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  1. Koprince Law LLC

    SBA OHA Rejects “Chain Affiliation” Theory

    Ordinarily, a company isn’t affiliated with the affiliates of its affiliates. That sentence may sound a little silly, but it encapsulates an important principle about the breadth of the SBA’s affiliation rules. As demonstrated in a recent SBA Office of Hearings and Appeals decision, the SBA doesn’t apply its rules to create “chain affiliation.” Before we get to the case itself, a simple example might be helpful. Let’s say two companies–Company A and Company B–are affiliated under the common management rule because the same individual is the highest officer of both companies. Let’s also assume that Company B receives almost all of its revenues from Company C, creating affiliation between Companies B and C under the economic dependence rule. Companies A and C have no direct connections. Is Company A affiliated with Company C–the affiliate of its affiliate? It’s an important question. For many small businesses, adding “chain affiliates” like Company C could push them over relevant size standards. OHA’s recent decision in Size Appeal of WisEngineering, LLC, SBA No. SIZ-5908 (2018) provides some answers. The WisEngineering case involved an Army solicitation for logistics support services. The solicitation was issued as a small business set-aside. After evaluating competitive proposals, the Contracting Officer announced that Barbaricum, LLC was the apparent successful offeror. WisEngineering, LLC, an unsuccessful competitor, filed a size protest. WisEngineering alleged that Barbaricum was affiliated with various entities. The SBA Area Office determined that Barbaricum was affiliated with Woodside O’Brien, LLC, a venture capital firm, under the SBA’s common ownership and identity of interest rules. However, affiliation with Woodside did not push Barbaricum over the solicitation’s $20.5 million size standard. Woodside held an interest in several entities collectively referred to as the “Portfolio Companies.” However, Barbaricum did not have any significant relationship with the Portfolio Companies. The SBA Area Office held that Barbaricum was not affiliated with the Portfolio Companies and issued a size determination finding Barbaricum to be an eligible small business. WisEngineering filed a size appeal with OHA. WisEngineering argued, in part, that the Area Office erred by failing to find Barbaricum affiliated with the Portfolio Companies. OHA wrote that “the record does not support the conclusion that Woodside is affiliated with the Portfolio Companies.” However, “even if Woodside were affiliated with the Portfolio Companies, this would not establish that Barbaricum and the Portfolio Companies are also affiliated.” Citing previous size appeal decisions, OHA wrote that it “has repeatedly rejected such ‘chain affiliation’ allegations, and has made clear that a challenged firm is not affiliated with the affiliates of its affiliate in the absence of any common ownership or control between the challenged firm and affiliate.” Here, WisEngineering “points to no evidence that Barbaricum, or its owners, hold any interest in, or have any power to control, the Portfolio Companies, or that any of the Portfolio Companies have any such ownership or control over Barbaricum.” Thus, “the Area Office correctly found that Barbaricum is not affiliated with the Portfolio Companies.” OHA denied the size appeal. As the WisEngineering case demonstrates, a company isn’t affiliated with the affiliates of the company’s affiliates, absent common ownership or control between the firms themselves. And in my view, that’s the right policy. In many cases, chain affiliation would result in companies being affiliated with entities with whom they have no connections, and potentially no reason to believe that they are affiliated. View the full article
  2. Koprince Law LLC

    SBA May Eliminate 8(a) Joint Venture Approvals

    The SBA is considering eliminating the requirement that contractors obtain the SBA’s prior approval to joint venture for 8(a) contracts. There’s no doubt that eliminating the approval requirement would reduce burdens and expenses for 8(a) companies and their joint venture partners–but it could also lead to an uptick in sustained protests against 8(a) joint ventures. Under current regulations, “SBA must approve a joint venture agreement prior to the award of an 8(a) contract on behalf of the joint venture.” Additionally, after the joint venture is approved in connection with the first 8(a) contract, “SBA must approve addendums prior to the award of any successive 8(a) contract to the joint venture.” The approval requirements are widely misunderstood. Some contractors believe that an 8(a) company must always receive the SBA’s prior approval to pursue a contract as a joint venture, even when the joint venture will pursue non-8(a) work. That’s not the case–only 8(a) contracts require the SBA’s prior approval. Other contractors believe that once the SBA approves a joint venture to bid on one 8(a) contract, the joint venture is “8(a) certified” and doesn’t need any future SBA approvals. Again, that’s wrong, and failing to get SBA’s approval of an addendum can cost the joint venture a contract. Misunderstandings aren’t the only problem with the approval process. It also can take a heck of a lot of work to get an 8(a) joint venture approved. Not only does the SBA require a joint venture agreement fully complying with 13 C.F.R. 124.513, but SBA District Offices also tend to require a great deal of supporting documentation, such as resumes, work share breakdowns, staffing plans, and so on. Some District Offices insist on “mandatory” joint venture agreement provisions that are nowhere to be found in the regulations; others demand that limited liability company joint ventures produce LLC operating agreements–again, not a regulatory requirement. Needless to say, for small, disadvantaged businesses, meeting these requirements can be onerous, time consuming and costly. Well, these problems may one day be a thing of the past. In a Federal Register publication issued last week, the SBA said that it is considering “possibly eliminating SBA’s role in approving joint venture agreements for 8(a) competitive contracts.” The SBA says that this change may make it “easier for small business concerns to understand and comply with” the 8(a) Program requirements. There’s little doubt that eliminating the prior approval requirement would be a good thing from the standpoint of cost and burden. But there may be a downside. If SBA adopts this change, I think you’ll see more protests sustained against 8(a) joint ventures. As annoying as the prior approval requirement might be, it also serves an important purpose–the SBA validates, before award, that the joint venture agreement meets all the mandatory requirements under 13 C.F.R. 124.513. If not, the SBA District Office typically sends the joint venture agreement back to the 8(a) company for edits. In other words, if the joint venture agreement isn’t perfect, it’s usually okay; the joint venturers will likely get a second bite at the apple. If the prior approval requirement is eliminated, the first and only time the SBA will review an 8(a) joint venture agreement is after an award is announced and a protest filed. This is how it already works for joint ventures competing for small business, HUBZone, WOSB, and non-VA SDVOSB contracts. At that point, if the joint venture agreement isn’t perfect, there are no do-overs. The protest is sustained, and the contract goes to the next in line. That’s the downside of the absence of prior approval–the stakes are much higher if and when the joint venture agreement is reviewed by the SBA. There are some mighty tremendous resources out there to help 8(a) companies and others form compliant joint ventures. But not everyone will avail themselves of those resources or get the joint venture agreement exactly right. And once competitors realize that the SBA isn’t reviewing joint venture agreements up front, they may be more inclined to file protests of awards to 8(a) joint ventures, guessing that the joint venture is more likely to have missed something than would be the case had the SBA given its prior seal of approval. Would eliminating prior approval be a good thing? On balance, I think so. The amount of time and effort needed to obtain prior approval just isn’t necessary in a program supporting disadvantaged small businesses. However, if the SBA does eliminate the prior approval requirement, 8(a) companies will need to understand that the obligation now rests with them to get the joint venture agreement exactly right the first time. It’s important to note that the SBA hasn’t made or even officially proposed this change. It’s just under consideration and may never occur. We’ll see what happens, but for now, the prior approval process continues. View the full article
  3. Koprince Law LLC

    SmallGovCon Week in Review: June 4 – 8, 2018

    TGIF! Let’s get the weekend started off with a look at the latest and greatest in government contracting. In this week’s edition of the SmallGovCon Week in Review, we’ll take a look at DoD’s final rule amending DFARS to increase certain micro-purchase thresholds, more questions about the SBA’s small business participation report cards, a former background investigator’s guilty plea, and much more. Have a great weekend! DoD issues final rule amending DFARS to increase micro-purchase thresholds. [Federal Register] Did the Small Business Administration really meet their FY17 goals. [Linkedin] A former background investigator pleads guilty to making a false statement and may serve 5 years. [U.S. Department of Justice] Google not renewing its contract with Pentagon due to employee backlash. [Quartz at Work] Richmond company agrees to pay $625,000 to settle federal civil fraud lawsuit. [U.S. Department of Justice] View the full article
  4. The SBA plans to issue a proposed rule consolidating the All Small Mentor-Protégé Program and the 8(a) Mentor-Protégé Program. According to a recent SBA publication in the Federal Register, the SBA has had a change of heart about whether it is necessary to run two similar mentor-protégé programs–one for everybody, and another only for 8(a) firms. When the SBA created the All Small Mentor-Protégé Program in 2016, the SBA purposely left in place the existing 8(a) Mentor-Protégé Program. At the time, SBA explained that it had considered consolidating the two mentor-protégé programs, but rejected the idea because the 8(a) Mentor-Protégé Program “has independently operating successfully for a number of years and SBA believes that it serves important business development purposes that should continue to be coordinated through SBA’s Office of Business Development, rather than through a separate mentor-protégé office managed elsewhere within the Agency.” Additionally, in 2016, the SBA couldn’t be sure how well the All Small Mentor-Protégé Program would work in practice. The SBA was concerned that the All Small Mentor-Protégé program might be overwhelmed with applications to the point where SBA might have to institute “open and closed enrollment periods” for that program. The SBA may not have wanted its 8(a) companies to be subjected to the potential of open and closed enrollment periods–and kept the separate 8(a) Mentor-Protégé Program active to make sure that didn’t happen. Fortunately, the SBA’s concerns about the implementation of the All Small Mentor-Protégé Program proved largely unfounded. In practice, the All Small Mentor-Protégé Program Office has been, in my opinion, about as close to perfect as a new government office can get. The ASMPP Office, as it is called (everything in government needs an acronym) is efficient, speedy, and responsive. Instead of needing to establish open and closed periods, the SBA at one point was able to tell the public that the average processing time of an All Small Mentor-Protégé Program application was a mere eight days. And because the All Small Mentor-Protégé Program offers the same benefits as the 8(a) Mentor-Protégé Program, even many 8(a) companies have elected to apply to the ASMPP instead of the 8(a) Mentor-Protégé Program. Instead of providing a special benefit to 8(a) companies, the existence of two similar SBA mentor-protégé programs has caused some confusion. For example, many contractors think that an 8(a) company must go through the 8(a) Mentor-Protégé Program instead of the All Small Mentor-Protégé Program. Nope. Others believe that a mentor-protégé joint venture cannot pursue an 8(a) set-aside contract unless the joint venture was formed under the 8(a) Mentor-Protégé Program instead of the ASMPP. Again, nope. Now it seems that the SBA has changed its mind about the need for two SBA mentor-protégé programs. In the Federal Register publication, the SBA says that it “contemplates consolidating the All Small Mentor-Protégé Program and the 8(a) Mentor-Protégé Program into one program.” The SBA plans to issue a formal rule to implement this change, but hasn’t done so yet. We’ll keep you posted. View the full article
  5. It’s a basic tenet of government contracting that a contractor must comply with the requirements of an agency solicitation. Those are the rules of the game. But in practice, there can be some tricky calls. For instance, what if a solicitation includes a requirement that appears to conflict with the FAR? Does an offeror still have to comply? A recent GAO decision explored this situation in the context of a solicitation’s requirement for subcontracting plans. The decision in Land Shark Shredding, LLC, B-415908 (March 29, 2018) concerned a solicitation from the VA for document shredding services. The RFQ was set aside for veteran-owned small businesses. The RFQ included three evaluation factors: technical, price, and past performance. As part of the technical factor, the RFQ required vendors submit a subcontracting plan. Under the subcontracting plan, vendors were to: Provide proposed team, including all subcontractors and the duties which will be performed by the pertinent individuals. This information will enable the [contracting officer] to assess the contractor’s compliance with the limitations on subcontracting or percentage of work performance requirement. The RFQ advised vendors that “[f]ailure to provide the information requested in the evaluation criteria may result in being found non-responsive.” The CO, in response to an inquiry about why it did not receive the award, told Land Shark Shredding, LLC (Land Shark) that its quotation was nonresponsive, in large part because it did not provide a subcontracting plan. Land Shark argued that, because it is a small business, and small businesses are not required to submit small business subcontracting plans, it should not have been found at fault for not submitting a subcontracting plan. The Solicitation included FAR clause 52.219-9, Small Business Subcontracting Plan, which the GAO agreed by its terms states that “[t]his clause does not apply to small business concerns.” GAO held that the RFQ’s evaluation subfactor required the submission of a subcontracting plan, and the RFQ stated this would help the VA “assess the contractor’s compliance with the limitations on subcontracting or percentage of work performance requirement. Therefore, “it is clear that the RFQ required vendors to submit a subcontracting plan, not a small business subcontracting plan pursuant to the inapplicable FAR and VAAR clauses.” In addition, Land Shark argued that it had informed the agency as part of its proposal that “use of subcontractors on the contract remained undecided, which served as its subcontracting plan” or, alternatively, that it might perform the work without subcontractors. GAO was not buying that argument, holding that “Land Shark’s indecision about whether it will perform the work itself or employ a subcontractor to fulfill the requirements does not provide the information requested by the RFQ, and did not provide sufficient information to allow the VA to assess compliance with the limitations on subcontracting requirement.” GAO also noted that, to the extent Land Shark was protesting that the subcontracting plan requirement itself was unnecessary for the procurement, this was an untimely challenge to the terms of the solicitation. Viewed through the GAO’s eyes, it seems like a simple decision that when a solicitation calls for a subcontracting plan, a contractor must submit one. However, from the contractor’s perspective, (a) the solicitation was asking for something that was not required under the FAR and (b) the contractor attempted to honestly state in its proposal that it did not know if it would use subcontractors. After all, this was a paper shredding contract, probably on the less complicated end of the universe of government contracts. GAO, as usual, stuck to the rules of the game: if it’s required in the solicitation, it better be in the proposal. As GAO noted, if you don’t think the solicitation requirements are reasonable, that is a pre-award challenge. View the full article
  6. An 8(a) joint venture agreement was ambiguous about whether the joint venturers intended to create a populated joint venture (which is no longer allowed) or an unpopulated joint venture–and the ambiguity cost the joint venture an 8(a) set-aside contract. In a recent decision, the U.S. Court of Federal Claims upheld the SBA’s decision to reject a joint venture agreement that was ambiguous about whether the joint venture was populated or unpopulated. The Court’s decision in Senter, LLC v. United States, No. 17-1752C (2018) involved a solicitation for support services at Coast Guard headquarters. The Coast Guard issued the solicitation as an 8(a) set-aside on July 21, 2017. Senter, LLC submitted a proposal. Senter was a joint venture between Sylvain Analytics, Inc., an 8(a) company, and Enetereza, Inc., a non-8(a) company. The joint venture was originally established in April 2016, presumably to compete for a different contract. The joint venture agreement described Senter as a “populated Joint Venture limited liability company” that would be “populated with its own employees.” The joint venture agreement referred to Senter as “populated” in various other places. At the time, there was nothing wrong with establishing a populated joint venture–that is, a joint venture that would perform the contract with employees of its own. For convenience, most joint ventures were unpopulated, meaning that the joint venture members performed work on the joint venture’s behalf using the members’ employees. But the SBA regulations allowed both populated and unpopulated joint ventures. That changed in August 2016. In a final rule effective August 24, 2016, the SBA eliminated populated joint ventures for set-aside contracts. Following the 2016 revision, the SBA’s regulations have required that joint ventures be unpopulated. That takes us back to the 2017 Coast Guard solicitation. By then, of course, the SBA’s regulations required Senter to be unpopulated. After the Coast Guard identified Senter as the apparent successful offeror, the Coast Guard contacted the SBA to determine whether Senter was eligible to receive the contract. The SBA determined that Senter had not (as SBA regulations require) submitted an addendum for SBA approval to pursue the Coast Guard contract. This alone could have caused the SBA to deny Senter the contract. But the SBA apparently was in a lenient mood, because it gave Senter the opportunity to amend the joint venture agreement anyway. The SBA sent Senter a joint venture checklist, which required Senter to (among other things) indicate that the joint venture was unpopulated. Senter didn’t follow the SBA’s instructions, or at least didn’t follow them well. The addendum it submitted still identified the joint venture as “populated” and said that it would be “populated with its own employees.” Confusingly, though, the addendum said that Sylvain would perform 51% of the work and Enetereza would perform 49%–as might be the case in an unpopulated joint venture. After some additional back-and-forth, the SBA issued a denial letter informing Senter that it was ineligible to receive the contract. The SBA cited “discrepancies and lack of supporting documents,” particularly regarding whether the joint venture was populated or unpopulated. Senter ultimately filed a complaint in the Court, seeking to overturn the SBA’s determination. Senter alleged that it “established with documentation that it was an un-populated joint venture,” and therefore the SBA erred by finding Senter ineligible for the Coast Guard contract. The Court wrote that “the documents Senter submitted to the SBA contained a dizzying array of inconsistencies and ambiguities pertaining to its status as populated or unpopulated.” After walking through many of these inconsistencies, the Court wrote: Any 8(a) contractor should be aware of the general rule that it must establish its eligibility as of the date of the submission of its initial offer. Senter was therefore in a position to know that when the SBA assessed the addendum, it would necessarily have to ensure that the agreement, as amended and revised by the addendum, met the SBA’s standards for program eligibility, including the requirement that the JV be unpopulated. The Court denied Senter’s protest and granted the government’s motion for judgment. The Senter case is a good reminder of something I often see in our firm’s practice–contractors tripped up when documents become outdated because of rule changes. The SBA overhauled its joint venture regulations in 2016, and not just to eliminate populated joint ventures. The SBA also changed the profit-splitting rules, made major changes to the SDVOSB joint venture rules, and adopted new rules for HUBZone joint ventures, among many others. Using a “template” joint venture agreement that dates from before August 2016 is almost a surefire recipe for noncompliance. As Senter makes clear, anyone planning to submit a proposal as a joint venture must be certain that the joint venture agreement meets current regulations. View the full article
  7. This week, I had the great opportunity to join Guy Timberlake in Minneapolis to discuss the impacts of the 2018 NDAA on small businesses. It was a wonderful event (made all the better by the fabulous participants and presenters). Minneapolis was fun, but it’s nice to be home. Hopefully you’re gearing up for a lovely weekend (perhaps with a little bit of pool time reserved). Before you punch out completely, let’s check out the latest in the world of government contracting. In this week’s edition of the SmallGovCon Week in Review, we take a look at Washington Technology’s new podcast focused on the future of government contracting, a lawsuit in which a contractor allegedly falsely overcharged the U.S. Navy for ship husbanding services, and more. Enjoy, and we’ll see you back here next week! Washington Technology launches “Project 38,” a podcast that discusses the future of government contracting [Washington Technology] The General Services Administration wants to make it easier for federal and state agencies to quickly acquire a broader array of cybersecurity services [Nextgov] United States settles lawsuit alleging that a contractor falsely overcharged the U.S. Navy for ship husbanding services [U.S. Department of Justice] An audit of two Army Contracting Command centers in Redstone, Alabama, and Warren, Michigan, revealed The Department of Defense must increase its efforts in order to meet small business subcontracting goals [Small Business Trends] A civilian employee at Picatinny Arsenal admitted his role in a scheme that traded bribes and other gratuities for favorable treatment on government contracts [TAPinto.net] View the full article
  8. For Fiscal Year 2017, SBA’s small business goaling scorecard awarded 21 agencies grades of “A+” or “A” for their small business contracting and subcontracting. Two agencies received a “B” and a single, lonely agency brought up the rear with a “C.” Not one agency received a grade below “C,” even agencies that missed most of their small business goals. It was a “record breaking” performance, to hear SBA tell it. But these inflated grades do a disservice to the public and government alike. So long as almost everyone is going to get a top grade anyway, I say we just replace next year’s SBA goaling grades with agency participation trophies. Why do I think SBA’s goaling scores are a problem? Let’s take a look at a few examples from the 2017 report card. First up, the Department of Agriculture. When it came to prime contracting goals, Ag was five-for-five: it exceeded its small business, WOSB, SDB, SDVOSB and HUBZone goals. And the small business achievement was especially impressive: 58.05%, versus a 49% goal. For its lofty achievements, Ag (appropriately, I think) earned an “A.” Now let’s take a look at the Department of Energy. DOE went just one-for-five on its prime contracting goals. DOE exceeded its small business goal, but the raw numbers weren’t that exciting: DOE managed 13.79% for small businesses, versus a 10.2% goal. DOE missed all four of its socioeconomic goals, whiffing particularly badly on HUBZone (3.00% goal, 0.62% achievement) and SDVOSB (3.00% goal, 0.98% achievement). So SBA really let those bums at DOE have it! SBA gave DOE… ummm, an “A.” Now, I know DOE has some unique pressures in the small business world because of DOE’s extensive use of large M&O primes. And it’s not like DOE isn’t trying–the annual DOE Small Business Conference is truly excellent. But this isn’t a commentary on DOE, it’s a commentary on SBA: Ag and DOE got the very same letter grade even though Ag exceeded all five of its goals, and DOE missed four-of-five. What kind of scoring system assigns the same grade for 100% success as 20% success? Let’s look at an an agency that doesn’t share DOE’s unique contracting model (I know, I know, every agency is “unique” but DOE probably more than most). The National Science Foundation went just two-for-five on its goals. It exceeded its small business and SDB goals, the latter by a significant margin. But NSF fell short on its WOSB, SDVOSB and HUBZone goals. Its WOSB achievement was particularly disappointing–just 3.57% versus a 5.00% goal. So what grade did NSF get? An “A.” Finally, let’s check in on the fine folks at the Department of Justice. For FY 2017, DOJ missed its small business goal, although it came pretty close. DOJ fared particularly badly with HUBZones, managing just 1.09% against a 3.00% goal. But DOJ exceeded its WOSB, SDB and SDVOSB goals. What grade did the SBA assign DOJ? By now, you see where I am going with this–of course, the DOJ also got an “A.” So here we have four agencies. One of the four knocked it out of the park, exceeding all five of its prime contracting goals. Another did relatively poorly, meeting only one of its goals. The others fell in between, hitting two and three goals, respectively. Some major differences, yet all four agencies get to tout identical “A” small business grades. The SBA publishes the scoring methodology it uses to develop its scorecard grades. The statistical formulas may be too complex for my little lawyer brain to fully process, with terms like “component weight” and “weighted performance.” But you know what? I don’t need to truly understand how the math works. Because any methodology that produces the same grade for the four agencies I just discussed is bad methodology. And bad methodology leads to bad public policy. By handing out “A” grades like tootsie rolls on Halloween, the SBA provides a disincentive for under-performing agencies to get better. Why, for example, should a DOE Contracting Officer care about issuing HUBZone set-asides to improve on the agency’s abysmal HUBZone score when DOE is already A-rated? If an agency can get top scores without meeting any of its socioeconomic goals, why worry about those goals at all? And what about agencies like Ag, which exceeded all of its goals? Sure, Ag gets to tout an “A”–but apparently it could have gotten that same grade with a lot less small business contracting. So, what’s to stop Ag from looking at other agencies’ scorecards and saying, “why the heck are we trying so hard?” An “A” grade ought to be something that sets an agency apart, a reward for truly outstanding work, something to really brag about. Instead, it’s become run-of-the-mill. Worst of all, the glut of “A” grades makes it seem as though the government is doing fantastically across the board when it comes to small business contracting. Sure, some agencies are doing very well, and deserve kudos. But does any small contractor really think that 21 out of 24 agencies truly are doing “A” level work when it comes to promoting small business? Let’s keep in mind that one of the so-called “A” agencies achieved approximately zero percent of its socioeconomic goals. When the SBA issues a press release touting 21 “A” grades and one lingering lonely “C,” the message that policymakers and the public get is that small business contracting couldn’t be better. This has very real policy consequences. After all, why should policymakers bother to question efforts like streamlining, consolidation, bundling, category management and the like, if almost the entire government is getting “A” grades from the very agency whose purpose is to protect and serve small businesses? The SBA’s recent press release smacks of spin instead of unvarnished small business advocacy. For instance, the SBA’s press release brags that the government exceeded its WOSB “subcontract goals.” That’s nice, but subcontracts are awarded by prime contractors, not the feds. The actual dollars the federal government spent on WOSB prime contracts in FY 2017? A mere 4.7%, well short of the not-so-lofty 5% goal. This inconvenient fact isn’t mentioned in the press release–nor is the fact that the government missed its HUBZone goal by a wide margin (3.00% goal, 1.65% achievement). And while the SBA press release trumpets the government’s achievement of the 23% small business goal, it fails to note that small business achievement declined compared with the prior fiscal year: from 24.34% to 23.88%. Indeed, the government’s prime contracting achievements declined in four of five categories; a slight increase in the SDVOSB category was the only exception. Small businesses don’t need spin; they need advocacy. Small businesses face very important policy challenges on the horizon, like the streamlining recommendations from the Section 809 Panel. The last thing small businesses need is for policymakers to evaluate the future of federal contracting with a distorted view about how well the government is already doing when it comes to promoting small business contracting. If the SBA is going to give everyone, or almost everyone, the same goaling grade, then I say we eliminate grading entirely. Moving forward, the SBA’s policy on small business scorecards should be no different than the policy of a second-grade soccer coach at the season-end pizza party: everyone gets a participation trophy. You heard me. Starting next year, each agency will get a bright, shiny SBA-approved trophy. But instead of trying to grade the agency’s performance, and risk sending policymakers rose-colored signals, the trophy will simply confirm that, yep, the agency procured some stuff in the last fiscal year. Congratulations, agency! You participated! You just keep that nice trophy right there on the shelf and show it to your grandmother when she visits for Thanksgiving, okay? Let’s face it, we’re pretty much heading in the participation trophy direction anyway, with “A” grades being devalued by how commonplace they’ve become–and how disconnected they are to agencies’ actual small business achievements. So what do you say, SBA? Let’s toss out the complicated weighted formulas and get started on those soon-to-be-coveted FY 2018 participation trophies. At least now, when Ag and DOE get the same thing, it will make a little bit of sense. View the full article
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    SmallGovCon Week in Review: May 21 – 25, 2018

    Memorial Day is almost here, which means the unofficial start of summer. I hope everyone enjoys the long weekend while remembering all the men and women who gave their lives in service to our country. In this week’s edition of the SmallGovCon Week in Review, two Topeka men were named in a scheme to fraudulently obtain government contracts set aside for minority and disabled military veteran contractors, contractors argue that a Pentagon proposal to curb bid protests would deny fair access of companies seeking relief from potentially unjustified awards, and much more (including some special pre-holiday snarky commentary by yours truly). Procurement fraud allegations from right here in Kansas: two Topeka businessmen are named in $352 million dollar fraud scheme. [KSNT] A contractors’ group is urging the Senate to reject a DoD proposal to curb bid protests. [Government Executive] (And see my article about how DoD bid protests are already exceedingly uncommon). The SBA has announced that the government met its 23% small business goal in FY 2017. [PR Newswire] (That’s good news, of course, but the SBA’s spin omits the fact that the government missed its WOSB and HUBZone goals once again). The Army is recompeting $600 million follow-on contract to provide information technology services worldwide. [Bloomberg Government] Simplified buying has increased over the years and this year agencies are on track for a record-breaking fiscal year. [GovConChannel] The DOE has issued a revised Small Business First policy to foster dynamic business environment for the small business community. [U.S. Department of Energy] (And given that DOE missed all four of its socioeconomic goals in FY 2017, a renewed focus on small business seems wise). As agencies approach the year-end surge, they’ll look for ways to spend their remaining IT funds quickly, and SEWP is set up to do just that. [Bloomberg Government] Two men who took part in a bid-rigging and bribery scheme involving $54 millions in contracts at Fort Gordon received the maximum prison terms of five years Wednesday despite the recommendation from the U.S. Attorney’s office for a reduction in their sentences. [The Augusta Chronicle] View the full article
  10. Koprince Law LLC

    Thank You, DOE Small Businesses!

    I am back in Lawrence after a great trip to Houston, where I spoke at the DOE 17th Annual Small Business Forum & Expo. My breakout session on the Top 10 Legal Issues for Small Contractors covered a range of topics from enhanced debriefings to joint ventures. A big thank you to Earl Morgan, Anita Anderson, and all the other organizers of this outstanding event. And thank you, also, to everyone who attended my session and stuck around afterward to ask questions. I’ll be in Wichita on June 5 to present a much longer version (a half-day!) of the Top 10 Legal Issues seminar. To register, visit the Kansas PTAC website. I hope to see you there! View the full article
  11. It’s that time of year again. School’s ending for the summer and kids are coming home (some sheepishly) with their report cards. And with the close of Fiscal Year 2017, the federal government has also been given its report card. Like last year, the FY 2017 report card reveals a mixed bag. Though the SBA gave the federal government another “A,” the bottom-line numbers reveal a troubling trend for small business government contractors. As a quick background, the SBA is obligated under federal law to set small business participation goals for the federal government. In addition to the overall 23% goal for small business prime contract awards, the government should also award at least 5% of its prime contract awards to WOSBs and small disadvantaged businesses and 3% to SDVOSBs and HUBZone companies. Last year, the SBA gave the federal government an “A” grade for achieving its small business prime contracting effort in Fiscal Year 2016. This grade came even despite missing its HUBZone and WOSB participation goals “by a country mile.” On the face of it, the federal government enjoyed more success in 2017: the federal government awarded more contracts, by dollar value, to small businesses last year than it did the prior year ($105.7 billion in 2017 versus slightly less than $100 billion in 2016). 23.88% of these contracts were issued as prime contracts to small businesses, 9.10% to SDBs, and another 4.05% to SDVOSBs—all in excess of the stated goals. And on an agency-level basis, the 2017 grades are fairly similar to those last year: 20 agencies earned an “A+” or an “A,” 3 agencies received a “B,” and 1 was given a “C.” Just like last year, however, the federal government missed its HUBZone and WOSB prime contracting goals: it awarded only 1.65% of its prime contracts to HUBZones and only another 4.71% of contracts to WOSBs. Digging into the report deeper gives pause for concern. In almost every category, the federal government’s prime contracting achievement numbers declined from just last year. For example: In 2016, the government awarded 24.34% of prime contracts to small businesses, but that number fell to 23.88% in 2017; and 9.10% of prime contracts went to SDBs in 2017, compared to 9.53% in 2016. These declines might seem trivial. But when the government procures hundreds of billions of dollars of goods and services annually, even the smallest decrease represents a significant hit. Perhaps more troubling, however, is the government’s continuing (and worsening) failure to prioritize HUBZone and WOSB awards. Though the 2016 report highlighted deficiencies in the government’s efforts, it backslid even more in 2017: it awarded 4.71% of prime contracts to WOSBs in 2017 (down from 4.79% in 2016) and only 1.65% to HUBZones (versus 1.67% in 2016). The SBA’s small business participation goals should represent the minimum aspirations for the federal government. But so long as the SBA is willing to provide positive affirmation in the face of some significant failures, what incentive do agencies (or the federal government as a whole) have to actually increase their small business participation levels? Just as any parent would be concerned if their child came home with a report card showing worsening performance across almost every metric, the SBA should be concerned with the government’s small business participation performance. If you ask us, ignoring the troubling trend in small business participation won’t lead to any substantive improvement; instead, the SBA should demand better from the federal government. View the full article
  12. An incumbent contract wasn’t entitled to receive “extra credit” in the agency’e evaluation of offerors’ transition plans. In a recent bid protest decision, the GAO held that the agency reasonably awarded a non-incumbent more strengths than the incumbent in the evaluation of transition plans, writing that incumbency alone doesn’t automatically entitle the incumbent to the highest-possible transition plan score. The GAO’s decision in Integral Consulting Services, Inc., B-415292.2, B-415292.3 (May 7, 2018) involved an Army task order competition seeking a contractor to provide various support services primarily in support of the National Ground Intelligence Center. The solicitation called for a best value tradeoff considering technical merit and cost. The solicitation specified that the Army’s evaluation of the technical factor would include an analysis of each offeror’s transition plan. The Army was to evaluate “[t]he Offeror’s understanding of the processes and procedures required to transition from an incumbent contract,” as well as “the Offeror’s understanding of the risks associated with its approach, and the strategies it will employ to mitigate those risks.” The Army received six proposals. Integral Consulting Services, Inc. was one of the six offerors. The Army then established a competitive range, which included Integral. Integral’s transition plan relied on its status as the incumbent. Integral proposed a complete transition on “day one,” well in advance of the solicitation’s 90-day transition period. In its discussions with Integral, the Army identified two weaknesses in Integral’s transition plan. The Army said that Integral’s transition plan “lacked details regarding the processes and procedures it would use, and did not clearly identify risk areas or mitigation strategies, to successfully accomplish transition on day one, as proposed.” After reviewing Integral’s response, the Army found that Integral had successfully resolved the weaknesses by performing a “more comprehensive look” into its experience and knowledge. The Army ultimately assigned Integral a single strength for Integral’s transition plan because “unlike a new entity coming in to assume control of the program, the incumbent has only to implement processes already in place.” The Army gave two strengths to the transition plan of another offeror, The Buffalo Group. In its evaluation of TBG, the Army assigned a strength for exceeding the 90-day transition timeline and another strength for TBG’s risk mitigation plan. TBG and Integral were both assessed overall “Outstanding” ratings for the technical factor. However, TBG’s total proposed cost/price was approximately $89.7 million whereas Integral’s was approximately $131.6 million. The Army awarded the task order to TBG. Integral filed a GAO bid protest challenging the award to TBG. Among its grounds of protest, Integral argued that it was unreasonable for the Army to have assigned more strengths to TBG’s transition plan than to Integral’s. Integral contended that, as the incumbent, no other offeror could pose less transition risk, which should have led to Integral receiving the higher score. The GAO wrote that “[t]here is no requirement that an incumbent be given extra credit for its status as an incumbent, or that an agency assign or reserve the highest rating for the incumbent offeror.” Here, the Army found that it was reasonable for the Army to find that TBG’s transition plan merited two strengths and Integral’s only one. Moreover, given the large difference in cost/price, there was nothing in the record to suggest that the single extra strength TBG received for its transition plan was “a discriminating factor in favor of TBG in the award decision.” GAO denied the protest. Make no mistake–incumbency often is an advantage. According to a survey published last year, the win rate for incumbents was 54 percent in 2016. But the incumbent win rate was down significantly from 2015, and the study’s authors suggested that pricing pressures may be largely to blame. Whatever the reasons, the GAO case law makes clear that mere incumbency does not entitle an offeror to the highest-possible ratings. GAO has previously held that the incumbent is not entitled to the highest past performance rating. As Integral Consulting Services demonstrates, the same holds true for transition plans. View the full article
  13. How does a company go about challenging overly restrictive terms in a solicitation? In order to make such a challenge (and some of them do succeed), it is necessary to show something more than just the fact that a protestor cannot meet the terms of the solicitation. A recent GAO decision provides a real-world example of how not to challenge a solicitation as overly restrictive of competition and reinforces that this can be a difficult thing to prove at GAO. In Armstrong Elevator Company, B-415809 (March 28, 2018), Armstrong Elevator Company (Armstrong) protested an RFP from the GSA for elevator and escalator modernization and maintenance. The Solicitation sought a “contractor to perform a fixed-price design-build contract for a vertical transportation modernization project” for several sites including 16 passenger elevators. In particular, the base contract sought replacement of eight passenger traction elevators and one freight traction elevator, along with specified support functions such as electric and painting. The five option CLINS included tasks such as replacing eight additional passenger traction elevators and one freight traction elevator, modernization of elevators, and maintenance and call-back contract services. For past performance, the solicitation “required offerors to demonstrate successful experience as a contractor responsible for design and construction of three ‘similarly complex’ elevator projects that were substantially completed in the last five years.” A “similarly complex” project was defined as meeting all of the five requirements: The project included 10 or more traction elevators; The project included a follow-on maintenance and call-back contract services of at least three years; The project included fire recall replacement, electrical service revisions/upgrades, and emergency power interface, all in support of elevators; The total elevator project construction cost at award was at least $4 million; and The project was performed in an occupied and functioning building. Armstrong challenged the requirements for similar past performance projects as overly restrictive, noting it could meet all five requirements, but not with a single project. GAO explained that “[t]he determination of a contracting agency’s needs, including the selection of evaluation criteria, is primarily within the agency’s discretion and we will not object to the use of particular evaluation criteria so long as they reasonably relate to the agency’s needs in choosing a contractor that will best serve the government’s interests.” Further, “[t]he fact that a requirement may be burdensome, or even impossible for a particular firm, does not make it objectionable if it meets the agency’s needs.” In this case, the GAO found, the restrictive past performance requirements were reasonably related to the agency’s needs. The GAO wrote that, for example, the requirement for experience with 10 or more traction elevators was reasonable because “the entire scope of work would cover the modernization of 20 elevators and 6 escalators, and that the minimum requirements for this factor were developed in accordance with GSA’s practice to develop its technical evaluation based on a project’s full requirements.” GAO denied the protest, writing “[a]lthough the protester may disagree with the agency’s assessment of its needs, its disagreement with the agency’s solicitation approach and assessments, without more, does not render the agency’s determination unreasonable.” The Armstrong Elevator Company protest makes two important points. First, in order to challenge the terms of a solicitation as being overly restrictive, a firm must show more than the fact that the firm itself is not capable of meeting those terms. And second, GAO will review the agency’s explanation for the terms of the solicitation with some deference. So long as the solicitation’s restrictions are reasonably related to the government’s needs, the protest will likely be denied. View the full article
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    SmallGovCon Week in Review: May 14 – 18, 2018

    As we head into the second half of May, it is time for graduation parties and summer fun. But before we enjoy the weekend, it’s Friday and time for the SmallGovCon Week in Review. In this week’s edition, we highlight GAO giving contractors a second chance to make it into the OASIS unrestricted pool; an audit showing that DOD isn’t giving small businesses enough opportunity; DSS’ plans for a new methodology to vet security of contractor facilities; and more. GSA plans to add vendors to two OASIS Unrestricted pools. [Bloomberg Government] Google employees resign over company’s involvement with Project Maven. [fedscoop] Auditor report states DSS only accomplished 60% of its workload during 2016. [Nextgov] Google employees resign over company’s involvement with Project Maven. [fedscoop] North Carolina man sentenced to 6 years in prison for accepting bribes at U.S. Army Communications. [U.S. Department of Justice] Head of GSA looking to reshape procurement schedules to reduce duplication and save money. [fedscoop] Google employees resign over company’s involvement with Project Maven. [fedscoop] View the full article
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    Late Bid Revision Costs Bidder The Award

    When a bidder submits a bid under a sealed bid procurement, it is responsible for ensuring that the bid is timely submitted. But what happens if a bidder wants to revise a bid that’s already been submitted? As a recent GAO case shows, even a revised bid must be timely submitted in order for it to be considered. If a bidder tries to revise its bid too late in the process, it might end up costing itself the award. The facts in Williams Building Company, Inc., B-415317.3 (April 12, 2018) are pretty interesting. The Department of Veterans Affairs issued an invitation for bids for construction services and scheduled the bid opening for 9:00 on September 13. Williams Building Company submitted its bid at 8:30 but, as the deadline for opening drew close, it asked the Contracting Officer if it could change the bid. The Contracting Officer handed the bid back to Williams, who changed the bid and resubmitted it at 9:02. One minute later, the Contracting Officer opened the bids, and Williams’ revised bid was found to be the lowest price. After a couple of bid protests—first by Williams (challenging the rejection of its bid as late, to which the VA took a voluntary corrective action) and then by the second-lowest price bidder (arguing that Williams’ bid should have been considered late and, thus, unawardable)—the VA ultimately rejected Williams’ bid as late. Williams filed a GAO protest challenging its exclusion. It argued that even if its revised bid was considered late, the VA still should have considered its initial bid for the award. GAO rejected Williams’ argument, focusing on who had control of the bid at the time it was due. In doing so, GAO noted that “[t]he time a hand-carried bid is considered submitted is determined by the time the bidder relinquishes control of the bid to the government.” Although Williams’ initial bid was timely submitted, the VA relinquished control of the bid back to Williams when Williams asked to make revisions. Because the VA didn’t have control of Williams’ bid—either initial or revised—at the submission deadline, the VA could not have properly considered it for the award. When you think about it, this rule makes sense. Otherwise, bidders might be incentivized to submit incomplete or inaccurate bids by the deadline, only to “revise” them to include more complete terms or pricing after opening. Agencies wouldn’t know which bids are valid and which aren’t, and the bid submission deadline would be rendered a nullity. This result would cause chaos in the bid opening process. So what’s a bidder to do if it wants to make changes to its bid? GAO’s decision suggests a few possibilities. Perhaps most obviously, the bidder should give itself enough time to make any revisions before the submission deadline. But if the bidder is cutting it close, it might consider exchanging its submitted bid for another instead of “pulling back” the submitted bid to make revisions. That way, the bid remains in the government’s control and will be considered for the award. Though the underlying rule requiring bids to be timely submitted is important, the real reason I wanted to write about this decision is the irony of Williams’ bid revision: its initial bid was about $4.8 million, and its revised bid was for a little more than $4.9 million. The awardee’s bid, however, was almost $5.4 million. In other words, Williams’ bid would have been the lowest price awardee either way. Its late revision cost it the contract award. The rule discussed in Williams Building Company is relatively straightforward; its application can have enormous consequences. In this case, a late bid revision cost the bidder an award. Bidders under a FAR Part 14 procurement should be aware of the submission deadline to timely submit their bid packages. View the full article
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    Thank You, Michigan!

    I am back in Lawrence after a great trip to Flint, Michigan on Friday for the Region 6 PTAC’s Meet the Buyer event. My luncheon keynote covered some of the most important recent developments for government contractors, including the SAM “hack,” some major pieces of the 2018 National Defense Authorization Act, and much more. A big thank you to Jasmine McKenney, Maureen Miller and their colleagues for inviting me to speak. And thank you, as well, to everyone I met at the event–particularly those who stuck around after the keynote to ask such great questions. Next up on the travel agenda: a flight south to Houston, where I’ll be presenting next week at the 17th Annual DOE Small Business Forum & Expo. Hope to see you there! View the full article
  17. On May 21, 2018, the VA will suspend SDVOSB and VOSB applications for “approximately thirty (30)” days while the VA transitions to a new VIP interface. According to a notice posted on the VA OSDBU website, the suspension will affect “both new applications and applications for re-verification.” However, the VA CVE “will continue processing previously submitted applications during the suspension.” The VA doesn’t beat around the bush: “any applicants (Veterans) that desire to have their cases begin the verification process before the suspension start date, should strongly consider case submission completion to VIP prior to May 21, 2018.” The temporary suspension will draw the headlines–as it does in this post. But the good new is that the updated system sounds like it will allow for a more user-friendly experience. According to the VA’s notice, the updated system will allow for easier uploads, automatic validation of SAM profiles and DUNS numbers, and other features designed to make it easier for veterans and their representatives to use. Fingers crossed that will be the case. In the meantime, SDVOSBs and VOSBs should circle May 21 on their calendars. If you’re planning on an SDVOSB or VOSB application, it’s not “now or never,” but it is “now or June.” View the full article
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    SmallGovCon Week in Review May 7 – 11, 2018

    For all the mothers out there, happy Mother’s Day! We hope you have a great, relaxing weekend. But first, it’s Friday, and time for the SmallGovCon Week in Review. In this week’s edition, we’ll discuss an important update to the VA’s CVE application process. We’ll also update you on the on-going saga regarding the Department of Education’s student loan servicing contracts and, as is our (unfortunate) custom, highlight some of the week’s examples of government contractors behaving badly. Enjoy! On May 11, the VA issued an important update regarding the CVE application process as part of its rollout of the new Vendor Information Pages (VIP) database. Beginning May 21, the VA will suspend incoming applications for SDVOSB/VOSB status and anticipates that the suspension will last about a month. CVE will still process previously-submitted applications during the suspension. If your business is interested in obtaining SDVOSB or VOSB status, CVE recommends that you submit your application prior to the May 21 suspension deadline. Check SmallGovCon for updates on the CVE’s application process. Department of Education rescinds contracts to collect overdue student loans. [Washington Post] Former administrator for Bureau of Prisons agrees to pay $50,000 to resolve allegations that he violated the Anti-Kickback Act. [Justice.gov] US Attorney’s office for Southern District of Georgia announces procurement fraud prosecutions. [savannahnow] Former Military Contractor sentenced for bribery and fraud. [Justice.gov] View the full article
  19. The Civilian Board of Contract Appeals can be used to pursue appeals of claims of all sizes. A special small claims process is available for lower-dollar appeals. A recent CBCA decision is a good reminder of the small claims procedure available at the Board. In this case, the claimant was able to use this streamlined procedure to win an appeal of its claim for $7,272.17. In Hal-Pe Associates Engineering Services Inc., CBCA 5361 (2018), Hal-Pe Associates Engineering Services, Inc. sought compensation for extra work it performed as part of VA construction project at an Ambulatory Care Center in Columbus, Ohio. Hal-Pe claimed it finished all requirements of the project by January 20, 2015. The VA argued that the project was not completed because Hal-Pe did not “collect post-installation data for the harmonic correction units” it installed. Hal-Pe argued to the Contracting Officer that post-installation monitoring was not required under the contract but eventually performed the work and then filed a claim for equitable adjustment in the amount of $7,272.17 for the extra work. After the CO denied the claim, Hal-Pe filed an appeal with the CBCA. Hal-Pe elected to have the appeal heard under Board Rule 52, Small Claims Procedure. The small claims procedure is available if the amount in dispute is $50,000 or less or, if the claimant is a small business, an amount in dispute up to $150,000. The appellant (and only the appellant, as the government cannot decide this) must choose to use the small claims procedure within “30 calendar days after the appellant’s receipt of the agency answer.” Under the small claims procedure, “[t]he presiding judge may issue a decision, which may be in summary form, orally or in writing. . . . A decision shall be final and conclusive and shall not be set aside except in the case of fraud. A decision shall have no value as precedent.” In a small claims case, “Pleadings, discovery, and other prehearing activities may be restricted or eliminated.” In addition, the presiding judge is supposed to issue a decision within 120 days of when the appellant opted for the small claims procedure. In this case, both parties also elected to have the appeal decided without a hearing under Board Rule 19. The Board reviewed the contract at issue and found that it required “power metering of harmonic distortion to be performed in advance of filter installation, but not again at the completion of the work as ultimately required by respondent.” While the contract also stated that devices are to be set properly per drawings and specifications, this was not a clear requirement for the post-installation power metering and collection of data required by the VA. The Board reviewed the record and found it included detailed costs to support the $7,272.17 claim, and the VA offered no rebuttal. The CBCA granted the appeal and awarded the full amount claimed–$7,272.17, plus interest. When only a small amount is in dispute, a contractor may wonder whether the time and expense involved in an appeal are worth it. The Hal-Pe Associates Engineering Services decision is a good reminder that the small claims procedure can allow for a streamlined process for small businesses with appeals of claims under $150,000 to have them resolved by the CBCA. View the full article
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    SmallGovCon Congratulates Matthew Schoonover!

    I am very pleased to announced that Matthew Schoonover has been elevated to the partnership at Koprince Law LLC. Since joining the firm in early 2015, Matt has worked tirelessly on behalf of government contractors across the country. He’s developed a great reputation in the field and is regularly asked to speak at industry events (in fact, he’s on the road today for a government contracts conference in Texas). Matt is also a regular contributor to SmallGovCon, where his “5 Things You Should Know” series is one of the blog’s most popular features. Above all, Matt’s an all-around good person and embodies the values of ethics and professionalism that we strive to achieve every day. Congratulations, Matt! View the full article
  21. It’s Friday and I’m looking forward to a great weekend here in the Midwest. The Kentucky Derby will be run on Saturday, so if horses are your thing, grab your best (or most outrageous) hat, a mint julep and enjoy! But first, it’s time to find out what is new in the wide world of government contracts. In this week’s edition of the SmallGovCon Week in Review, an acquisition reform panel says it is on track to reduce the size of the DFARS by 50%, alleged SBIR fraud results in a $1.9 million settlement, the DoD resumes its attack on contractors’ protest rights, and more. A military contractor accused of cheating the Pentagon is still actively working on a government contract, ABC News says. [abcnews.go.com] The FAR Council has issued a change officially amending the DoD task order bid protest threshold from $10 million to $25 million. [Federal Register] Apparently unsatisfied with this rollback of contractors’ protest rights, the DoD is pushing legislation to sharply limit bid protests in the Court of Federal Claims. But, as the article points out, the major RAND Corporation study says that DoD bid protests are already “exceedingly uncommon.” [Federal News Radio] The FAR Council also issued a final rule providing for additional duties for agency OSDBUs. [Federal Register] That very busy FAR Council issued another final rule, this one raising the dollar threshold for the audit of prime contract settlement proposals and subcontract settlements. [Federal Register] A DoD reform panel says it is on track to reduce the size of the DFARS by 50%. I hate to be that guy, but I’ll believe it when I see it. [Federal News Radio] A Maryland company and two former top officers have agreed to pay nearly $2 million to settle allegations of SBIR fraud. [Department of Justice] View the full article
  22. SBA’s regulations say that in order to qualify as a small business under a set-aside or sole-source contract seeking manufactured products or supply items, an offeror ordinarily must either be the manufacturer of the end item or qualify under the nonmanufacturer rule. This post will discuss five things your small business should know about qualifying as a manufacturer under the SBA’s rules; in a future post, I’ll walk through the nonmanufacturer rule. Let’s get to it: here are 5 Things You Should Know about the SBA’s definition of manufacturer. When does the definition of manufacturer apply? SBA’s rule applies whenever the government seeks manufactured products or supply items under a solicitation reserved for small businesses (including 8(a), HUBZone, SDVOSB, or WOSB companies). The solicitation should make this fairly clear. But if you have any doubts, take a look at the NAICS code: if it’s assigned a code beginning with “31,” “32,” or “33” (as in, NAICS code 311111 (dog and cat food manufacturing) or 339940 (office supplies (except paper) manufacturing)), the agency wants a manufactured product or a supply item. If it’s still not clear, ask the contracting officer for clarification before bidding. Are you the manufacturer? SBA’s regulations say that the manufacturer is the company that performs the primary activities in transforming or assembling materials into the end item being procured. To qualify, the company must use its own facilities, and as a result of the company’s work, the end item must “possess characteristics which, as a result of mechanical, chemical, or human action, it did not possess before the original substances, parts, or components were assembled or transformed.” SBA also says that performing “minimal operations” doesn’t do the trick, and cautions that “[f]irms that add substances, parts or components to an existing end item to modify its performance will not be considered the end item manufacturer where those identical modifications can be performed by and are available from the manufacturer of the existing end item.” That’s a definition only a lawyer could love, so keep the following factors in mind to help determine whether you’re the manufacturer: * The proportion of total value in the end item added by your efforts (excluding overhead, testing, and quality control costs and profit); * The importance of the elements you add to the end item’s overall function, even regardless of value; and * Your technical capabilities; plant, facilities, and equipment; production or assembly line processes; packaging and boxing operations; labeling of products; and warranties. In most cases, it should be fairly obvious whether your company is the manufacturer. But if there are doubts, it may be wise to review relevant decisions of the SBA’s Office of Hearings and Appeals, which decides appeals relating to the rule. It’s also important to note that the SBA’s definition is not identical to those used in domestic preference statutes like the Trade Agreements Act and Buy American Act. Qualifying as a manufacturer under a domestic preference statute doesn’t automatically satisfy the SBA. Can there be more than one manufacturer? Nope. Well, at least not for size purposes—under SBA’s rules, there can only be one manufacturer of the end item being procured. So, if you’re working with another company’s products, make sure that you’re the manufacturer. Does the manufacturer rule apply to multiple award contracts? Yes, it does. But there’s no requirement that each and every item acquired under a multiple-award contract be manufactured by a small business. If 50% or more of the estimated contract value is for items that are manufactured by small businesses, then the rule is satisfied. But if less that 50% of the items acquired (by value) are from small businesses, then SBA would have to issue a waiver for the contract to be set aside. Is your company eligible for the award even if it’s not the manufacturer? Maybe. As I mentioned at the beginning of this post, a small business must either qualify as the item’s manufacturer or meet the nonmanufacturer rule’s requirements in order to be eligible for the award. We’ll discuss those requirements in a future post. *** So that’s the gist of SBA’s definition of manufacturer. Again, a separate post will discuss the nonmanufacturer rule, and it’s important to not mix the two. If you’re a small business bidding on a solicitation for manufactured products or supply items, keep this rule in mind. And, as always, give me a call to discuss any questions. View the full article
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    GAO Releases Updated Bid Protest Guide

    Coinciding with the May 1, 2018 requirement that GAO bid protests be filed using the new Electronic Protest Docketing System, the GAO has released an updated version of its “Descriptive Guide” to the GAO bid protest process. This Guide–the tenth edition published by GAO–is packed with useful information and tips about using EPDS and about the protest process in general. A few EPDS-specific highlights follow. The GAO reminds readers that “[p]rotests (with the exception of protests containing classified materials) must be filed through [EPDS] in accordance with EPDS instructions.” Mindful of the strict timeliness rules applicable to GAO bid protests, the GAO wisely advises readers that “[a] protester should be careful to allot sufficient time to set up an account and file the protest in EPDS.” Especially now, with EPDS mandatory for the first time, it will be imperative for protesters to avoid waiting to the last minute to set up their EPDS accounts. The GAO says that “EPDS will automatically send the agency e-mail notice advising it that a protest has been filed immediately upon the filing of the protest.” That notice “is important because it is the official notice that may trigger a statutory stay of the award or performance of a contract pending GAO’s decision.” However, the GAO reminds readers that “[a]lthough the notice of the filing of a new protest generated by EPDS to the agency may trigger a statutory stay, GAO does not review agency decisions in this regard.” The GAO informs readers that protest decisions will be “distributed to the parties through EPDS.” The GAO will continue to publish decisions on its website, however. Decisions that do not contain protected information are generally available “within 24 hours of the case being closed” and public versions of decisions containing protected information “will be prepared as soon as possible,” with GAO’s goal to issue such decisions “within 2 to 3 weeks after the protected decision is issued.” The EPDS requirement is a major change in the GAO protest process. For attorneys, business owners and others interested in the new process–and in learning some more about how GAO protests work in general–the new Descriptive Guide is well worth a read. View the full article
  24. The SBA has rejected several recommendations for major changes in how the SBA calculates small business size status. In commentary published in the Federal Register last week, the SBA rejected (among other things) recommendations that it use average employee count to evaluate the sizes of construction firms and that other firms’ sizes be measured by profits or net worth instead of average annual receipts. The SBA’s commentary accompanied the publication of the SBA’s revised Size Standards Methodology White Paper, which is now available on the SBA’s website. The White Paper explains how the SBA establishes, reviews, and modifies its small business size standards. Way back in October 2009, the SBA solicited commentary on the White Paper in effect at the time. The SBA also sought comments on various policy questions the SBA must consider when developing size standards, such as “how high a small business size standard should be, should there be a single measure of business size for all industries (i.e., employee or annual receipts)” and so on. The SBA accepted comments until the end of the 2015 fiscal year. Now, some 8 1/2 years after the SBA first sought public comments, the SBA has published its responses to those comments. If you’re something of a size policy nerd (I’ll admit to it!), the SBA’s Federal Register commentary is worth reading in its entirety. But for those who may not put themselves in that category, here are some of the highlights: Profit measure rejected. The SBA rejected a suggestion to establish size standards based on gross profits rather than average annual receipts or employee count. “If a size standard were established in terms of gross profits,” the SBA wrote, “a company with hundreds of millions in revenues and thousands of employees can qualify as small under a profits-based size standard.” In fact, the SBA said, “t is not unusual for very larger companies to have little or negative profit over the course of business cycles.” Plus, “a firm’s profits can be manipulated and thus would be an inconsistent and misleading measure of [a] firm’s size for size standards purposes.” Probably once a month or so, I hear from a business owner who asks whether size standards are already based on profits. It’s a rather common misconception. But not only are profits not the measure of small business size, the SBA has no plans to head in that direction. Employee count for construction rejected. The SBA also rejected a suggestion to use average employee count, rather than average annual receipts, to measure the sizes of construction companies. “Under SBA’s prime contractor performance requirements . . . a general construction company needs to perform as little as 15 percent of the value of the work and a specialty trade contractor can perform as little as 25 percent of the work with their own resources,” the SBA wrote. “SBA is concerned that employee based size standards could encourage construction companies near the size standard to subcontract more work to others to bypass the limitations on subcontracting and remain technically a small business.” The SBA concluded: “[r]eceipts, as a representative of the overall value of a company’s entire portfolio of work in a given period of time, are a better measure of the size of a construction company to determine its eligibility for Federal assistance.” Net worth limits rejected. The SBA similarly rejected a proposal to base size standards on net worth, saying that such a measure “is not practicable.” The SBA explained that “[a] company’s net worth can be affected by a number of things, such as debt, repurchased corporate stock, etc.” Furthermore, “data on net worth is not available by industry,” which would make it impossible for SBA to fairly establish size standards based on that measure. No mid-tier or “micro” size standards. The SBA also rejected calls to establish new size standards for “mid-sized” businesses (certain companies that have outgrown the small business size standard) and “micro” businesses (such as those with less than $100,000 in sales or fewer than 20 employees). In rejecting these proposals, the SBA cited “significant complexity,” a “much more burdensome system and reporting requirements” and the fact that “Congress would need to establish new small business procurement goals for each tier to ensure that small businesses at different tiers have a fair access to Federal contracts.” The SBA’s commentary is chock-full of interesting information, and not everything is the SBA saying “no.” The SBA does make some proposed improvements and refinements to its size standards methodology. The SBA also seeks public commentary on a variety of important size questions, such as whether there would be a uniform maximum size standard, and whether the SBA should consider lowering any size standards. Public comments are due by June 26, 2018. View the full article
  25. It’s going to be a beautiful weekend here in Lawrence, with temperatures in the 70s and lots of sun. I’m looking forward to some time outdoors finally enjoying the spring. But before I hit the exit at the office, it’s time for our weekly dose of government contracts news and notes. In this week’s edition of the SmallGovCon Week in Review, a well-known large federal contractor is accused of underpaying its employees, a commentator asks whether RFIs are one big waste of time, the Secretary of Defense says criminal charges are likely as part of a major contracting investigation, and much more. A well-known large contractor has been accused of underpaying 10,000 workers. [washingtonpost.com] Spending surges to a record on government-wide telecommunications contract vehicles. [about.bgov.com] Are RFIs a waste of time? One commentator takes a look. [fcw.com] Defense Secretary James Mattis says the government likely will file criminal charges related to an investigation of whether a contractor misspent millions in federal dollars. [Federal News Radio] The VA has proposed additional VAAR revisions as part of its ongoing effort to overhaul its agency FAR supplement. [Federal Register] The GAO has issued its annual report on opportunities for agencies to reduce “fragmentation, overlap, and duplication.” [GAO] View the full article