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  1. 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
  2. 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
  6. 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
  8. 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
  10. 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
  11. 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
  13. 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
  14. 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
  15. As agencies look for ways to streamline acquisitions, task and delivery order procurements are becoming increasingly popular. But an agency doesn’t have unfettered discretion to award work under a multiple-award contract; each task or delivery order must be within the scope of the awarded IDIQ. A recent GAO opinion considers what happens when an agency issues task orders that are outside the scope of the underlying multiple-award contract. In Western Pilot Service, B-415732 (March 6, 2018), Western Pilot Service and others protested the award of a task order request for proposals for single engine air tanker (SEAT) flight services to support the Bureau of Land Management’s wildfire suppression operations. The BLM issued two solicitations, in keeping with historical precedent. One was for aircraft to be available on-call when needed and would be for surge capability (the on-call solicitation). Awardees would then have the option to accept or decline work. This on-call solicitation was to be awarded based on a best-value tradeoff. The other solicitation was for 33 aircraft for dedicated BLM use for guaranteed periods of at least 100 days that would serve as the base of the fire suppression operations (the exclusive-use RFP). The exclusive-use RFP required contractors to devote their aircraft for the full 100-day task order. Again, BLM would make award based on a best-value tradeoff basis. For the 2017 wildfire season, a series of protests led the BLM to cancel the exclusive-use procurement, leaving only the on-call procurement in place for that season. After the 2017 wildfire season, instead of issuing a new exclusive-use solicitation, BLM issued the task order request for proposals, challenged here, under the on-call IDIQ contracts. The TORP called for more than 40 task orders for fixed periods at 21 locations for periods of 75, 90, and 100 days. The protesters argued that the flight services contemplated under the TORP were beyond the scope of the on-call IDIQ contracts, and the way that flight services would be furnished under the “TORP is materially different than how services are provided under the on-call contract.” GAO noted that, absent exceptions that allow for sole-source or limited competition, “[t]ask orders that are outside the scope of the underlying multiple-award contract are subject to the statutory requirement for full and open competition set forth in the Competition in Contracting Act of 1984 (CICA).” To determine if a task or delivery order is beyond the scope of an underlying contract, GAO looks at whether the order is “materially different from the original contract,” based on “the circumstances attending the original procurement; any changes in the type of work, performance period, and costs between the contract as awarded and the order as issued; and whether the original solicitation effectively advised offerors of the potential for the type of orders issued.” GAO also examines “whether the agency itself has historically procured the task order services under a separate contract, such that it appears that the agency itself has viewed the task order services as separable and essentially different in nature.” Based on this somewhat vague standard, GAO compared the on-call contracts to the TORP and found “that SEAT flight services for guaranteed periods of at least 75 days at predetermined locations are beyond the scope of the protesters’ on-call contracts.” GAO concluded that the “TORP essentially converts the on-call contracts into exclusive-use procurement vehicles.” GAO compared the specifics of the two types of services (on-call and exclusive-use), noting that the on-call services were for emergencies, for shorter periods when needed, with aircraft moving to various locations around the country. The exclusive-use TORP services, conversely, were for one location, for 75 days or more, and for BLM use for an entire period. The historical distinction between exclusive-use and on-call services also helped persuade GAO that an exclusive-use order under the on-call contract was beyond the scope of the original award. GAO noted that there was competitive prejudice because the protesters “did not anticipate that their on-call daily availability, flight hour, and mobilization rates would become ceiling prices for a task order competition for the exclusive-use services, something that had not been done previously.” If they had known, they would have structured their pricing differently. What to make of this decision, then? It certainly seems as if the agency got tired of the cycle of protests and decided to stick with its existing, on-call procurement in order to fit the acquisition needs that had been met by the exclusive-use solicitation. In other words, BLM tried to fit a round peg (the exclusive-use need) into a square hole (the on-call contract vehicle). In the world of multiple-award contracts, such a practice is not allowed. View the full article
  16. Koprince Law LLC

    SmallGovCon Welcomes Nicole Pottroff

    I am pleased to announce that Nicole Pottroff has joined our team of government contracts attorney-authors here at SmallGovCon. Nicole is an associate attorney with Koprince Law LLC, where her practice focuses on federal government contracts law. Before joining our team, Nicole practiced law in the Kansas City area, where she worked on a variety of complex civil litigation matters. Check out Nicole’s full biography to learn more about our newest author, and don’t miss her first SmallGovCon post on when the government must include a company in a limited simplified acquisition procurement. View the full article
  17. A recent GAO decision has shed light on the question of what an agency must do to adequately promote competition during a simplified acquisition. There is still no bright line for determining which agency actions meet this threshold. However, the recent decision in Bluehorse Corp., B-415641 et al. (Feb. 6, 2018), established that merely inquiring about a solicitation, without taking further action as recommended by the procuring agency, is not enough to force an agency to include a company in a limited competition. To promote contracting efficiency, the FAR allows for special simplified acquisition procedures to be applied to certain procurements that do not exceed the regulatory threshold. An agency is not required to use the ordinary full and open competition standards to conduct these simplified acquisition procurements. However, what exactly is required of a federal agency under a simplified acquisition procedure has yet to be clearly defined by the applicable provisions of the FAR and the relevant GAO case law. The FAR requires the agency to “promote competition to the maximum extent practicable” and establishes that this standard can generally be met through the solicitation of at least three sources. See FAR § 13.104. GAO’s decision in Bluehorse involved two requirements for clear diesel fuel issued by the Department of the Interior, Bureau of Indian Affairs. Bluehorse Corporation, an Indian Small Business Economic Enterprise, attempted to protest the oral solicitation and award of these contracts to a competitor based on several grounds, all of which were denied by GAO. The procurement was conducted under simplified acquisition procedures, because the dollar value for the requirements was below $25,000, as required by FAR § 13.003. These contracts required the supply of clear diesel fuel to two San Carlos Irrigation Project (“SCIP”) locations in Coolidge, Arizona, and Sacaton, Arizona. The BIA conducted market research via an ISBEE search in SBA’s Dynamic Small Business Search database to identify ISBEE petroleum refineries capable of performing the two requirements. The search yielded thirty-eight ISBEE sources, including the protester, Bluehorse. An SCIP representative then contacted four potential ISBEE suppliers from this list regarding each procurement. These suppliers all purported capability to meet the contract requirements. After orally soliciting quotes from three of these suppliers, BIA awarded the contracts to the vendor with the lowest quoted price for each contract. Bluehorse argued that the agency improperly denied it the opportunity to compete by failing to solicit Bluehorse’s oral quotations for these contracts. To support its challenges, Bluehorse relied on its history of work at the Coolidge site and the geographic proximity of the two SCIP contract sites. Bluehorse explained that it delivered clear diesel fuel to the same SCIP site in Coolidge, Arizona, in February of 2016, and the following September, it requested the delivery schedule for an upcoming solicitation that the agency had posted for fuel to the Coolidge site. In response to this inquiry, the agency requested that Bluehorse include its best delivery schedule “if” it provided a quote; but Bluehorse did not respond or provide such information. Nonetheless, Bluehorse argued that the agency’s failure to request a quotation for the Coolidge site was improper given Bluehorse’s past fuel delivery to the site. Further, Bluehorse relied on the geographic proximity of the two Arizona SCIP sites to argue that the agency should have solicited a quotation from Bluehorse for the Sacaton SCIP site as well. The agency responded that its actions were proper in accordance with the FAR because it contacted at least three vendors, and it was not aware of Bluehorse’s interest in competing for these specific requirements. Relying on the FAR and the relevant sections of the United States Code, GAO explained the legal standard for simplified acquisition procedures as follows: Where an agency is using simplified acquisition procedures, it is not required to use full and open competition to conduct the procurement. Instead, the agency is required to promote competition to the maximum extent practicable. While this standard generally may be met through the solicitation of at least three sources . . an agency does not satisfy its requirement to obtain competition to the maximum extent practicable where it fails to solicit other responsible sources who request the opportunity to compete-in those circumstances, those sources should be afforded a reasonable opportunity to do so. GAO further explained that, “[t]he determinative issue in such cases is whether the agency made a deliberative or conscious attempt to preclude the protester from competing, knowing the firm’s interest in competing, and, if it did so, whether that action was reasonable.” In applying this standard to the procurement at hand, GAO found nothing improper with the agency’s decision not to obtain oral quotations from Bluehorse for either of the locations under the solicitations. GAO did not dispute the fact that Bluehorse provided diesel fuel to the agency in February of 2016 for the same Coolidge, Arizona location or the fact that Bluehorse was aware of a September 2016 solicitation for fuel at the Coolidge location. Nonetheless, GAO found that it was Bluehorse’s responsibility to respond to the agency’s statement that it needed the fuel immediately and the agency’s request that Bluehorse provide its best delivery schedule if it submitted a quote. Regarding these facts, GAO explained: Bluehorse provided no response, and there is nothing in the record to indicate that Bluehorse was in contact with the agency regarding fuel deliveries to this location after this. Given this, there is no evidence that the agency was aware of Bluehorse’s interest in competing for this work. In conclusion, GAO held, “while it was within the agency’s discretion to obtain an oral quotation from Bluehorse for either location, we find that under the facts here the agency was not required to do so.” GAO denied Bluehorse’s protest. Bluehorse highlights the minimal standards placed upon agency actions under an oral solicitation conducted under simplified acquisition procedures. While the agency is required to afford fair competition opportunities to responsible sources that have explicitly expressed their interest in submitting a quotation, the agency is not required to orally solicit quotations from sources whose interest in the solicitation the agency has not been made aware of. This holding makes it clear that a firm may not rely on general inquisitions, contract history, or the ordinary full and open competition requirements to support a protest under these procedures. The firm must clearly establish and actively pursue its interest in competing for the contract(s). Once an agency is made aware of a firm’s interest in a solicitation, it is not permitted to make a deliberate or conscious attempt to prevent that firm from competing under that solicitation. However, when there is no evidence on the record that the agency has been informed of a firm’s clear intention to compete under the solicitation, the agency acts properly by fulfilling the minimal search requirements of FAR § 13.104. The BIA acted properly here, according to GAO, by orally soliciting quotations from at least three capable and responsible sources and subsequently awarding the contracts to one of those sources. View the full article
  18. I was enjoying a day off last Friday, so we have a lot of catching up to do on government contracting news and notes. It’s time for a special two-week super-sized edition of the SmallGovCon Week in Review. In this edition, the GAO looks at NASA’s investigations of contractor whistleblowing complaints, the SBA announces nine new Women’s Business Centers, the Coast Guard sinks $60 million into an electronic health record system procurement with nothing to show for it, 70,000 contractors must provide notarized letters in the wake of a “SAM scam” and much more. NASA contractor employees are legally protected for whistleblowing, but is the agency timely investigating reprisal complaints? [www.gao.gov] The SBA announced the addition of nine new Women’s Business Centers to help women entrepreneurs. [parsippanyfocus.com] (Great news, but when is that elusive WOSB certification program coming? Anyone? Anyone? Bueller?) The Coast Guard will adopt the same commercial Electronic Health Records system as DoD. [fcw.com] HUD invites comments on a proposed rule to amend HUD Acquisition Regulation. [federalregister.gov] The owner of transportation company that contracted with State Department sentenced to 14 months for stealing federal funds. [justice.gov] After a “SAM scam” resulted in some contractors’ bank information being changed, 70,000 contractors must get notarized letters to continue working for the government. [federalnewsradio.com] The DOJ has announced nine companies as the apparent winners of the SDVOSB track of the major ITSS-5 contract. [washingtontechnology.com] The owner of a private school has pleaded guilty in a VA bribery and kickback scheme. [justice.gov] In a final rule, VA amends six VAAR clauses and removes one duplicate clause. [federalregister.gov] SDVOSB and SDB fraud: three defendants have pleaded guilty to a long-term scheme. [justice.gov] NAICS is just part of it: Guy Timberlake breaks down how the government uses PSC codes–and why it matters to contractors. [govconchannel.com] One commentator offers tops on how contractors can take proactive steps now to benefit from $1.2 trillion fiscal 2018 funding package. [washingtontechnology.com] The Chairman of the House Armed Services Committee is pushing to implement many of the Section 809 Panel’s acquisition reform recommendations. [Federal News Radio] View the full article
  19. The owner of a 1/120th interest was presumed to control a company under the SBA’s affiliation rules. You read that right. In a recent size appeal decision, the SBA Office of Hearings and Appeals held that where 120 owners each held one share of stock in a company, all 120 were presumed to control the company for size purposes. OHA’s decision in Size Appeal of Melton Sales & Service, Inc., SBA No. SIZ-5893 (2018) involved an Army solicitation seeking the remanufacture of Route Clearance Vehicle engines. The Contracting Officer issued the solicitation as a small business set-aside under NAICS code 333618 (Other Engine Equipment Manufacturing), with a corresponding 1,500 employee size standard. After reviewing competitive proposals, the Army informed offerors that MTP Drivetrain Service, LLC was the apparent successful offeror. An unsuccessful competitor then filed a size protest challenging MTP’s small business status. Among its allegations, the protester contended that MTP was affiliated with VIPAR Heavy Duty, Inc. The SBA Area Office determined that Joe Niswanger held a 70% ownership interest in MTP. His son, Rudy Niswanger, was MTP’s General Manager. The Area Office concluded that Joe and Rudy Niswanger controlled MTP. The Area Office then identified 24 other companies under the control of MTP and/or the Niswangers. One of these companies was Joe Gear Holdings, LLC. Joe Gear, in turn, owned a single share of stock in VIPAR. In total, VIPAR had 120 shares outstanding, all held by different individuals or entities, and each entitled to one vote. The Area Office determined that Joe Gear’s 1/120th share ratio “does not provide Joe Gear with the power to control VIPAR.” The Area Office concluded that MTP was not affiliated with VIPAR. After adding together the average employee counts of MTP and its affiliates, the Area Office found that MTP was a small business for purposes of the Army solicitation. The original protester filed a size appeal with OHA. The protester argued, in part, that the Area Office had erred by determining that MTP was not affiliated with VIPAR. OHA wrote that, under the SBA’s “common ownership” affiliation rules, if two or more persons or entities “each owns, controls, or has the power to control less than 50 percent of a concern’s voting stock, and such minority holdings are equal or approximately equal in size, and the aggregate of those holdings is large compared with any other stock holding, SBA presumes that such person controls or has the power to control the concern whose size is at issue.” The presumption “may be rebutted with evidence to the contrary, such as evidence demonstrating another party such as the Board of Directors and CEO or President controls the concern.” Here, “it is undisputed that MTP is affiliated with Joe Gear through common ownership, and Joe Gear holds one of VIPAR’s 120 shares” of stock. Therefore, “[w]hen considering MTP’s affiliation with VIPAR under the minority shareholder rule, the Area Office erred in concluding Joe Gear’s 1/120th interest does not provide Joe Gear with control or the power to control VIPAR.” OHA acknowledged that the single share alone wasn’t enough for Joe Gear to make VIPAR take action, but explained that under the SBA’s affiliation rules, “individual control is immaterial, as multiple minority shareholders may control a subject concern even if they individually cannot.” When multiple minority shareholders each hold equal or approximately equal interests, “in the absence of clear evidence demonstrating control or the power to control by another party, it is presumed that each minority shareholder has equal control over the subject concern, regardless of the size of the shareholder’s interests.” In VIPAR’s case, “[t]he Area Office failed to establish MTP and Joe Gear had rebutted this presumption with evidence demonstrating another party controls or has the power to control VIPAR.” Therefore, “Joe Gear must be presumed to control or have the power to control VIPAR under the multiple minority shareholder rule, and accordingly, MTP is affiliated with VIPAR.” Fortunately for MTP, even adding VIPAR’s size to the mix didn’t change the ultimate result–MTP and its affiliates still fell below the 1,500-employee size standard. OHA characterized the Area Office’s analysis of VIPAR as “harmless error,” and affirmed the size determination. Some of the SBA’s affiliation rules are pretty darn intuitive, but others absolutely are not. The typical businessperson probably wouldn’t think that holding 1 of 120 shares, all with equal voting power, would create control–but that’s how it works under the SBA’s multiple minority shareholder rule. One final note: a separate rule applies to “widely traded” companies, like those you might hold in your investment or retirement portfolios. Here, OHA found that this separate rule didn’t apply to VIPAR, because its shares were not publicly traded. View the full article
  20. An unequal evaluation can get an agency into hot water and force a reevaluation, as GAO has stated before. But with agencies entitled to broad discretion in their evaluations, how do you know what constitutes unequal evaluation? Some GAO opinions can leave you wondering where the line is drawn, but a recent GAO decision provides an easy-to-understand example involving a requirement to train personnel under certain regulations. In that case, the GAO held that it was improper for the agency to assign a weakness to the protester for omitting a discussion of certain regulations as applied to its training program, while failing to assign weaknesses to several awardees whose proposals also omitted this discussion. In Transworld Systems, Inc., B-414090.13 (December 22, 2017), GAO reviewed the award of an RFQ to multiple awardees under a Federal Supply Schedule. The RFQ was for private debt collection services for Department of the Treasury, Bureau of the Fiscal Service. The evaluation criteria and weights assigned to each were (1) technical approach (25%); (2) management approach and organizational structure (management approach) (25%); (3) quality control approach (20%); (4) past performance (25%); and (5) utilization of small business concerns (5%). For quality control, the proposal, in part, had to outline a training plan to show “how staff would be trained on applicable laws, regulations, procedures, and Bureau requirements.” Transworld Systems, Inc.’s quotation received a deficiency and a weakness and was rated poor for the quality control factor. The agency assigned a weakness “because TSI’s quotation did not address HIPAA and TOP [Treasury Offset Program] regulations in addressing training on laws and regulations and Bureau requirements.” TSI filed a GAO bid protest challenging the agency’s evaluation. Under GAO precedent, “t is a fundamental principle of government procurement that competition must be conducted on an equal basis; that is, the contracting agency must treat all offerors or vendors equally; it must even-handedly evaluate offers against common requirements and evaluation criteria.” GAO noted that the quotations of several awardees “did not address both HIPAA and TOP regulations and their quotations were not assessed weaknesses under the quality control factor for their omission.” Thus, GAO held, “the Bureau’s evaluation of TSI’s proposal was unequal as compared to the evaluations of the quotations of” four awardees. GAO sustained the protest based on the unequal evaluation and recommended reevaluation of proposals. This decision reinforces that GAO will sustain a protest based on unequal evaluation of weaknesses. Because an unequal evaluation may not become evident until outside counsel is able to review the source selection file under a protective order (which is what happened here), a protester may not be able to make an allegation of unequal treatment in its initial protest filing. But once the agency report is produced, if there is an example or two of unequal evaluation, that may constitute a good basis for a supplemental protest. View the full article
  21. The SBA’s regulations do not allow an 8(a) company to file a size protest challenging the award of an 8(a) sole source contract to a competitor. In a recent size appeal decision, the SBA Office of Hearings and Appeals confirmed that size protests relating to 8(a) sole source awards can be filed by contracting officers or the SBA itself–but not by competitors. OHA’s decision in Size Appeal of GovSmart, Inc., SBA No. SIZ-5894 (2018) involved a Navy procurement for commercial off-the-shelf firmware, software license renewals and hardware maintenance. The Navy awarded the work to Cypher Analytics, Inc. d/b/a Crown Point Systems, using an 8(a) sole source purchase order. Shortly after the award, another 8(a) company, GovSmart, Inc., filed a size protest. GovSmart contended that Crown Point was ineligible because it was violating the ostensible subcontractor affiliation rule. The SBA Area Office issued a size determination dismissing GovSmart’s size protest for lack of standing. The SBA Area Office said that because the award was an 8(a) sole source, GovSmart was not permitted to protest under SBA’s size protest regulations. GovSmart then appealed the decision to OHA. OHA wrote that SBA’s size protest regulations, at 13 C.F.R. 121.1001, specifically identify who may request a size determination in connection with an 8(a) sole source award. The list includes “[t]he Participant nominated for award of the particular sole source contract,” “[t]he SBA program official with authority to execute the 8(a) contract or, where applicable, the procuring activity contracting officer who has been delegated SBA’s 8(a) contract execution functions,” or “[t]he SBA District Director in the district office that services the Participant, or the [SBA] Associate Administrator for Business Development.” Notably missing from the list: 8(a) competitors. Although GovSmart contended that it, too, was “nominated” for the 8(a) contract but ultimately unsuccessful in receiving it, OHA pointed to 13 C.F.R. 124.517, which states that “[t]he size status of an 8(a) participant nominated for an 8(a) sole source contract may not be protested by another 8(a) participant or any other party.” Thus, “given that Crown Point clearly was nominated for the instant 8(a) sole source award, [GovSmart] cannot pursue a size protest against Crown Point, regardless of whether [GovSmart] also may have been nominated.” OHA denied GovSmart’s size appeal. Size protests are an important part of the government’s size and socioeconomic preference systems, but they have their limits. As the GovSmart case demonstrates, an 8(a) company cannot file a size protest challenging the award of an 8(a) sole source contract to a competitor. View the full article
  22. A protester contending that the VA violated the “rule of two” by failing to set-aside a solicitation for SDVOSBs must present sufficient facts to indicate that the VA should have had a reasonable expectation of receiving two or more offers from SDVOSBs at fair and reasonable prices. In a recent decision, the Court of Federal Claims dismissed a rule of two challenge because, according to the Court, the protester only identified one SDVOSB–itself–that was likely to submit an offer at a fair and reasonable price. The Court’s decision in Veterans Contracting Group, Inc. v. United States, No. 18-92C (2018) involved a VA solicitation for a roof replacement at the VA Medical Center in Northport, New York. The VA originally issued the solicitation as an SDVOSB set-aside. The VA received four proposals, but only two were deemed “responsive,” that is, considered to meet the terms and conditions of the solicitation. Veterans Contracting Group, Inc. submitted one of the bids deemed non-responsive because VCG had been removed from the VA VetBiz database. A second offeror, too, was apparently eliminated for failing to be verified as an SDVOSB. The VA evaluated the pricing of the remaining two proposals and found that both offerors proposed pricing more than 30% higher than the Independent Government Estimate. The VA then cancelled the solicitation and reissued it as a small business set-aside. In the meantime, VCG prevailed in a Court of Federal Claims action challenging its exclusion from the VA’s database. The VA readmitted VCG to the VetBiz database. After its readmission, VCG protested the terms of the reissued solicitation. VCG contended that the VA failed to follow the “rule of two” by issuing the solicitation as a small business set-aside rather than an SDVOSB set-aside. VCG supported its protest by contending that four SDVOSBs submitted proposals originally, indicating that the VA should have expected to receive two or more SDVOSB proposals once again. The Court explained, “[e]xcept in cases subject to exceptions not relevant here, VA contracting officers are bound by the ‘rule of two,’ which requires them to ‘award contracts on the basis of competition restricted to [SDVOSBs] if the contracting officer has a reasonable expectation that two or more [SDVOSBs] will submit offers and that the award can be made at a fair and reasonable price that offers best value to the United States.” The Court wrote that, in light of the terms “reasonable expectation,” fair and reasonable price,” and “best value,” “[w]hile the rule of two is imperative where it applies, the pertinent statute builds discretion into the contracting officer’s evaluation process.” Here, “the only fact that [VCG] alleges in support” of its rule of two claim “is that four SDVOSBs previously bid on the original solicitation, apparently implying that the contracting officer could therefore reasonably expect that at least two SDVOSBs would submit bids on a re-issued solicitation at fair and reasonable pricing.” But “even with [VCG’s] restoration to the VetBiz database, only three of those bidders were eligible SDVOSBs, and two of them failed to offer bids at a fair and reasonable price.” The Court continued: [O]n the facts alleged, the court is only aware of one eligible SDVOSB who has offered a bid at a fair and reasonable price, namely, [VCG]. If [VCG] had alleged additional facts, e.g., relating to the average number of bids submitted on similar solicitations or its own knowledge of other eligible SDVOSBs that would have submitted bids if the roofing solicitation had been reissued, the outcome might be different, but on the facts at hand, [VCG] has failed to state a claim. The Court dismissed VCG’s complaint. The Court’s decision offers some important pointers for SDVOSBs and VOSBs thinking of challenging a VA set-aside decision. First, the VA isn’t required to consider a company in the “rule of two” analysis if the VA has good reason to believe that the company won’t offer a fair and reasonable price. Here, that meant that the VA didn’t have to include the two original offerors who proposed pricing well in excess of the IGE. Second, a protester must introduce facts indicating that at least one eligible, qualified SDVOSB–other than the protester itself–is likely to submit a proposal. As the Court suggested, those facts could be things like “the average number of bids submitted on similar solicitations or its own knowledge of other eligible SDVOSBs” that would submit bids if the solicitation was issued as an SDVOSB set-aside. There’s no guarantee that VCG would have won its protest had it introduced facts like these, but at least the Court would have considered the issue on the merits. But because the Court believed that VCG had only established that one qualified, capable SDVOSB–itself–was likely to submit a fairly priced offer, the Court simply dismissed the protest. One final note: the acquisition in this case sounds like one that might be solicited under a tiered evaluation in the future. After discussing the concept at last year’s National Veterans Small Business Engagement, the VA posted a Procurement Policy Memorandum in February providing guidance for the use of tiered evaluations. View the full article
  23. An agency cannot buy “Open Market” items from a Federal Supply Schedule vendor when the same items are readily available under another vendor’s FSS contract–even if the vendor selling Open Market items offers them as a discounted bundle and the FSS vendor does not. In a recent decision, GAO held that it was improper for an agency to buy bundled software packages as Open Market items when another vendor sold the same licenses on its FSS contract as four separate items. Scope Infotech, Inc., B-414782.4 et al. (Comp. Gen. Mar. 22, 2018), involved a procurement for information technology operations and support for the Department of Health and Human Services, Centers for Medicare and Medicaid Services. The procurement was set-aside for small businesses holding GSA Schedule 70 contracts. The procurement has a drawn out history, including two prior protests that resulted in corrective actions. As relevant to this protest, offerors were to propose a suite for software licenses to support various DHHS networks and the Healthcare.gov exchanges. One of the required licenses was for JBoss software. Scope timely submitted a bid in response to the solicitation. As relevant here, Scope initially proposed to provide the JBoss software license as an Open Market item. “Open Market” items is a term of art to describe items that are not available on the FSS but are added to individual FSS task order deliveries. Authorization for Open Market purchases can be found in FAR 8.402(f). A predicate for including Open Market items in an FSS procurement, however, is complying with applicable Competition In Contracting Act requirements, including full and open competition. The agency received six offers in response to its Solicitation, including Scope. Following its preliminary evaluation, the agency reached out to offerors requesting additional information about the software suites the offerors proposed. With respect to Scope, the agency inquired as to whether the JBoss software licenses could be obtained from Scope or one of its team members on the FSS. Scope replied that it could provide JBoss licenses on the FSS, but it would not be able to provide the same discounts. Following these initial communications, the agency narrowed the competitive field to only Scope and Sparksoft Corp. During discussions, the agency observed that both Scope and Sparksoft had proposed a significant number of software licenses as Open Market items. The agency requested that “f at all possible, please provide a quote with no open market [software licenses].” Both offerors subsequently revised their pricing proposals; however, Sparksoft continued to include the JBoss licenses as an Open Market item. On May 31, 2017, Sparksoft was awarded the task order. In its third protest, Scope challenged the evaluation of Sparksoft’s proposal because Sparksoft proposed providing the JBoss licenses as an Open Market item. Less than two weeks after Scope protested, the agency executed a justification and approval authorizing other than full and open competition to procure JBoss as an open market item. The agency based its justification and approval on 41 U.S.C. § 253(c)(1), which authorizes the use of non-competitive acquisition procedures when “the property or services needed by the executive agency are available from only one responsible source and no other type of property or services will satisfy the needs of the executive agency[.]” The thrust of Scope’s argument was that since a member of its team could provide the JBoss licenses on its GSA Schedule contract, it was improper to award the task order to Sparksoft because it listed JBoss licenses as Open Market items. The agency’s response was somewhat convoluted. The Agency defended that it was reasonable to procure JBoss licenses as Open Market items because Scope’s team broke out the various JBoss licenses as four separate line items and noted that these licenses were bundled into two separate packages under the predecessor contract. According to the agency, the mention of the incumbent contract bundling indicated Scope could not obtain the required JBoss software licenses on the FSS. GAO did not agree. As GAO explained, “Scope’s quotation provided all the necessary information for the agency to confirm that Scope was offering the four separate JBoss software licenses on a GSA schedule[.]” A proper review of this information by the Agency would have revealed that Scope was offering unbundled JBoss licenses from the FSS. Consequently, “the agency’s conclusion that Scope failed to provide the JBoss software licenses on a GSA schedule was unreasonable.” Next, the agency argued that because the bundled JBoss contracts could not be obtained on the FSS, it was reasonable to obtain them as Open Market items. GAO was unconvinced. While the agency vigorously argued the different product numbers for the bundled software packages meant they were different items not available on the FSS, GAO noted “the exact software licenses quoted in Sparksoft’s proposal as open market items were quoted by Scope on [its team member’s] GSA schedule.” GAO continued: [W]hile the agency makes much of the fact that [Scope’s teammate] provides different numbers for those software licenses, whether bundled or unbundled, and provides a price discount for the bundled items, the agency’s claim that the price discount prevents Sparksoft from quoting these items on a GSA schedule is unreasonable and circumvents the very purpose of the FSS. That is, to award contracts to vendors quoting scheduled items. As such, “the agency could not reasonably rely on a bundle-item price discount as a basis to find that the JBoss software licenses were not available on a GSA schedule.” Because the agency could procure the JBoss licenses it required on the FSS, GAO concluded it was unreasonable for the agency to instead procure the same licenses as Open Market items. GAO therefore sustained this basis of protest. Scope Infotech is a good barometer for GAO’s approach to purchasing bundled items as Open Market on the FSS: it is the form and function of the item(s) being procured that matters. Here, for example, while the bundling of the software packages may have resulted in a cost savings, there was no functional difference between the bundled and non-bundled software packages. Since the non-bundled package could be obtained on the FSS, it was unreasonable for the agency to procure a bundle of identical software as an Open Market item. View the full article
  24. Because of a recent cyber attack on the System for Award Management, the Federal Service Desk is requiring new contractors to submit a signed notarized letter in order to be registered. Later this month, existing registrants seeking to update or renew profiles will have to do the same. This move comes after the General Services Administration acknowledged on March 22 that the inspector general is looking into a hack of the SAM.gov database, in which the hackers changed the banking information for “a limited number” of contractors. The GSA has released scant details regarding the hack except to say that it affected only a limited number of registrants and that GSA has “notified the affected entities.” The perpetrators apparently changed the bank account information for Electronic Fund Transfer (EFT) in an unspecified number of entities. Although GSA has not confirmed the electronic theft of any contracting dollars, presumably the hackers at least tried to get the federal government to pay them for contracted work. According to fedscoop.com, cyber attacks were first identified in 2017 and have been ongoing until recently. The perpetrators reportedly used a sophisticated technique called “spear phishing”—sending a high-quality but fake email to the contractor’s point of contact in order to steal logins and ultimately change payment accounts. In response, GSA is advising all registered entities to check their SAM profiles and verify their registered information, particularly bank accounts. If you suspect that a payment due your company was paid to a fraudulent account, GSA is advising contractors to contact FSD, which provides support for SAM.gov. GSA deactivated those registrants affected and provided them with instructions for how to re-register. It has also taken “proactive steps” required to “address this fraudulent activity”. Specifically, GSA said: These proactive steps include requiring submission of an original, signed notarized letter identifying the authorized Entity Administrator for the entity associated with the Data Universal Numbering System (DUNS) number before the registration will be activated. This requirement went into effect on March 22, 2018, for new entities registering in SAM. This requirement will go into effect April 27, 2018, for existing registrations being updated or renewed. Thus, any new registrants will need a notarized letter. By the end of April, any current registrant needing to update or renew a profile will also need to submit a notarized letter. GSA added that it “has begun implementing additional reviews during the registration process to prevent future issues” although it did not elaborate on what those additional reviews would entail. Meanwhile, the GSA has posted a step-by-step set of instructions for completing the notarization process. SAM.gov is the database that all contractors must be registered in to do business with the federal government. It is therefore a fundamental barrier to being awarded a contract. While it is a good thing that the GSA is taking steps to address the recent problems, it’s not clear that requiring notarized letters is the best solution. Requiring notarized letters and whatever these “additional reviews” are adds more hoops for contractors to jump through in an already complicated process—especially since the notarization requirement will apply each time a contractor updates its SAM profile. Most small business contractors, in our experience, don’t have notaries on staff, meaning extra trips (and fees) to banks and other institutions offering notary services. Beyond that, it is also unclear how requiring a notarized letter would prevent the type of attack that reportedly occurred, although the new requirement might make it more difficult for hackers to successfully use the information they glean. Verifying the identity of the users was not the problem, it was that the hackers were able to use the publicly available information on SAM.gov to trick users into providing their login information. The notarization requirement wouldn’t seem to prevent that underlying issue, although the requirement for a notarized letter could make it more difficult for a hacker to use that information to update the victims’ accounts, such as by switching the victims’ bank account information. Still, a hacker who executes a successful phishing scheme may not balk at providing fake notarized letters, either. We’ll keep you posted. View the full article
  25. Contrary to a common misconception, an offeror is not automatically entitled to “use” the past performance of parent companies, sister companies or other corporate affiliates. So when can an offeror rely on the past performance of an affiliate in submitting a proposal? A recent GAO opinion sheds some light on that question. Not meeting the GAO’s guidelines for describing the detailed involvement of the affiliate can have a harsh result—a sustained protest if award was made based on the affiliate’s past performance. In Language Select LLP, B-415097.2 (Nov 14, 2017), GAO considered the Social Security Administration’s issuance of a Federal Supply Schedule blanket purchase agreement to Cyracom International, Inc. for worldwide telephone interpreter services. The underlying Solicitation was based on best value, considering the factors of corporate experience (the most important factor), past performance, and evaluated price. Under corporate experience, vendors were to provide a “complete and full description” of three contracts demonstrating the firm’s relevant experience and how these contracts were “similar in size, scope, and complexity to the RFQ requirement.” Past performance ratings would be based on having each client from the three corporate experience contracts submit a completed past performance questionnaire form to SSA. SSA could contract the references and obtain past performance information from other sources. SSA would base its evaluation “‘in part’ by assessing the firm’s quality of service, its timeliness of performance, its management of personnel, and its business relations.” About a month before the evaluation was finalized, SSA contacted Cyracom for an explanation of the relationship between it and another entity (the name was redacted in the opinion but was referred to as Cyracom Affiliate), because Cyracom had listed the Cyracom Affiliate’s name on the past performance contracts. Cyracom responded that Cyracom Affiliate was a wholly-owned subsidiary of Cyracom, that “its services are provided and managed by the parent company,” and that Cyracom “uses its divisions ‘[Cyracom Affiliate]’ and ‘CyraCom’ for marketing to different industries.” In evaluating the proposal of Language Select LLP, which was the incumbent contractor, SSA rated its corporate experience as “good.” For Language Select’s past performance, SSA reviewed FAPIIS/PPIRS information, past performance questionnaires, and SSA reports on incumbent performance. SSA identified one termination for cause from FEMA, and weighing this termination for cause against the multiple strengths, it assigned a “very good” rating for past performance. For Cyracom, SSA assigned a “satisfactory” rating for the corporate experience factor, taking into account the similarities of the contracts submitted in terms of scope and complexity. However, SSA found weaknesses because the contracts were smaller than SSA’s requirement. For Cyracom’s past performance, SSA noted that each prior contract was identified as performed by Cyracom Affiliate, rather than Cyracom. SSA noted that Cyracom Affiliate was a wholly-owned subsidiary of Cyracom and that its services were “provided and managed by the parent company.” There was one termination for cause in Cyracom’s past performance record, which the evaluation panel deemed a “minor problem.” The summary of the adjectival ratings and prices were; Language Select: Corporate Experience – Good, Past Performance – Very Good, Price $34.7 million. Cyracom: Corporate Experience – Satisfactory, Past Performance – Very Good, Price $29.9 million. Noting that the price difference of 13.65 percent outweighed the minimal risk of awarding to Cyracom, the contracting officer awarded the contract to Cyracom. Language Select protested the award, arguing that the SSA engaged in unequal discussions when it asked Cyracom for its relationship to the Cyracom Affiliate. SSA argued that the question to Cyracom was just a clarification, as it had already deduced that the Cyracom Affiliate was affiliated with Cyracom based on “the fact that CII’s quotation was printed on stationery that depicted an affiliation, and that information available online did also.” GAO noted, with respect to affiliation, that where an agency observes apparent affiliation between companies but lacks evidence establishing the nature of the relationship in the procurement at issue, the potential for variations in the extent and nature of the relationship between two affiliated companies means that it is not reasonable for that agency simply to infer that the relationship will affect contract performance, or even to accept an offeror’s general representation that the performance of an affiliated company–positive or negative–should be attributed to that offeror. Before the agency can properly attribute the past performance of an affiliate to an offeror, it generally must have a factual basis showing the planned relationship between the companies on the contract at issue. Where, as here, the record before the agency does not indicate the involvement of the affiliate in performance of the contract, the agency cannot simply attribute the affiliate’s past performance to the offeror. GAO concluded that, when SSA sought an explanation of the role of the Cyracom Affiliate, it constituted discussions. Since Language Select did not receive an equivalent opportunity, SSA did not conduct discussions fairly and equally. Language Select also challenged the reasonableness of SSA’s past performance and experience evaluation, arguing that it was improper for SSA to attribute the Cyracom Affiliate’s experience to Cyracom. SSA argued that it is sufficient that an affiliate “shares management with the offeror” or where “the parent company manages the entire corporate family.” GAO disagreed, noting that “[a]bsent a factual basis to conclude that the awardee had a commitment of resources from other separate corporate subsidiaries, we found the attribution of those affiliates’ past performance and experience to the awardee to be improper.” GAO held that the stationary and online information showing the affiliate relationship and the statement by Cyracom that the Cyracom Affiliate “was a wholly-owned subsidiary and that its services were ‘provided and managed by'” Cyracom was not enough to demonstrate the factual basis. This decision is important because it sets guidelines for evaluating past performance based on affiliates. Generally, in preparing a proposal that uses affiliate past performance, the offeror must clearly demonstrate the factual basis for how the affiliate will be involved in performance and how the affiliate will share resources with the offeror. Merely noting the affiliation between the offeror and the affiliate is not sufficient for use of an affiliate’s past performance. View the full article
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