations regarding pricing, a construction company settles a SDB fraud claim for $5.4 million, and more. NASA has proposed a new rule that would require vendors to make their company’s greenhouse emissions data available through the Systems for Award Management. [FCW] Over the past 10 years the U.S. DoD has granted more than 300,000 lawful waivers to the Buy American Act and while some of the exceptions make sense, many of them do not. [Journal Inquirer] The summer of 2016 will be known from this point forward as “the summer of the billion dollar IT contract” with 26 protests of an $11.5 billion training contract. [Federal News Radio] Back in 2012 the GAO said that the costs and technical challenges of moving away from the DUNS to another system for identifying and tracking contractors would simply be too great. One industry group says that, four years, later the time is ripe to dump the DUNS. [Federal News Radio] One of the largest federal consulting practices has agreed to settle a False Claims Act brought by the General Services Administration for allegations the vendor failed to lower prices on its IT services contracts. [Federal Times] The Department of Energy is examining what it would take to overhaul the IT behind its business operations, possibly resulting in a contract that could be worth up to $850 million. [fedscoop] The charges against a former Hayner Hoyt employee have been dismissed after alleging the company had fired him for refusing to go along with a scheme to defraud a government program that provided contracts to small business owned by disabled veterans. [Syracuse.com] Federal Times offers seven highlights form the General Services Administration’s Office of Inspector General semiannual report. [Federal Times] Allegations that Harper Construction, Inc., knowingly used sham small disadvantaged businesses and then falsely certified to the government that it used legitimate small disadvantaged businesses has led to the company paying $5.4 million to the United States. [Oceanside Camp Pendleton Patch] Washington Technology takes a look at the 100 largest government contractors over the past two decades to determine the changing government market over the years and where 2016 is heading. [Washington Technology] View the full article
  4. The nonmanufacturer rule will not apply to small business set-aside contracts valued between $3,000 and $150,000, according to the SBA. In its recent major rulemaking, the SBA exempts these small business set-aside contracts from the nonmanufacturer rule, meaning that small businesses will be able to supply the products of large manufacturers for these contracts without violating the limitations on subcontracting. In its rulemaking, the SBA explains its new exemption as a way to increase small business awards: SBA believes that not applying the nonmanufacturer rule to small business set-asides valued between $3,500 and $150,000 will spur small business competition by making it more likely that a contracting officer will set aside an acquisition for small business concerns because the agency will not have to request a waiver from SBA where there are no small business manufacturers available. The SBA points out that it can take “several weeks” for the SBA to process a nonmanufacturer rule waiver request, and suggests that contracting officers are unlikely to pursue waivers for lower-dollar procurements, choosing instead to simply release such solicitations as unrestricted. The new rule will expand current authority, which allows an exemption for simplified acquisitions below $25,000. The SBA’s new rulemaking also includes several other important changes related to the nonmanufacturer rule: The SBA clarifies that procurements for rental services should be classified as acquisitions for services, not acquisitions for supplies. The SBA notes that “renting an item is not the same thing as buying a item.” This clarification means that offerors for solicitations for rented products shouldn’t need to worry about the nonmanufacturer rule (although they will need to comply with the applicable limitation on subcontracting). In some cases, a single procurement seeks multiple items, and only some of them are subject to nonmanfacturer rule waivers. In such a case, the new rule provides, “more than 50% of the value of the products to be supplied by the nonmanufacturer that are not subject to a waiver must be the products of one or more domestic small business manufacturers or processors.” The new regulations includes an example of how this concept should work in practice. The SBA has adopted a requirement that a contracting officer notify potential offerors of any nonmanufacturer rule waivers (whether class waivers or contract-specific waivers) that will be applied to the procurement. The SBA writes that “[w]ithout notification that a waiver is being applied by the contracting officer, potential offerors cannot reasonably anticipate what if any requirements they must meet in order to perform the procurement in accordance with SBA’s regulations.” The notification “must be provided at the time a solicitation is issued.” The SBA has expanded its authority to grant nonmanufacturer rule waivers. Under current law, waivers must be granted before a solicitation is issued. The new rule allows the SBA to grant waivers after a solicitation has been issued so long as “the contracting officer provides all potential offerors additional time to respond.” In an even bigger change, the new rule allows the SBA to grant nonmanufacturer rule waivers after award, if the agency makes a modification for which a waiver is appropriate. The SBA has clarified that the nonmanufacturer rule (including waivers) applies to certain types of software. The SBA writes that “where the government buys certain types of unmodified software that is generally available to both the public and the government . . . the contracting officer should classify the requirement as a commodity or supply.” However, “if the software being acquired requires any custom modifications in order to meet the needs of the government, it is not eligible for a waiver of the NMR because the contractor is performing a service, not providing a supply.” The SBA’s changes to the nonmanufacturer rule take effect on June 30, 2016. View the full article
  5. GAO ordinarily will not hear any argument that is based on a company’s small business status, even if the alleged large company is only a proposed subcontractor. In a recent decision, GAO declined to hear a protester’s argument that the awardee’s supposedly-small subcontractors were affiliated with other entities, holding that such a determination is reserved solely for the SBA. The case, URS Federal Services, Inc., B-412580 et al. (Mar. 31, 2016), involved an Army task order request seeking proposals to perform maintenance, repair, overhaul, modification and upgrade of various military vehicles and equipment. The solicitation was issued on an unrestricted basis, but contained a requirement that 25 percent of the labor value for each performance period be proposed for performance by small businesses. After evaluating competitive proposals, the Army awarded the task order to VSE Corporation. URS Federal Services, Inc., the incumbent, then filed a GAO bid protest challenging various aspects of the award decision. Among its challenges, URS contended that the agency should have excluded VSE’s proposal for failing to meet the 25% small business requirement. URS contended that two of VSE’s proposed small business subcontractors were affiliated with each other, causing both to exceed the relevant size standard. The GAO wrote that the Small Business Act “gives the Small Business Administration (SBA) not our office, conclusive authority to determine matters of small business size for federal procurements.” Accordingly, GAO’s bid protest regulations provide that challenges to an entity’s size status “may be reviewed solely by the Small Business Administration.” GAO dismissed this aspect of URS’s protest, writing “[w]e will not consider any allegation that is based on URS’s assertions regarding the size status of particular firms, since such matters are solely for the SBA’s consideration.” What’s interesting to consider, however, is what if URS was right? For argument’s sake, let’s say that the awardee’s subcontractors were affiliated and therefore too large to satisfy the small business participation requirements. What should URS have done? The SBA’s size protest regulations allow “interested parties” to file protests with respect to “SBA’s Subcontracting Program.” (See 13 C.F.R. 121.1001(a)(3)). In a 2013 case, IAP World Services, Inc., SBA No. SIZ-5480 (June 24, 2013), the SBA Office of Hearings and Appeals held that an unsuccessful offeror could file a size protest based on whether the successful offeror–itself a large business–would improperly count work performed by a certain entity toward its subcontracting goals. In reaching this conclusion, OHA wrote that 13 C.F.R. 121.1001 “contemplates that there will be protests of the small business size status of subcontractors under [SBA’s] Subcontracting Program and that these may be filed by ‘other interested parties,'” including “an unsuccessful offeror for the prime contract.” Thus, it seems that URS should have taken the matter to the SBA. As the GAO made clear in URS Federal Services, it will not decide such challenges as part of the bid protest process. View the full article
  6. Small businesses will be able to joint venture with one another more often under a new SBA rule. As part of a recent major rulemaking, the SBA will allow two or more small businesses to joint venture for any procurement without being affiliated with regard to the performance of that requirement. Under the current regulation, two or more small businesses may be affiliated with one another if they joint venture for a particular procurement, depending on that procurement’s value. In fact, the underlying rule provides that joint venture partners are affiliated for purposes of that procurement. However, an exception states that the businesses can avoid affiliation if the procurement exceeds half of the size standard corresponding to the NAICS code assigned to the contract (for revenue-based size standards) or $10 million (for employee-based size standards). That’s a mouthful, so here is a quick example. Let’s say Company A is a $5 million dollar business, and Company B is a $6 million dollar business. Companies A and B want to joint venture for a contract carrying a $7 million size standard. Can they do so? It depends on the value of the procurement. If the value of the procurement exceeds $3.5 million (half of $7 million), then the joint venture would be eligible, because both companies are smaller than $7 million. But if the value of the procurement is less than $3.5 million, Companies A and B cannot joint venture, because they are considered affiliates–and their aggregated revenues exceed $7 million. Last year, the SBA proposed to do away with this complexity and simply allow small businesses to joint venture together, without regard to affiliation, so long as all joint venture partners qualify as small under the NAICS code. Now, the SBA has finalized that rule. The SBA writes that public comments on the proposal were “overwhelmingly positive,” and that the SBA believes that “the proposed change [will] encourage more small business joint venturing, in furtherance of the government-wide goals for small business participation in federal contracting.” The SBA concludes: This final rule clarifies that a joint venture of two or more business concerns may submit an offer as a small business for a Federal procurement, subcontract or sale so long as each concern is small under the size standard corresponding to the NAICS code assigned to the contract. The final rule takes effect on June 30, 2016. But the final rule may not be the only important change to the SBA’s joint venture rules this year. As part of a separate proposed regulation, the SBA has suggested other major changes, such as doing away with the concept of a “populated” joint venture. A final version of that rule has yet to be released, so stay tuned. View the full article
  7. The SBA has changed its affiliation regulations to clarify when a presumption of affiliation exists due to family relationships or economic dependence. In its major final rulemaking published today, the SBA clears up some longstanding confusion regarding affiliation based on a so-called “identity of interest.” The SBA’s current “identity of interest” affiliation rule states that businesses controlled by family members may be deemed affiliated–but does not explain how close the family relationship must be in order for the rule to apply. The SBA’s final rule eliminates this confusion. It states: Firms owned or controlled by married couples, parties to a civil union, parents, children, and siblings are presumed to be affiliated with each other if they conduct business with each other, such as subcontracts or joint ventures or share or provide loans, resources, equipment, locations or employees with one another. This presumption may be overcome by showing a clear line of fracture between the concerns. Other types of familial relationships are not grounds for affiliation on family relationships. By limiting the application of the rule to certain types of close family relationships, the SBA essentially codifies SBA Office of Hearings and Appeals case law, which has long interpreted the rule to apply only to close family relationships. It’s a good thing to have the types of relationships at issue spelled out in the regulation, rather than buried in a series of administrative decisions. More interesting to me is the fact that the final rule suggests that the presumption of affiliation doesn’t apply unless the firms in question “conduct business with each other.” I wonder whether this regulation essentially overturns OHA’s recent decision in W&T Travel Services, LLC. In that case, OHA held that two firms were affiliated because the family members in question were jointly involved in a third business–even though the two firms in question had no meaningful business relationships. I will be curious to see how OHA addresses this component of the final rule when cases begin to arise under it. The SBA’s final rule also codifies OHA case law regarding so-called “economic dependence” affiliation. As my colleague Matt Schoonover recently wrote, OHA has long held that a small business ordinarily will be deemed affiliated with another entity where the small business receives 70% or more of its revenues from that entity. The final rule provides: (2) SBA may presume an identity of interest based upon economic dependence if the concern in question derived 70% or more of its receipts from another concern over the previous three fiscal years. (i) This presumption may be rebutted by a showing that despite the contractual relations with another concern, the concern at issue is not solely dependent on that other concern, such as where the concern has been in business for a short amount of time and has only been able to secure a limited number of contracts. As with the rule on family relationships, the codification of the “70% rule” will help small businesses better understand their affiliation risks, without having to delve into OHA’s case law. In that regard, it’s a positive change. View the full article
  8. A small business cannot file a viable SBA size protest if the small business has been excluded from the competitive range, or if its proposal has otherwise found to be non-responsive or technically unacceptable. In its recent final rule addressing the limitations on subcontracting, the SBA also clarifies when small businesses can–and cannot–file viable size protests. Under the SBA’s current regulation, a size protest may be filed by “[a]ny offeror whom the contracting officer has not eliminated for reasons unrelated to size.” Many small businesses and contracting officers have found this regulation confusing, both because it contains a double negative and because it is unclear when an offeror has (or has not) been “eliminated” from a competition. In its new final rule, the SBA states that its intent “is to provide standing to any offeror that is in line or [under] consideration for award, but not to provide standing for an offeror that has been found to be non-responsive, technically unacceptable, or outside of the competitive range.” The SBA points out that, while such offerors cannot file viable size protests of their own, “SBA and the contracting officer may file a size protest at any time, so any firm, including those that do not have standing, may bring information pertaining to the size of the apparent successful offeror to the attention of SBA and/or the contracting officer for their consideration.” The new rule provides that a size protest can be filed by “[a]ny offeror that the contracting officer has not eliminated from consideration for any procurement-related reason, such as non-responsiveness, technical unacceptability or outside of the competitive range.” The rule takes effect June 30, 2016. View the full article
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