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Koprince Law LLC

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  1. Happy Friday! We hope you had a great week and can take time to enjoy your weekend. We’ve been receiving a lot of rain here in the Midwest lately. The rain gauge was completely full and topped out at 4 1/2″ in a 12 hour span of time, this past week. Everything outside is looking beautiful and I’m guessing there will be a lot of lawn mowing going on this weekend. We’ve included several articles that hopefully provide some good information concerning federal government contracting this week. Enjoy your weekend! Murky Laws Keep Contractors Wary of Losses in Next Debt Crisis [BlmLaw] President Biden, House Speaker McCarthy Reach Deal on Borrowing Limit [GovConWire] DISA’s plan to solve the facility clearance conundrum for small businesses [FedNewsNet] Biden and McCarthy reach a final deal to avoid US default and now must sell it to Congress [FedNewsNet] Agencies launch initiative to better identify minority-owned contractors [NextGov] GSA, SBA to Boost Contracting Opportunities for 8(a) Firms via Revised Partnership Agreement [GovConWire] What’s in that 99-page debt ceiling deal for contractors? [FedNewsNet] Don’t Miss These 3 Key Cyber Contract Opportunities [GovConWire] Former chief scientist for GTRI pleads guilty to conspiring to defraud Georgia Tech and the CIA [DoJ] GSA and SBA launch initiative to broaden small federal contracting landscape [FedScoop] USDA plots departmentwide cloud move with STRATUS contract [FedScoop] Agencies launch initiative to better identify minority-owned contractors [FCW] The post SmallGovCon Week in Review: May 29- June 2, 2023 first appeared on SmallGovCon - Government Contracts Law Blog.View the full article
  2. For small businesses and their teammates, few topics in government contracting are as confusing as the limitations on subcontracting for set-aside and socioeconomic sole source contracts. And if that isn’t stressful enough, the “LoS” is an area of heavy enforcement: get it wrong, and a contractor can face major penalties. The nonmanufacturer rule is one that is also commonly misunderstood in the federal government contracting realm. But it is also one we encounter quite often in our role assisting federal contractors. In this course, government contracts attorneys, Nicole Pottroff & Stephanie Ellis, from Koprince McCall Pottroff LLC will help you make sense of the limitations on subcontracting and nonmanufacturer rule. Using a step-by-step process and plenty of examples to help bring the rules to life will help you ensure that you understand and comply with these essential rules. Hope you will join us! Registration link here. The post Event: Limitations on Subcontracting and the Nonmanufacturing Rule Webinar hosted by Texas El Paso APEX Accelerators, June 6, 10:00-11:30am MDT first appeared on SmallGovCon - Government Contracts Law Blog.View the full article
  3. A couple of weeks ago, I explored the Court of Federal Claims case of SH Synergy, LLC v. United States. In that blog, linked below, I looked at the first question raised in the protest that centered on the question of whether a mentor with two approved mentor protégé joint ventures with two different protégés under the SBA’s Mentor-Protégé Program is restricted from placing competing offers for a solicitation. The answer to that was yes, they are restricted pursuant to 13 C.F.R. § 125.9. Because this decision was chocked full of useful information, and as promised, I’m back to look at the second issue tackled in this mammoth COFC opinion: did the solicitation’s terms, which required mentor-protégé joint ventures, woman-owned small business joint ventures, and service-disabled veteran owned small business joint ventures to be evaluated in the same manner as offerors, generally, violate procurement regulations? As you will see, the answer to that question is also yes, and it appears that this decision has already had an impact on other procurements. The second part of this opinion looks at 13 C.F.R. § 125.8(e), which states that procuring agencies evaluating joint ventures formed as part of an SBA approved Mentor-Protégé Agreement “must consider work done and qualification held individually by each partner to the joint venture as well as any work done by the joint venture itself previously.” Further, “[a] procuring activity may not require the protégé firm to individually meet the same evaluation or responsibility criteria as that required of other offerors generally.” However, that doesn’t mean that MPJVs are not required to have the past performance, experience, business systems, and certifications necessary to perform the contract. It does mean that the joint venture, in the aggregate, must be able to demonstrate such requirements. In light of the language contained in § 125.8(e), the plaintiffs in SH Synergy claimed that parts of the solicitation violated the regulation in two ways. First, the solicitation required that MPJVs to submit “a minimum of one Primary Relevant Experience Project or Emerging Technology Relevant Experience Project must be from the Protégé or the offering Mentor-Protégé Joint Venture.” But the plaintiffs’ didn’t take issue with the fact that the protégé in an MPJV must submit at least one relevant experience project, whether individually or through the JV itself. Rather, plaintiffs claimed that this requirement put a higher level of scrutiny on MPJVs than it did on offerors generally, because offerors that were not part of an MPJV were permitted to “obtain all Relevant Experience Projects from subcontractors,” even though protégés in an MPJV could not. Second, the solicitation required MPJVs relevant experience projects to be evaluated “using the same evaluation criteria and points scale as projects submitted by offerors generally.” Focusing on the first issue, COFC determined that the agency did not violate SBA regulations by requiring the protégé in an MPJV to submit an individually performed relevant experience project. Nor did it by allowing prime contractors generally to obtain their relevant experience projects from subcontractors. While the plaintiffs acknowledged that the language of § 125.8(e) required agencies to “consider the capabilities and past performance of each member of the [MPJV] as the capabilities and past performance of the joint venture,” they asserted that giving the prime contractors flexibility in choosing the projects they would submit for evaluation, including those from their subcontractors, violated SBA regulations. However, just like there is a regulation applicable to experience requirements for MPJVs, there is also a regulation applicable to experience requirements for small business prime contractors. And that regulation, 13 C.F.R. § 125.2(g) permits small business prime contractors using a team of small business subcontractors to submit the capabilities, past performance, and experience for each first-tier subcontractor that is part of the team. Moving on to the second issue up for discussion today, COFC considered the protesters’ claim that the solicitation violated § 125.8(e) when it applied the same evaluation criteria to assess relevant experience projects of MPJVs as it did to offerors generally. As I mentioned earlier, § 125.8(e) states that, “[a] procuring activity may not require the protégé firm to individually meet the same evaluation or responsibility criteria as that required of other offerors generally.” If you recall the discussion in my first blog post on this decision, GSA planned to “award IDIQ contracts to the highest technically rated qualifying proposals based on how well the proposals score[d] on the Solicitations’ standardized points system,” with the same point system applying to all offers. A key issue identified by the plaintiffs was related to the primary relevant experience projects that each offeror was required to submit. This was an issue for the protégés in a MPJV because all offerors were required to submit primary relevant experience projects with the same contract value: $10M. With an even application, protégés, which are generally in the earlier stages of business growth and are often reliant on their mentor’s assistance—that is the point of the Mentor-Protégé Program, after all—are disadvantaged if they are required to submit the same size project as, say, an other than small business offeror. Therefore, because the solicitation assigned points in the same manner to all offerors, the solicitation violated § 125.8(e). And, in the end, COFC agreed, and required GSA to amend the solicitation to be in compliance with § 125.8(e). You may be thinking, “Sure, this applies to MPJVs, but you also mentioned WOSBs and SDVOSBs. How does this apply to them?” I’m so glad you asked! While COFC did not dedicate any space within the opinion specifically to either of those categories, the plaintiffs had made the same assertions on behalf of WOSBs and SDVOSBs through 13 C.F.R. § 127.506 and 13 C.F.R. § 128.402, respectively, which contain similar language. COFC addresses these regulations in footnotes throughout the opinion, and determines that they, too, cannot be evaluated in the same manner as offerors generally, but stops short of offering any guidance on how MPJVs, WOSBJVs, and SDVOSBJVs must be evaluated in relation to each other. Interestingly, we have already seen an impact from this opinion on other procurements. The Transformation Twenty-One Total Technology Next Generation 2, or T4NG2 as it’s commonly referred to, has had what appear to be two amendments to its solicitation in response to the decision in SH Synergy. On May 11, 2023, the Department of Veterans Affairs amended the solicitation to change the scoring applicable to MPJVs. Then, on May 25, 2023, it issued another amendment that changed the scoring applicable to WOSBJVs and SDVOSBJVs, showing a clear desire by the VA to comply with the SBA regulations. And it is likely that this method of scoring will continue with other IDIQ awards that are evaluated in a similar fashion. I know my interest is piqued to see whether any forthcoming protests will look at the dynamic between evaluations for MPJVs, WOSBJVs, and SDVOSBJVs. Questions about this post? Or need help with a government contracting legal issue? Email us. Looking for the latest government contracting legal news? Sign up for our free monthly newsletter, and follow us on LinkedIn, Twitter and Facebook. The post COFC Part II: Evaluation of Mentor-Protégé Joint Ventures first appeared on SmallGovCon - Government Contracts Law Blog.View the full article
  4. Happy Friday and we hope you are looking forward to a nice, long weekend. Monday, May 29 is Memorial Day and an official federal holiday, but do you know when and why it was established? If not, here’s a brief history lesson. After the Civil war, in late 1860s, Americans in various towns and cities had begun holding springtime tributes to countless fallen soldiers. In 1966 the federal government declared Waterloo, New York as the official birthplace of Memorial Day because it hosted an annual, community-wide event, during which businesses closed and residents decorated the graves of soldiers with flowers and flags. In 1968, Congress passed the Uniform Monday Holiday Act, which established Memorial Day as the last Monday in May and declared Memorial Day a federal holiday. So, now you have the background story of how this day was established. We hope you all have a wonderful weekend and here are some recent articles, including ones on a pending default, VA contracts, and small disadvantaged businsses. Biden-Harris Administration to Launch New Initiative to Increase Federal Contracting with Small Disadvantaged Businesses [SBA] U.S. Office of Personnel Management Employee Pleads Guilty to Conflict of Interest Violation [DoJ] DOJ IG Horowitz reviews a decade of Bureau of Prisons crisis oversight [FedNewsNet] Veterans Affairs: Observations on IT Contracting Trends and Management Oversight [GAO] OPM employee pleads guilty to steering millions in government contracts to family business [WTOP] US Department of Labor Asks Judge to Force Federal Contractor to Provide Documents, Info Needed for Equal Employment Opportunity Evaluation [DoL] WHAT THEY ARE SAYING: GSA’s Buy Clean Inflation Reduction Act Requirements for Low Carbon Construction Materials [GSA] Infant formula producers probed by FTC over bids for government contracts [FinTimes] A default isn’t a shutdown, but agencies could treat it that way [FeedNewsNet] F-35 Program: DOD Needs Better Accountability for Global Spare Parts and Reporting of Losses Worth Millions [GAO] CIO-SP4 protests move toward final decision [WashTech] A Government Accountability Office representative told House lawmakers that Veterans Affairs’ IT obligations have been “increasingly concentrated with a small group of vendors. [NextGov] How GSA’s Technology Transformation Services is Harnessing Change in Tech Modernization [GovConWire] The post SmallGovCon Week in Review: May 22-26, 2023 first appeared on SmallGovCon - Government Contracts Law Blog.View the full article
  5. GSA has produced a number of successful contract vehicles over the years, one of which was the One Acquisition Solution for Integrated Solution or “OASIS.” This vehicle, used to acquire professional services (not including information technology) for the government, was so successful that GSA is in the process of preparing its sequel, OASIS+. On March 6, 2023, the agency issued its second draft RFP, and the final RFP is expected soon. In light of this, we’re going to go through some of the planned provisions for OASIS+ for small businesses, with special attention to the provisions on teaming arrangements and joint ventures. First, a caveat: All of the below is from the second RFP draft. The final draft may contain different provisions, so be sure to review it when it is released. This is just a preview. The Competition Now, GSA plans to split OASIS+ in two: One part is an unrestricted competition open to all federal contractors, and one for small businesses, the latter of which (OASIS+ SB), we will focus on here. It appears there will not be a separate competition for say 8(a)s and WOSBs for awards of OASIS SB+ main contracts. You will be competing with all other small businesses that bid for OASIS+ SB. But, awardees will be given contracts based on their socio-economic categories and can expect task orders that will be set aside for those categories. Credits Bids will be reviewed and awarded credits if they meet various criteria. The draft notes: “The qualifying threshold for all small business and socioeconomic set-asides (e.g. small business, 8(a), HUBZone, WOSB, SDVOSB) has been set at 36 out of the available 50 credits.” What sort of things will earn a bidder credits? Here are the areas that can earn a bidder credits: Qualifying Project Experience (Work similar to the work that will be awarded under OASIS+) Federal Prime Contractor Experience (General experience with federal contracting as a prime) Systems, Rates, and Clearances (Accounting systems, government facility clearance) Certifications (ISO, CMMI) Past Performance The draft breaks these down further, so check it out for more details. Teaming Arrangements As expected, OASIS+ SB permits the usage of teaming arrangements, either in the form of creating a partnership/joint venture with another entity or by agreeing to use another company as a subcontractor. We will discuss the joint ventures below, but we first wanted to note an important caveat on teaming with subcontractors. At Section L.5.1.3.2, on page 146, it states: “An Offeror may agree with one (1) or more other small businesses to have them act as its first-tier subcontractors under a potential OASIS+ award.” This appears to suggest that larger subcontractors cannot be used in this sort of teaming arrangement. Further down, the language appears to confirm that: “If one or all members of the teaming agreement exceed all size standards within a particular Domain, the Offeror(s) may still submit a proposal under the Unrestricted OASIS+ solicitation separately to be considered for award as an “Other than Small Business” as long as they technically qualify under the specific evaluation criteria for that solicitation.” This language is curious. It appears that, for OASIS+ SB, offerors cannot use large businesses as subcontractors, or at least they can’t use such subcontractors in their proposal. We think that GSA’s aim here is to prevent offerors from using large business subcontractor experience in their proposals, but the language seems to create some uncertainty as to whether offerors can team with large subcontractors at all under OASIS+ SB, even if the offeror doesn’t try to use the large subcontractor’s experience in its proposal. In any event, it appears per this draft language that large subcontractors are prohibited. It remains to be seen if this language as written, will be kept in the final RFP, but if it is, we think it is something worth asking for clarification on if offerors are unclear about it. This language is a bit unexpected in its scope. We think it is very limiting on offerors in its effects, and we are curious to see if GSA might modify it or provide some clarification. We recommend that, if you plan on bidding and are unsure about the language, that you ask about it in any question sessions for the RFP. Joint Ventures As for joint ventures, we want to start with an important reminder: Populated joint ventures between similarly situated entities are going to eligible for small-business set asides as of May 30, 2023! Assuming OASIS+ SB is released after that date, this will be an option. There are some other interesting considerations here. Bidders apparently can use the experience of (small) subcontractors to the joint venture for Qualifying Project Experience and Federal Prime Contractor Experience as well as Past Performance. Another thing worth noting is that for “Systems, Rates, and Clearances” and “Certifications,” offerors submitting as a joint venture can have the claimed system, certification, or clearance in the name of the joint venture itself or in the name of a member of the joint venture. Note, however, that a subcontractor of the joint venture having one of these systems, certifications, or clearances will not be accepted. One other thing to note is that the language appears to permit mentor-protégé joint ventures, but it also states that if any members exceed all size standards under a particular task area (what they call a “Domain”) that the joint venture must instead submit its proposal under the unrestricted OASIS+ solicitation as the joint venture will be considered an “Other than Small Business.” This language contradicts the affiliation exception for mentor-protégé joint ventures, and we are curious if this language will receive some clarification. Summary There are a few interesting provisions in the most recent draft of the RFP for OASIS+ SB. The unclear provisions on large subcontractors raise some interesting questions, and the provisions do grant some fair flexibility for joint venturers. Of course, this is just the second draft. Once the final version is released, no doubt we’ll see some differences, so be sure to keep your eye out. Questions about this post? Or need help with a government contracting legal issue? Email us. Looking for the latest government contracting legal news? Sign up for our free monthly newsletter, and follow us on LinkedIn, Twitter and Facebook. The post OASIS+ Small Business: A Preview first appeared on SmallGovCon - Government Contracts Law Blog.View the full article
  6. As readers of SmallGovCon know, SBA interprets its small business joint venture rules vary strictly. A small business joint venture must follow all of SBA’s requirements down to the letter, or risk being found noncompliant. In a recent case, SBA’s Office of Hearings and Appeals (OHA) examined how a joint venture was managed under the state law of Michigan and found that the joint venture was noncompliant with small business rules. In Size Appeal of: Syscom, Inc., SBA No. SIZ-6195, 2023 (2023), SBA’s Office of Hearings and Appeals (OHA) considered a size protest arising from an Air Force procurement for Integrated Solid Waste Management set aside for 8(a) Participants under a size standard of $41.5 million. SNI United, LLC (SNI) was the apparent awardee, and SysCom, Inc. (SysCom or Appellant) challenged SNI’s size. SNI was a joint venture (JV) composed of an 8(a) participant, 1-855-US-TRASH, LLC (US Trash), and a small business, Six Nations, Inc. (Six Nations). SysCom alleged that the joint venture was noncompliant because, among other reasons, US Trash didn’t control day-to-day management and managers from Six Nations controlled the JV. An initial size determination said that SNI was a small business, but after an appeal OHA sent it back to the Area Office to take another look, stating that “although SNI represented to the Area Office that it is a joint venture between two business concerns, majority-owned and controlled by US Trash, its Managing Venturer, these assertions appear inconsistent with Michigan state law as well as with other evidence in the record, much of which SNI itself submitted to the Area Office.” Interestingly, the Area Office said, on remand, that it “cannot decide the enforceability or scope of this provision or the other peculiarities of [SNI’s] organization and their effect on its control. Any inquiry into ‘whether SNI’s business and ownership structures meet SBA joint venture requirements’ is premature . . . .” The Area Office also noted it has no “expertise in interpreting or applying Michigan state law”, nor does it have “the luxury of time nor other assistance and resources to undertake such an effort”. The Michigan statue in question states: Unless the articles of organization state that the business of the limited liability company is to be managed by 1 or more managers, the business of the limited liability company shall be managed by the members, subject to any provision in an operating agreement restricting or enlarging the management rights and duties of any member or group of members. If management is vested in the members, both of the following apply: (a) The members are considered managers for purposes of applying this act, including section 406 regarding the agency authority of managers, unless the context clearly requires otherwise. (b) The members have, and are subject to, all duties and liabilities of managers and to all limitations on liability and indemnification rights of managers. Mich. Comp. Laws § 450.4401. On appeal, OHA reiterated that an 8(a) joint venture must designate an 8(a) participant as its “managing venturer”, responsible for “controlling the day-to-day management and administration of the contractual performance of the joint venture”. 13 C.F.R. § 124.513(c)(2). But OHA noted a particularity of Michigan law that caused a problem for the joint venture. Michigan law stipulates that, unless a particular Manager or Managing Member is identified in an LLC’s operating agreement or articles of organization, all members are deemed to be managers of the LLC. SNI informed the Area Office that it does not have an operating agreement, and according to SNI’s Articles of Organization, US Trash is not designated as the Manager or Managing Member of SNI. Given this record, then, the Area Office properly found a “clear contradiction” between SNI’s JVA and Michigan law, and correctly concluded that Michigan law must take precedence. It follows that US Trash is not the Managing Venturer of SNI, in contravention of 13 C.F.R. § 124.513(c)(2). But there was also a problem with the JV’s Board of Directors, consisting of only two people, one from each joint venture member. Under this setup, “Ms. McMahan (one of SNI’s two Directors) can exert negative control over SNI by, for example, declining to attend Board meetings, thereby blocking a quorum. . . .” SNI argued that that “Ms. McMahan’s control over SNI is illusory, because Mr. Hamad, as SNI’s majority shareholder, may unilaterally remove her from the Board.” But the bylaws stated: “no Director shall be removed if the number of votes recorded against his removal would be sufficient, if cumulatively voted at an election of the entire Board of Directors to elect one or more Directors.” Under this language, “it does not appear that Mr. Hamad, with only 51% ownership, has a sufficiently large ownership interest in SNI to unilaterally remove Ms. McMahan from SNI’s Board.” This decision makes it clear that having a written joint venture agreement and operating agreement is a must. And that written document must clearly set forth who is the managing venturer and manager of the joint venture and possibly designate the managing member as well. While this decision focused on Michigan law, other states may have similar rules. As we’ve said before, be careful setting up your joint venture. Questions about this post? Or need help with a government contracting legal issue? Email us. Looking for the latest government contracting legal news? Sign up for our free monthly newsletter, and follow us on LinkedIn, Twitter and Facebook. The post OHA: Ill-Defined Joint Venture Agreement and State Law Requirements Means JV was Invalid first appeared on SmallGovCon - Government Contracts Law Blog.View the full article
  7. It’s Friday, once again, and time for another week in review. We hope you had a great week. This week in federal government contracting news there were several articles on the VA electronic health records contract, the debt talks, as well as plenty of examples of why one should never try to pull one over on the federal government without facing the consequences. Enjoy your weekend! Industrial funding fee pain relievers [FedNewsNet] Former U.S. Army Employee Arrested In Bribery And Kickbacks Scheme Involving Defense Contracts [DoJ] Requested policy change at OMB [Congress] VA renews EHR contract, sets higher penalties for performance metrics missed by vendor [FedNewsNet] What would happen to contractors in case of a debt default? [FedNewsNet] Fake solicitation highlights growing attacks against federal officials [FedNewsNet] VA puts Oracle Cerner on a short leash in $10B health records contract [FCW] VA seeks cyber operations help [FCW] VA and Oracle Cerner reach agreement on electronic health record contract extension [FedScoop] CISA issues draft attestation form for government software providers [FedScoop] How contractors can prepare for a very big year in contracting [FedNewsNet] U.S. Resolves Civil Claims Against Medical Device Manufacturer for Falsely Claiming that Chinese Components Sold to the Federal Government Were American Made [DoJ] Rochester Man Pleads Guilty To Wire Fraud For Falsifying Documents Submitted To The Army [DoJ] US Department of Labor, Permaswage Reach Agreement to Resolve Gender Pay Discrimination, Disability Discrimination at Gardena, California, Facility [DoL] The post SmallGovCon Week in Review: May 15-19, 2023 first appeared on SmallGovCon - Government Contracts Law Blog.View the full article
  8. Those who work within the federal government contracting world are likely to have noticed that, lately, many large indefinite delivery, indefinite quantity (IDIQ) contracting vehicles are soliciting offers. However, with large contracting vehicles, which are often worth billions of dollars and promise many awards, there are often many protests. And Polaris, Transformation Twenty-One Total Technology Next Generation 2 (T4NG2), and Chief Information Officer – Solutions and Partners 4 (CIO-SP4), to name just a few of such solicitations, are no exception. Although many bid protests are filed with the Government Accountability Office (GAO), the Court of Federal Claims (COFC) also has jurisdiction over such matters, and COFC decisions are usually more indepth and the review of information from the agency more robust than at GAO.. This post will discuss the first of three main issues SH Synergy, LLC v. United States, and, because there is so much useful information packed into the decision’s 75 pages, we’ll plan a separate post for other issues. First, a very general description of the process offerors must endure while responding to these large IDIQ solicitations. Throughout the proposal drafting process, potential offerors plan and strategize to organize teams and submit proposals that they believe will be among the best of the best, and, therefore, have the highest likelihood of landing a coveted award—and even then, it does not guarantee award of any actual work. It merely awards the offeror the opportunity to submit a proposal for a task order under the IDIQ. Offerors join together in strategic teams intended to best target the solicitation’s requirements, whether through formal joint ventures or less formal teaming arrangements. In addition to the sheer magnitude of time dedicated to preparing a solid team and proposal, offerors also spend tens of thousands of dollars, or even hundreds of thousands, throughout this initial proposal process. Taking the foregoing into account, it is easy to see why so many protests occur. Now, on to the real reason you all are here. SH Synergy, LLC v. United States, No. 22-CV-1466 (Fed. Cl. Apr. 21, 2023) is a COFC decision that takes a look at, among other things, small business joint ventures’ participation in the Polaris solicitation. Small business joint ventures include either the option of joint ventures created by parties in a formal Mentor-Protégé Agreement (MPA) per 13 C.F.R. § 125.9, or small business joint ventures created between multiple small businesses. While all types of small business set-asides allow for small business joint ventures, general small business joint ventures, which can include any type of socioeconomic category per 13 C.F.R. § 125.8(a), are the most applicable in this situation. If you are interested, you can find the requirements of joint ventures for the other socioeconomic categories here, here, and here. From a mile high view, the SBA’s Mentor-Protégé Program permits, small business protégés to work with their (most often) other than small business mentor, with reduced risk of affiliation. Notably, a mentor may have more than one protégé, up to three to be exact, but SBA regulations require that a mentor with multiple protégés abide by a couple of additional rules. First, the protégés may not be competitors of each other, and the mentor must demonstrate that the additional mentor-protégé relationship will not adversely affect the development of either protégé. Second, a mentor with more than one protégé may not submit competing offers through separate joint ventures, each with one protégé. And therein lies the first issue: SH Synergy and VHC Partners, both plaintiffs protesting the solicitation, shared the same mentor, and because of this fact, neither of the joint ventures were permitted to bid on the small business pool. The court first noted that 13 C.F.R. § 125.9’s plain language was clear: “[a] mentor that has more than one protégé cannot submit competing offers in response to a solicitation for a specific procurement through separate joint ventures with different protégés.” Additional language within § 125.9 and the Federal Register further supported SBA’s intent to have § 125.9 apply both before and after admission to the Mentor-Protégé Program. Therefore, any restrictions within § 125.9 applied to both joint ventures, including the restriction that prohibits different joint ventures that share the same mentor from submitting competing bids. Once COFC determined that § 125.9 applied to mentor-protégé relationships after admission to the program, it turned its focus to the protesters’ next argument; that submitting offers at the IDIQ level, instead of at the task order level, does not include competing offers, as that term is used in § 125.9. Unfortunately for the protesters, their reasoning here fell short as well. This was because language within the solicitation stated that “GSA will evaluate, verify, and rank the proposals against one another to ensure only the highest-rated, technically qualified offerors receive award.” Even though the first phase of evaluations only involved the self-scoring to determine whether offerors can meet the needs of GSA, the eventual ranking and verification process “inherently compares the relative strength of each proposal against proposals submitted by competing offerors.” Essentially, because offerors would eventually be ranked against each other, the protesters would violate § 125.9 if both submitted proposals to the small business category. Note, however, that because one of the protesters was a woman-owned small business, and the other was a service-disabled veteran owned small business, they were permitted to submit a proposal to the WOSB or SDVOSB pool, as applicable, because each pool was compared only with those offerors in the same pool, and not all offerors generally. And with that, came the end of the protesters’ first claim, in which we learned that: SBA’s rules governing its Mentor-Protégé Program, and any joint ventures created in association with it, apply both before and after admission to the program; and Competition between joint ventures does not need to occur in the very first round of evaluations for offers to be considered “competitive bids,” eventual competition at any phase of evaluation is enough to restrict mentor-protégé joint ventures that share a mentor from submitting an offer in the same pool. This is an important decision showing that agencies will enforce the restriction on a mentor’s protegés from competing against each other, and good on the agency for doing so. Questions about this post? Or need help with a government contracting legal issue? Email us. Looking for the latest government contracting legal news? Sign up for our free monthly newsletter, and follow us on LinkedIn, Twitter and Facebook. The post COFC Confirms: Mentor-Protege JVs from the Same Mentor Can’t Bid Against Each Other first appeared on SmallGovCon - Government Contracts Law Blog.View the full article
  9. Most contractors, when starting their journey into the world of federal contracting eventually run into the same question: What size is my business? In the world of federal contracting, the size of your business can determine whether you can bid on certain procurements, participate in certain programs, and more. Miscalculating or misrepresenting your business size could open you up to size protests, and other severe repercussions. So, knowing the accurate size of your business could be critical to the success or failure of your federal contacting business. But don’t fear, in this edition of our Back to Basics series, we will discuss some of the basics around calculating the size of your business and why it all matters. What does “size” mean for federal contracting? As Julie Andrews so astutely sang in Sound of Music, “Let’s start at the very beginning, a very good place to start.” When talking about calculating size, the first thing to ask is, what does size even mean? While this may seem like a fairly simple question, it can have varying answers based on who you are asking, and why you are asking it. Often businesses will informally gauge their business “size” by looking at other businesses in their industry and comparing themselves. This will lead to the inevitable thought of, “I guess I am pretty small compared to that company” or “wow I’ve got a lot of employees and revenue compared to that business that does what I do in this town, so I guess I am a large business.” While that may make for good shop talk at your next industry convention or at your local coffee shop, when it comes to federal contracting, the Small Business Administration (SBA) demands something much more concrete. In the realm of federal contracting, when an agency or other business discusses the “size” of a certain business, what they are truly meaning is, are you smaller, or bigger than the size standard establishes for the applicable NAICS code? Size for federal contracting is categorized by NAICS code, either specified in the solicitation you would like to bid on, or that you chose to represent your business’s primary industry. Specifically, the SBA expects a business claiming to be small to “not exceed the size standard for the NAICS code specified in the solicitation.” That is what size roughly means when you are dealing with federal contracting. What is a NAICS code? Given the last answer, some contractors’ next question may be, “what is a NAICS code?” (side-note, when saying NAICS, remember that it is pronounced “naykes” like the word “cakes”, although if you pronounce it differently, that is allowed). NAICS code is short for North American Industry Classification Code System, and each NAICS code is a six digit number that directly correlates to a defined industry, and size standard. Contractors must select a primary NAICS code to represent what their company does when registering their business on SAM.gov and participate in different federal contracting programs. (A list of the NAICS Codes, as well as the industries and sizes assigned to them is published by the SBA here). For example, if I decided that I was finally bored of watching my extensive movie collection, and I wanted to start a business making movies for the Government, I would likely choose for my business, NAICS code 512110, whose assigned industry is “Motion Picture and Video Production”, which has assigned to it currently a $40,000,000 size standard (don’t worry we will get to what that all means below). Of course, businesses can be multi-faceted, so I could have my primary NAICS be 512110, but then also do other work in other related NAICS codes, making those my “secondary NAICS codes.” In addition to this, each solicitation will have a single NAICS code assigned to it by the procuring agency “which best describes the principal purpose of the product or service being acquired.” Going back to my example, if the Government wanted some private contractors to produce films for the Government, they would probably issue a solicitation with the earlier discussed NAICS Code 512110 assigned to it, thus putting offerors on alert to what size standard may apply as well as what that the agency believes best describes the work they will be looking for. While a contractor’s self-assigned NAICS code can determine what size a contractor needs to be to classify itself as a small business for contracting programs (such as SDVOSB, 8(a) etc.), the NAICS code that is assigned to a procurement determines if a contractor is small enough for that specific procurement. (Important side note, there are ways to appeal or contest NAICS codes that are assigned to solicitations, which we don’t have time to go into here, but if you are interested in that, I encourage you to check out our post about NAICS code appeals here.) How to determine the size of your business With the definition of size and what dictates the size standard out of the way, we can finally get to the big question at hand, how do you determine the size of your business for federal contracting? As hinted to above, it all relies on the NAICS code. If you are a contractor and want to apply to participate in a small business program, such as the 8(a) Program, one of the multitude of requirements for that program is to simply be a small business. This is a situation in which you would look at your primary NAICS code to see what the assigned size for that NAICS code currently is (the sizes are regularly updated for inflation etc.). You then conduct the necessary size calculation (discussed below), and if your final calculation is smaller than the assigned size for that NAICS code, then you are “small”. If not, then you are “other than small” (SBA doesn’t use the words “large business”). So, for my earlier examples, my pretend filmmaking business would need to be smaller than $40,000,000. For a solicitation, a contractor would look at the procurement documentation itself to see what NAICS code the agency assigned the solicitation, then do the needed calculation to determine if they would qualify as a “small business” for that procurement. So, shifting gears from the movies, to music, let’s say an agency wanted a contractor to produce a recording of a concert it was organizing. Presumably that agency would utilize NAICS Code 512250, Record Production and Distribution, which carries a size standard of 900 employees. If I had also started a record production line of business at my hypothetical movie business, due to my love of music (this would be an example of a secondary NAICS code), and wanted to bid as a small business on this procurement, I would need to have my size calculations result in fewer than 900 employees. While reading this, I am sure you had a couple things pop into your mind: 1) How do I “calculate” the size, like you keep referring to?; and 2) there are size standards based on revenue AND employees? Don’t worry, that’s exactly what we will cover next. How do you calculate size under an employee size standard? As alluded to, there are two types of size standards, a receipts-based size standard, and an employee-based size standard. The regulations and table of size standards will list these out for each NAICS code, so when faced with a size question, you can reference those to see exactly which standard and size applies to the NAICS code at issue. First, we will look at how to compute size under an employee-based size standard. Continuing with my examples from above, let’s pretend that there is a contract assigned NAICS Code 512250, Record Production and Distribution, which carries a size standard of 900 employees. SBA states that when determining your business’ size for an employee size standard, you calculate the average number of employees based upon the “numbers of employees for each of the pay periods for the preceding completed 24 calendar months.” This includes employees of any domestic and foreign affiliates. Additionally, part-time employees are counted the same as full-time employees. Using our example, for simplicity’s sake, we will assume I have been in business for over 24 months, so I would gather information on how many employees (including part time employees) I had for each pay period, add them all up, then divide by the number of pay periods I had during those 24 months. If the result of that calculation is below 900, then I am “small” for that solicitation. If your business has not been in operation for 24 months, you use the average number of employees for each of the pay periods that you have been in business. Also if you have any affiliates, then the SBA has specifics on how to properly calculate your “average” employees. In general, you would add the average number of employees of your business with the average number of employees for each affiliate, but there are additional wrinkles for when they became affiliates, or if they are former affiliates. How do you calculate size under a receipts-based standard? The other size standard is based on receipts (or for lack of a better word, money), not number of employees. Utilizing our earlier examples, lets propose that the government wanted to have someone produce a movie about the World War I museum in nearby Kansas City, Missouri, and issued a solicitation under NAICS code 512110. As discussed, that NAICS Code carries with it a $40,000,000 size standard. If my hypothetical film business wanted to bid on that solicitation as a small business, our receipts based size calculation would need to be below $40,000,000. To make this calculation, first you need to figure out what “receipts” are. SBA states that to calculate receipts based size standards, you first need to determine what constitutes “receipts”. SBA explains that receipts include “all revenue in whatever form received or accrued from whatever source, including from the sales of products or services, interest, dividends, rents, royalties, fees, or commissions, reduced by returns and allowances.” This is basically the “total income” (or for a sole proprietorship “gross income”), plus “cost of goods sold” as shown on a business’ tax forms. This may seem like quite a big amount of revenue to include, as you may be accustomed to multiple types of write offs, deductions etc. on your taxes, but SBA does not allow such reductions. For determining size, SBA has a narrow list of what can be excluded from the “receipts” and those are the only items that may be excluded. SBA makes it quite clear that “[a]ll other items, such as subcontractor costs, reimbursements for purchases a contractor makes at a customer’s request, investment income, and employee-based costs such as payroll taxes, may not be excluded from receipts.” Now that we have defined what “receipts” are, the calculation itself can be examined. To determine size based on a receipts size standard, a business will take its annual receipts for the past five completed fiscal years (which as you recall is total income plus costs of goods sold) and divide it by five. If you have fully completed five fiscal years, then that’s as simple as it gets. Looking at my example, let’s say my fictitious film company has been going for at least five years, and for the past five years has the following financial info: Year 1: Total Income of $3,000,000, and costs of goods sold of $250,000. This makes Year 1 receipts: $3,250,000 (i.e., Total Income + Costs of Goods Sold). Year 2: Total Income of $5,000,000, and costs of goods sold of $350,000. This makes Year 2 receipts: $5,350,000 Year 3: Total Income of $15,000,000, and costs of goods sold of $500,000. This makes Year 3 receipts: $15,500,000. Year 4: Total Income of $13,000,000 and costs of goods sold of $400,000. This makes Year 4 receipts: $13,400,000. Year 5: Total Income of $20,000,000 and costs of goods sold of $650,000. This makes Year 5 receipts: $20,650,000. To find my size, I would do the following equation: ($3,250,000 + $5,350,000 + $15,500,000 + $13,400,000 + $20,650,000) / 5 = SIZE This would result in my hypothetical size being $11,630,000, well below the size standard of $40,000,000, making my hypothetical film studio “small” for that specific procurement. However, life and business is rarely simple, so SBA does provide directions on if your business has not been in business for five years, or possibly had a short year in its five years. If a business has been in business for less than five years, the business simply takes the total receipts for the period the business has been operating divided by the number of weeks it has been in business, multiplied by 52. If a business has one short year within its five completed fiscal years, to determine its size, it will take its total receipts for that short year, and the four other full fiscal years, divide them by the total number of weeks in the short year and four full years, then multiply that number by 52. Why does this matter? Being able to accurately calculate size has far reaching implications across the federal contracting landscape. First, when you register on SAM.gov you must represent whether you are small or not, and what your primary NAICS code is. This is basically your name tag that will be used for all your federal contracting interactions, meaning it needs to be accurate to avoid any sort of false representations or certifications. Agencies may rely on the information on SAM to determine your size and eligibility, so keeping that information, including size, accurate and up to date is crucial. Also, your ability to participate in certain small business contracting programs may be prohibited if you are not small, or you could face ramifications for falsely stating you are “small”. For example, in addition to meeting the other requirements of the 8(a) Program, you must also be a small business in your primary NAICS code. You could perfectly meet every other aspect of eligibility for the 8(a) Program, but if your business is not small, you simply cannot be admitted into the program, or if your size subsequently changes, it will put your participation in that program at risk. This goes for other small business contracting programs as well, such as the SDVOSB program. A small business will commonly need to meet a certain size to bid on and be awarded contracts. In my examples, we discuss how the NAICS assigned to the solicitation will determine if I am “small” for those hypothetical contracts or not. If those contracts were specifically set-aside for “small business” under those NAICS codes, then ONLY businesses that are small under that assigned NAICS code could bid on and be awarded that contract. If you happen not to be small, competitors may file size protests against you, putting your award at risk (there could be false representation concerns too). Also, important to note is the risk of affiliation. We discuss this in another Back to Basics that you definitely should read, but in short, if you are found as an affiliate of another business under SBA’s rules you combine both business’ sizes which could make your business and the affiliate too large for certain procurements or small business program participation. What starts as a simple question of “is your business small” can actually mean so much more in federal contracting, sending you down a rabbit hole of employee pay periods, and receipts calculations. That’s why it is so important to arm yourself with as much knowledge as possible regarding size and how it is calculated. While this Back to Basics does exactly what it says, and provides some basics for contractors to understand, the world of size calculations, determinations, representations, and protests can be quite nuanced and fact specific. So, be sure to take your time to read the regulations and size standards, and reach out to a qualified federal contracts attorney when there is any doubt, as these complicated issues can truly mean the life or death of a contract award. Questions about this post? Or need government contracting legal assistance? Email us. Looking for the latest government contracting legal news? Sign up for our free monthly newsletter, and follow us on LinkedIn, Twitter and Facebook. The post Back to Basics: Calculating Small Business Size first appeared on SmallGovCon - Government Contracts Law Blog.View the full article
  10. If you are an avid SmallGovCon reader and a small business government contractor, you are probably no stranger to at least the basics of SBA’s size standards and its size and affiliation regulations (if not, check out some of our other blogs on the subject and keep an eye out for our upcoming new, second edition of the “SBA Small Business Size and Affiliation Rules” handbook). But either way, did you know, if you are pursuing or participating in one of SBA’s other small business socioeconomic programs (8(a) Program, HUBZone, WOSB, SDVOSB, etc.), there may be additional requirements you must meet regarding your company’s size in order to be eligible for such small business socioeconomic statuses? I am not going to go too far into the general size standards set by the SBA (and if that is a huge bummer to you, again, no worries–our new, updated handbook on the “SBA Small Business Size and Affiliation Rules” is coming very soon!). But in a very condensed nutshell, each contract set aside by the federal government has an assigned North American Industry Classification System (NAICS) code–and each NAICS code carries a specific size standard with it. To bid on one of those set-aside contracts as a small business (whether you are also 8(a), HUBZone, WOSB, SDVOSB, etc., and whether the contract is also set aside for one of those socioeconomic statuses or not), you have to be considered small under that contract’s NAICS code–using SBA’s rules for calculating your size (found in part 121 of SBA’s regulations). Some size standards are based on annual receipts and some are based on your number of employees–but regardless, you will need to meet the standard set by the specific contract you are bidding, period. The rules I am about to discuss are rules SBA set in addition to the general size rules–so keep that in mind. 8(a) Program The 8(a) Program, naturally, has some of the strictest rules for qualifying as a small business 8(a) Program participant. I say “naturally” because the 8(a) Program also carries with it some of the most sought after benefits of all of SBA’s programs. Amongst the plethora of other eligibility requirements, the 8(a) Program also lays out detailed rules on maintaining your small business size status. The 8(a) Program’s basic eligibility rule says: a concern meets the basic requirements for admission to the 8(a) BD program if it is a small business which is unconditionally owned and controlled by one or more socially and economically disadvantaged individuals who are of good character and citizens of and residing in the United States, and which demonstrates potential for success. You might be thinking at this point, great! I am totally a small business under some of the NAICS codes out there, so I am good right? Well, spoiler alert, that is simply not good enough for SBA’s golden child of socioeconomic statuses. In order to get into the 8(a) Program, you also need to “pick” a primary NAICS code for your company–and be (and remain) small under that size standard too (note: pick is in quotations, as it is not a simple selection process; you must be able to show SBA that is the accurate NAICS code for most of the work you do). The 8(a) Program size rules say: What size business is eligible to participate in the 8(a) BD program? (a)(1) An applicant concern must qualify as a small business concern as defined in part 121 of this title. The applicable size standard is the one for its primary industry classification . . . (2) In order to remain eligible to participate in the 8(a) BD program after certification, a firm must generally remain small for its primary industry classification, as adjusted during the program. SBA may graduate a Participant prior to the expiration of its program term where the firm exceeds the size standard corresponding to its primary NAICS code, as adjusted, for three successive program years, unless the firm demonstrates that through its growth and development its primary industry is changing, pursuant to the criteria described in 13 CFR 121.107, to a related secondary NAICS code that is contained in its most recently approved business plan. The firm’s business plan must contain specific targets, objectives, and goals for its continued growth and development under its new primary industry. So, you not only need to be considered small under the NAICS code of any small business or 8(a) Program set-aside contract you wish to bid–but you also cannot exceed the size standard of your primary NAICS code for three years in a row, or you will get the boot. SBA calls this “early graduation” from the 8(a) Program so you don’t feel quite so bad–but it does mean you are out of the 8(a) Program for good. And if you are sitting there thinking to yourself, “so, I will just pick a higher size standard for my primary NAICS code!” That is easier said than done. To do that, you would need to demonstrate to SBA (through financial documents, taxes, contracts, etc.) that your company did in fact migrate to performing the majority of its work under a different NAICS code. In that regard, the 8(a) Program Definitions say: A Participant may change its primary industry classification where it can demonstrate to SBA by clear evidence that the majority of its total revenues during a three-year period have evolved from one NAICS code to another. So, to be a small business 8(a) Program participant, you will need to meet these size rules. And to be a small business 8(a) Program participant that can actually bid on a contract–you will need to meet SBA’s size standard for that contract as well. I will quickly note, there are some affiliation exceptions for Tribal-Owned, ANC, and NHO entities–so keep that in mind if you qualify as one of those and are calculating your size. SDVOSB/VOSB Program For the SBA’s SDVOSB and VOSB Program, there are also some additional rules for maintaining a certain size. But they are not quite as strict as the 8(a) Program. SBA’s SDVOSB/VOSB Eligibility rules state: What are the requirements a concern must meet to qualify as a VOSB or SDVOSB? (a) Qualification as a VOSB. To qualify as a VOSB, a business entity must be: (1) A small business concern as defined in part 121 of this chapter under the size standard corresponding to any NAICS code listed in its SAM profile; (2) Not less than 51 percent owned and controlled by one or more veterans. (b) Qualification as an SDVOSB. To qualify as an SDVOSB, a business entity must be: (1) A small business concern as defined in part 121 of this chapter under the size standard corresponding to any NAICS code listed in its SAM profile; (2) Not less than 51 percent owned and controlled by one or more service-disabled veterans or, in the case of a veteran with a disability that is rated by the Secretary of Veterans Affairs as a permanent and total disability who are unable to manage the daily business operations of such concern, the spouse or permanent caregiver of such veteran. Additionally, in the SDVOSB/VOSB Definitions, it says the following: “Small business concern (SBC)” means, a concern that, with its affiliates, meets the size standard corresponding to any North American Industry Classification System (NAICS) code listed in its SAM profile, pursuant to part 121 of this chapter. At the time of contract offer, a VOSB or SDVOSB must be small within the size standard corresponding to the NAICS code assigned to the contract. Thus, unlike the 8(a) Program rules, which focus solely on your size under your primary NAICS code (as demonstrated by your work history), the SDVOSB/VOSB rules allow you to consider yourself a small business for purposes of inclusion in SBA’s SDVOSB/VOSB Program as long as you are small under at least one of the NAICS codes you have listed in SAM. But don’t forget, that does not automatically qualify you for small business, SDVOSB, or VOSB set-asides–you still need to be small under the NAICS code for the set-aside contract you want to bid. WOSB/EDWOSB Program SBA’s WOSB Program and EDWOSB Program also sets some additional size requirements for its participants–but again, not quite as intensely as the 8(a) Program has. In fact, there is a (frankly, quite inexplicable) nuance in these regulations, as the size rules for the WOSB Program participation and EDWOSB Program participation are not the same. Though, generally, these two sets of rules parrot one another (except for the economic disadvantage requirements of the EDWOSB Program)–the size rules do not. SBA’s WOSB/EDWOSB rules state: What are the requirements a concern must meet to qualify as an EDWOSB or WOSB? (a) Qualification as an EDWOSB. To qualify as an EDWOSB, a concern must be: (1) A small business as defined in part 121 of this chapter for its primary industry classification; and (2) Not less than 51 percent unconditionally and directly owned and controlled by one or more women who are United States citizens and are economically disadvantaged. (b) Qualification as a WOSB. To qualify as a WOSB, a concern must be: (1) A small business as defined in part 121 of this chapter; and (2) Not less than 51 percent unconditionally and directly owned and So, curiously, one could participate in the WOSB Program at any size they want–though, again, they could not bid any small business work or WOSB work if they did not qualify as small for that work’s NAICS code. But to participate in the EDWOSB Program, you must maintain your small business size status under your primary NAICS code to remain in the program (and again, must also be small for any set-aside work you bid). Apparently, this nuance may be the result of some Congressional tinkering and corresponding SBA rule changes–but as of now, we don’t see any changes on the horizon. HUBZone Program And last, but certainly not least, is SBA’s HUBZone Program. For the HUBZone Program, SBA’s size rules state: (1) An applicant concern, together with its affiliates, must qualify as a small business concern under the size standard corresponding to its primary industry classification as defined in part 121 of this chapter. (2) In order to remain eligible as a certified HUBZone small business concern, a concern must qualify as small under the size standard corresponding to one or more NAICS codes in which it does business. So, for the HUBZone Program (somewhat similar to, but still not quite as strict as the 8(a) Program size rules), there are sort of two rules. One for getting into the program; and one for staying in the program. To get into the HUBZone program, a company must be small under its primary NAICS code. But once you are in, you can stay in by demonstrating that you remain small under at least one NAICS code in which your company does work. I will also note, there is an exception to these rules for “small agricultural cooperatives” HUBZone’s, which says: “in determining size, the small agricultural cooperative is treated as a ‘business concern’ and its member shareholders are not considered affiliated with the cooperative by virtue of their membership in the cooperative.” * * * Whelp, in a nutshell, those are SBA’s rules for participating in its socioeconomic programs for small businesses. These rules–and oh so many more–will be covered in great detail in the upcoming “SBA Small Business Size and Affiliation Rules” handbook, second edition, so keep your eye out for that one! Questions about this post? Email us. Need legal assistance? call at 785-200-8919. Looking for the latest government contracting legal news? Sign up for our free monthly newsletter, and follow us on LinkedIn, Twitter and Facebook. The post Size Standards Applicable to SBA’s Socioeconomic Programs first appeared on SmallGovCon - Government Contracts Law Blog.View the full article
  11. Happy Friday, Readers! The second week of May brought with it some rainy weather in the midwest. It’s difficult to stay ahead of getting the grass mowed when the grass is growing so quickly. Everything looks very lush and green here and the spring flowers are very colorful, as well. Only a few more weeks until school is out! Parents, are you ready? We’ve included some interesting articles, from federal government contracting news this week, for you to read as you sit back and relax this weekend. There was multiple stories about efforts to increase a diverse small business supplier base, as well as news on some large multiple award contracts. Enjoy! Texas Man Who Lied About Origin of Chinese-Made Products Sentenced to 4 Years In Prison, Ordered to Pay $1.15 Million [DoJ] Biden-Harris Administration provides new tools to help federal agencies find diverse suppliers, advance equity in procurement [GSA] SBA seeks to grow shrinking pool of small businesses getting federal contracts [FedNewsNet] CIO-SP3 procurement extended through October [FedScoop] White House and GSA launch platforms to improve equity in federal procurement [FedScoop] 6 Small Businesses Land Spots on $298M FAA Weather Observation Service Contract [GovConWire] 3 Major Federal IT Contract Opportunities [GovConWire] Does the GSA have the best data to work with during price negotiations with contractors? [FedNewsNet] Construction Business Operator Sentenced To Two Years In Prison For Failing To Pay More Than $4.4 Million Of Payroll Taxes [DoJ] DoD Issues Progress Payment Update [DoD] It’s official: No more COVID vaccine mandate for federal workers and contractors [FCW] GSA tools flag diverse suppliers for procurement officials [FCW] Do you know the 5 challenges unique to transforming how the government does business? [FedNewsNet] Ownership and Control and Contractual Assistance Requirements for the 8(a) Business Development Program; Correction [FedReg] The post SmallGovCon Week in Review: May 8-12, 2023 first appeared on SmallGovCon - Government Contracts Law Blog.View the full article
  12. 13 C.F.R. § 125.6 sets out the limitations on subcontracting for all small business set-asides (including 8(a), SDVOSB/VOSB, HUBzone, and WOSB/EDWOSB set asides.) These limitations on subcontracting are crucial for any small business federal contractor to be familiar with, and we have discussed how they work here. But, while the regulation does provide for certain legal penalties for violations of these limitations, up until SBA’s recent rule change, it didn’t provide for any direct consequences for a company’s past performance (although conceivably an agency could mention limitations on subcontracting as part of a CPARS review). Furthermore, SBA now will require that compliance with the limitations be looked at on an order-by-order basis for multi-agency set aside contracts where more than one agency can issue orders under the contract, and for full and open contracts where the task order is set aside for small businesses. All this is effective May 30, 2023, and we explore these changes here. On April 27, 2023, SBA released its long-awaited rule change that it first proposed back on September 9, 2022. We have explored what this change does in general and, more specifically, its impact on the ostensible subcontractor rule for size affiliation. Now, we are going to explore another way in which this rule will change things for federal contractors: the limitations on subcontracting. Task Order by Task Order Limitations on Subcontracting In its discussion of the old rule in the April 27, 2023 issuance of the new rule, SBA noted: “Section 125.6(d) provides that the period of time used to determine compliance for a total or partial set-aside contract will generally be the base term and then each subsequent option period. This makes sense when one agency oversees and monitors a contract. However, on a multi-agency set-aside contract, where more than one agency can issue orders under the contract, no one agency can practically monitor and track compliance.” This was true. For these contracts, where multiple agencies are involved and will each issue task orders, the contracting officers would not be aware of how the contractor was doing compliance-wise regarding orders issued by other agencies. While the COs could require the contractor to comply on an order-by-order basis, they did not have to. SBA felt this was an oversight, and so now, the rule will state as follows: “However, for a multi-agency set aside contract where more than one agency can issue orders under the contract, the ordering agency must use the period of performance for each order to determine compliance.” 13 C.F.R. § 125.6(d). In other words, for these set-aside contracts, where there are task orders and different agencies can issue task orders under the contract, the contractor will need to show its compliance with the limitations on subcontracting separately for each order. In addition to this, SBA added another portion to the rule: “For an order set aside under a full and open contract or a full and open contract with reserve, the agency will use the period of performance for each order to determine compliance unless the order is competed among small and other-than-small businesses (in which case the subcontracting limitations will not apply).” 13 C.F.R. § 125.6(d). This means that for unrestricted contracts that nonetheless allow for set aside task orders, if the order is indeed set aside, the contractor will need to show compliance with the limitations under that order. For all the other set-asides, however, the rule will remain that unless the CO says otherwise, the contractor just has to show compliance with the limitations on subcontracting from the perspective of the whole contract combined. To clarify, this means that going past the limitations for a task order is not necessarily a problem if the contractor makes up for it with the rest of the contract. If a contractor is not sure how an agency is measuring compliance, though, it’s always good to check with the agency. Consequences for Violations of Limitations of Subcontracting While 13 C.F.R. § 125.6 did provide for penalties for violations of the limitations of subcontracting, it did not provide for any impact on a contractor’s past performance. SBA decided to change that. Now, contracting officers are to evaluate compliance with the limitations where they apply: “(e) Past Performance Evaluation. Where an agency determines that a contractor has not met the applicable limitation on subcontracting requirement at the conclusion of contract performance, the agency must notify the business concern and give it the opportunity to explain any extenuating or mitigating circumstances that negatively impacted its ability to do so.” 13 C.F.R. 125.6(e). The effects of the rule can be serious. If the contractor does not provide an extenuating or mitigating circumstance, or the agency find the concern’s failure to meet the limitations were due to factors within its control, “the agency may not give a satisfactory or higher past performance rating for the appropriate factor or subfactor in accordance with FAR 42.1503.” 13 C.F.R. § 125.6(e)(1). (While FAR 42.1503 has allowed for past performance evaluation based on “failure to comply with limitations on subcontracting,” the new SBA rule is much more robust). Furthermore, even if the CO accepts the contractor’s excuse, the CO cannot give a satisfactory or higher rating unless “the individual at least one level above the contracting officer concurs with that determination.” 13 C.F.R. § 125.6(e)(2). In other words, the CO needs to get approval to make that call. What are these extenuating circumstances? Well, it will depend on each case, but the regulation provides examples: “Extenuating or mitigating circumstances that could lead to a satisfactory/positive rating include, but are not limited to, unforeseen labor shortages, modifications to the contract’s scope of work which were requested or directed by the Government, emergency or rapid response requirements that demand immediate subcontracting actions by the prime small business concern, unexpected changes to a subcontractor’s designation as a similarly situated entity (as defined in § 125.1), differing site or environmental conditions which arose during the course of performance, force majeure events, and the contractor’s good faith reliance upon a similarly situated subcontractor’s representation of size or relevant socioeconomic status.” 13 C.F.R. § 125.6(e)(2)(i). Note that the language says “could” lead to a satisfactory/positive rating. Don’t assume that because one of these factors are present that that means you’re in the clear. The agency still has to agree with you on it. Furthermore, “an agency cannot rely on any circumstances that were within the contractor’s control, or those which could have been mitigated without imposing an undue cost or burden on the contractor.” 13 C.F.R. § 125.6(e)(2)(ii). If you could have reasonably prevented or mitigated the problem, you will be out of luck. The limitations on subcontracting already were seriously important for contractors to pay attention to. Now, they are even more important as there is a more direct path for a CO to impose a past performance penalty on a small business. While the new rule does take into account those situations where the contractor could not reasonably comply with the limitations on subcontracting, it does not suggest that any excuses for violations will be accepted readily by the government. If you become aware that meeting the limitations might become an issue and its something you really can’t reasonably do anything about, we now even more strongly recommend you maintain good communications with your CO on this. It could make the difference not just for legal penalties, but for your company’s past performance too. These new tighter rules show SBA is going to be taking the limitations on subcontracting even more seriously, so contractors should follow suit. Questions about this blog? email us at info@koprince.com Need legal assistance? Give us a call at 785-200-8919. Looking for the latest government contracting legal news? Sign up for our free monthly newsletter, and follow us on LinkedIn, Twitter and Facebook. The post SBA New Rule: Guidelines for Compliance with Limitations on Subcontracting in 13 C.F.R. 125.6 first appeared on SmallGovCon - Government Contracts Law Blog.View the full article
  13. Happy Friday and happy May! I don’t know about you, but it sure seems like the pace picks up in the spring, as the weather gets warmer. The kids are getting ready for the summer break, there are graduations and weddings to attend and of course, it’s time to start mowing the lawn and preparing the gardens, too. We hope amid all the activities you have a chance to relax this weekend and, in the meantime, here are a few articles from the federal government contracting world, including updates on some prominent GSA acquisitions and the formal end of vaccine requirements for contractors. Have a great weekend! Billions in funding, not enough oversight resources, IGs tell Congress [FedNewsNet] Over half of GAO’s high-risk areas stem from critical skills gaps [FedNewNet] NIH Contracts Office Says Protests Delaying Start of IT [BGov] The Biden-⁠Harris Administration Will End COVID-⁠19 Vaccination Requirements for Federal Employees, Contractors, International Travelers, Head Start Educators, and CMS-Certified Facilities [WH] US to lift most federal COVID-19 vaccine mandates next week [FedNewsNet] Court hits GSA over handling of Polaris small biz contract [WashTech] Is there a ‘revolving door’ between private companies and the Pentagon? [FedNewsNet] Does the National Cybersecurity Strategy spell the end of the government market for commercial software? [FedNewsNet] Court of Federal Claims decision results in a ‘sea change’ for federal acquisition [FedNewsNet] Long Island Man Pleads Guilty to Bribing Federal Official to Obtain Nearly $1 Million in Federal Contracts [DoJ] Defendants Sentenced in Air Force Contract Fraud Case [DoJ] OMB’s upcoming AI guidance calls on agencies to ‘step up’ use of emerging tools [DoJ] Sen. Ernst leads bills seeking higher standard for federal small business contracting goals [FedNewsNet] FCW Insider Chat: Cybersecurity [FCW] 6 major multibillion dollar tech procurements to watch in 2023 [FCW] GAO appoints Beth Killoran as chief information officer [FedScoop] The post SmallGovCon Week in Review: May 1-5, 2023 first appeared on SmallGovCon - Government Contracts Law Blog.View the full article
  14. You may have noticed that SBA issued a final rule last week that created sweeping changes to the SBA’s 8(a) Program regulations, but along with that, SBA made sure to slip in a change to the ostensible subcontractor rule that has been a sticking point for many contractors when facing affiliation concerns. With this final rule, SBA will update the regulations to provide contractors certain ways to defend against potential ostensible subcontractor rule affiliation, depending on the type of contract at issue. This represents a shift in thinking, related to how to combat allegations brought under this affiliation rule and could present some new wrinkles for contractors to consider when setting up subcontracting arrangements. As avid readers of SmallGovCon know, we posted last week about some of the aspects of SBA’s recent final rule updating the 8(a) Program’s regulations. But it is important to point out, that within that final rule, is a change to the ostensible subcontractor rule that could affect a wide array of contractors, not only 8(a) Program participants. First, it is important to quickly review what the ostensible subcontractor rule is. Last year, we posted one of our “Back to Basics” on affiliation and another one of the different affiliation types, both of which we highly recommend contractors review to get acquainted with the implications of affiliation, as we don’t have the time to dive into all its subtleties here. That being said, affiliation is basically when certain factors lead the SBA to see two contractors, for all intents and purposes, as one contractor, and thus their size is combined. One of the many ways to be found affiliated with another contractor is the ostensible subcontractor rule. Currently, under 13 C.F.R. § 121.103(h)(2), to be found as a contractor’s “ostensible subcontractor”, and thus making both contractors affiliated, the following elements must be met: The subcontractor performs the “primary and vital requirements of a contract” OR The prime contractor is “unusually reliant” on the subcontractor AND The subcontractor cannot be a similarly situated entity as the prime contractor (which is defined by 13 C.F.R. § 125.1). The SBA, when making affiliation determinations based on these elements, will take into account “all aspects of the relationship between the prime and subcontractor”. In determining whether the prime contractor is “unusually reliant” on the subcontractor, or whether the subcontractor is performing the “primary and vital requirements of a contract,” the journey taken by the SBA is a very fact-intensive one and consequently really depends on the contract at issue, as well as the nuances of the relationship between the two contractors. We have previously talked here about some of the different analysis that occurs with ostensible subcontracting cases, but it really boils down to this: if the subcontractor is performing the work at the heart of the contract, or the prime contractor cannot perform without the subcontractor, then the ostensible subcontractor rule may be met. However, with the update recently released by SBA, this determination process is facing a change in which contractors may be able to take action to lessen risk of ostensible subcontractor affiliation. In the final rule issued last week, SBA updates 13 C.F.R. § 121.103 to move the ostensible subcontractor rule to section (h)(3) and keep the elements discussed above, but update the “factors” that would be considered by SBA. The final rule articulates that, for general construction contracts, the SBA has added to the regulation that “the primary and vital requirements of the contract are the management, supervision and oversight of the project, including coordinating the work of various subcontractors, not the actual construction work performed.” For general construction contractors, this provides a clear line to follow in order to help prevent ostensible subcontractor concerns centered around subcontractors performing the “primary and vital” requirements of a contract. The revisions to the rule, once effective, will clearly state to all, that as long as there aren’t any subcontractors performing the management, supervision, or oversight of the general construction project, then there is a low likelihood that the subcontractor is performing the primary and vital requirements of the contract. It will greatly reduce the risk that a subcontractor, on a general construction contract, will be seen as affiliated with the prime contractor under the ostensible subcontractor rule. However, it is important to note that this regulation language does not alleviate businesses of ensuring they are not unusually reliant on the subcontractor, and it only applies to general construction contracts. That being said, general construction contracts are not the only types of contracts that the final rule provided with some new defenses to ostensible subcontracting. SBA is also updating the regulation to state, that for a “contract or order set-aside or reserved for small business for services, specialty trade construction or supplies” SBA will not find that the primary and vital requirements are being performed by the subcontractor, or that the prime contractor is unusually reliant on the subcontractor, if the prime contractor can “demonstrate that it, together with any subcontractors that qualify as small businesses, will meet the limitations on subcontracting” found in 13 C.F.R. § 125.6. Therefore, contractors performing service, specialty trade construction, or supplies contracts, if set-aside for small businesses, can potentially avoid ostensible subcontractor concerns, by simply making sure to abide by the limitations on subcontracting. SBA case law used to be unclear on this, noting that for instance, compliance with limitations on subcontracting “is a matter of contractor responsibility, beyond OHA’s jurisdiction.” Shoreline Servs., Inc., SBA No. SIZ-5466 (May 28, 2013). OHA had also made clear that the two rules are separate, even though analysis of each may look at similar facts. Lynxnet, LLC, SBA No. SIZ-5612, 2014 (Nov. 7, 2014). Now, the two rules are closely intertwined, and SBA will have to look at limitations on subcontracting as part of ostensible subcontractor analysis. We published a “Back to Basics” on limitations on subcontracting last year, that you can review to refresh your understanding of limitations on subcontracting, as we once again can’t go in-depth here on its nuances, but in general, the limitations on subcontracting rule sets limits on how much work assigned to a prime contractor may be subcontracted by the prime contractor to subcontractors that are not similarly situated. For service and supply contracts, only 50% of the contract work may be subcontracted, and for specialty construction, only 75% of the contract work may be subcontracted. So, under this final rule, if a prime contractor on a small business service, supply, or specialty trade construction contract, can show that they, along with any small business subcontractors (or other similarly situated subcontractors under SBA’s socioeconomic programs), have met the limitations on subcontracting requirements, it will be interpreted by the SBA that the subcontractors are not performing primary and vital elements of the contract. Also, that the prime contractor is not unusually reliant on the subcontractor, thus defeating the ostensible subcontractor rule. Both of these changes represent some new, very clear ways for contractors to defend against ostensible subcontractor rule allegations, and if properly heeded may alleviate ostensible subcontractor affiliation concerns for many contractors. These options, likely can be easily met with careful planning and formation of a teaming agreement and/or proposal. While under the current rule, contractors must be very aware of the specific relationship and work done between them and their subcontractors. Once this rule becomes effective, it should provide some relief to contractors trying to navigate this oft-utilized affiliation rule, but it is important to keep in mind that this change is not effective until May 30, 2023. So until then, the old rules are still in effect. Questions about this blog? email us at info@koprince.com Questions about this post? Email us. Need legal assistance? call at 785-200-8919. Looking for the latest government contracting legal news? Sign up for our free monthly newsletter, and follow us on LinkedIn, Twitter and Facebook. The post New Defenses to the Ostensible Subcontractor Rule are Coming first appeared on SmallGovCon - Government Contracts Law Blog.View the full article
  15. It’s Friday, Readers! Hope everyone is ready for the weekend. The NFL Draft is right down the road in Kansas City this weekend and if you’re an NFL fan (as is almost required in Kansas City), I’m sure you are anxiously awaiting to see if your favorite players will be selected. What better way to welcome the weekend than with a bit of football excitement and a review of what’s been happening in the government contracting world? In this week’s roundup, there were several articles concerning DoD contracts and some cautionary tales on why defrauding the federal government is a really bad decision. Enjoy your weekend! GOP senator demands DEA boss explain no-bid contracts, hires [FedNewsNet] Protests may complicate awards for $60B VA IT contract [WashTech] Alleged transgression costs major government contractor $22M [FedNewsNet] L3 Technologies Settles False Claims Act Allegations Relating to Double-Charging for Certain Material Costs [DoJ] How the Air Force stuck with CACI for $5.7B IT contract [WashTech] The rest of fiscal 2023 is shaping up to be an extra-rocky time for contractors [FedNewsNet] Former Contracting Officer for the Department of Defense Pleads Guilty in Conspiracy to Defraud the Government [DoJ] Air Force $5.7B EITaaS contract freed from protests [FedNewsNet] IT2EC NEWS: For Some Vendors, Defense Conferences, Contracts Are Gravy [NatDefMag] DOD Construction Contracts: Contractor Proximity to Work Sites Varied [GAO] SBA to Expand Veterans Business Outreach Centers to 6 Additional States in 2023 [Inc] The post SmallGovCon Week in Review: April 24-28, 2023 first appeared on SmallGovCon - Government Contracts Law Blog.View the full article
  16. The FAR requires offerors, in most situations, to disclose any actual or potential organizational conflicts of interest (OCI) that exist when submitting an offer or proposal in response to a solicitation. While it is rare that an offeror will be excluded from competition solely due to the existence or potential of an OCI, offerors who do not disclose as required will most likely be excluded, making this a situation where you generally want to disclose the existence of an OCI up front, not explain after the agency’s discovery through other means. Offerors may choose to avoid, mitigate, or neutralize an OCI by putting up a organizational barrier between the individual creating the OCI and the perceived or actual conflict. However, in some situations, avoiding, mitigating, or neutralizing the OCI may not be in the agency’s best interest. In that case, and as happened in Accenture Federal Services, LLC, agencies are given the option to waive the requirements of FAR subpart 9.5, thereby making award regardless of the existence or potential of an OCI. What is an OCI? Many readers likely already know what an OCI is, especially if you have ever submitted an offer for a federal government contract. But, for those that don’t, so I’ll start with a very quick review of OCIs. “Organizational Conflict of Interest means that because of other activities or relationships with other persons, a person is unable or potentially unable to render impartial assistance or advice to the Government, or the person’s objectivity in performing the contract work is or might be otherwise impaired, or a person has an unfair competitive advantage.” FAR 2.101. Said plainly, OCIs are situations that lead to an offeror having an unfair competitive advantage, most often via access to proprietary information. There are three types of OCIs including unequal access to information, biased ground rules, and impaired objectivity. It is ultimately the contracting officer’s responsibility to identify and resolve potential conflicts, and the FAR requires the contracting officer to award the contract to an apparent successful offeror unless an identified conflict exists and cannot be avoided or mitigated. FAR 9.504. Accenture Federal Services, LLC In Accenture Federal Services, LLC, Accenture filed a protest questioning TSA’s award of a task order under a General Services Administration (GSA) indefinite-delivery, indefinite quantity (IDIQ) contract to Deloitte, claiming that TSA failed to reasonably consider and improperly waived an OCI identified by Deloitte in its proposal. Accenture and Deloitte both held contracts under the GSA IDIQ, and both were performing on task orders under the IDIQ. Accenture was performing personnel, payroll, and benefits services for TSA and Deloitte was performing recruiting and hiring services for TSA. Both parties were performing IT services under separate task orders; Accenture via FAST TO2 and Deloitte via FAST TO 6. TSA issued an RFP for a task order with a one-year base period and four options to perform human capital support services for “the full lifecycle of a TSA employee, including recruitment, onboarding, development, retention and separation.” The RFP stated that evaluations would utilize a best-value tradeoff analysis using various factors and phases, and offerors were required to identify potential OCIs and submit an OCI mitigation plan if applicable. Both parties were successful with their Phase 1 proposals and were asked by TSA to participate in Phase 2. In its Phase 2 proposal, Deloitte identified multiple potential OCIs and included an OCI mitigation plan, noting that, in performing the FAST TO6 requirements, “it is possible that certain personnel could be provided information that would be relevant to this procurement.” Accordingly, Deloitte’s mitigation plan identified several of its employees who had been firewalled from participating in the preparation of Deloitte’s proposal. Subsequently, TSA awarded the task order to Deloitte. Following its debriefing, Accenture filed a protest with GAO asserting that the agency had failed to reasonably consider two OCIs that Deloitte had: “unequal access to information” and “impaired objectivity.” Following its notice of the protest and alleged OCIs, TSA decided to take corrective action, “stating that it would perform an additional OCI review, document its findings, and make a new source selection decision.” Following the notice of TSA’s intent to take corrective action, the protest was dismissed. The contracting officer then completed her OCI review and concluded there were no conflicts of interest. This was, in part, because the requirements of Deloitte’s FAST TO6 contract were different from the requirements of the task order in question, with the former being “strictly technology enhancements” and the latter being “strictly services.” The contracting officer acknowledged that the awardee of the task order in question would be permitted to make recommendations for technology changes, which would be implemented by Deloitte under its FAST TO6 contract. But TSA ultimately concluded that, as the awardee, Deloitte’s objectivity in making such recommendations would not be impaired because TSA would review the recommendations, making the ultimate decision regarding whether or not to adopt the changes proposed by the awardee. Thereafter, Deloitte was again selected for award. Accenture then filed another protest with GAO asserting the same arguments as it did in its first protest, which was then followed by three supplemental protests adding support to its initial protest. Accenture’s second protest asserted that Deloitte had access to non-public information when performing on its FAST TO6 contract and, in performance of its IT support services contract, Deloitte had unequal access to information that gave Deloitte an unfair competitive advantage in preparing its proposal. Following a discussion held with GAO’s attorneys and representatives from both parties, TSA executed an OCI waiver pursuant to the authority of FAR 9.503, which permits a contracting officer to request a waiver of an OCI if it determines that the application in a particular situation would not be in the Government’s interest. Any such request must be in writing, setting forth the extent of the conflict, and must be approved by the agency hear or designee. Accordingly, the waiver contained the required information and stated: [This] award is the backbone of the infrastructure for TSA’s ability to meet its mission. . . . The inability to proceed with this award will restrict the opportunities to provide continuing improvement and efficiencies for the TSA workforce, including those that have been priorities for the Administrator. Furthermore, the time and cost to delay or put aside this award will be detrimental to the agency and it’s in the best interest of the agency for this waiver to exist. It is understandable that an OCI could cause concerns within such a large requirement to the mission of TSA as any agency. However, any potential concern does not outweigh the magnitude to which this contract impacts the agency and is considered [moot] at this time. As stated and demonstrated above, to the extent any residual OCIs might exist in the areas of impaired objectivity, biased ground rules, or unequal access to nonpublic information, the application of the rules and procedures of FAR 9.5 to those OCIs is waived. Accenture then filed its third supplemental protest, challenging the validity of the OCI waiver, claiming that the waiver did not discuss the extent of the conflict, as required. However, in the end, GAO determined that the waiver did, in fact, satisfy the requirements of FAR 9.503. The waiver was in writing, it set forth the extent of the conflict, addressing each assertion raised by Accenture regarding current or potential OCIs, and was approved by the appropriate individual within the agency, leaving no basis to sustain the protest of the alleged OCIs. Conclusion Ultimately, this decision left me wanting for more. While it thoroughly discussed OCI waivers and gave insight on their use, something that many may not even realize was a possibility, it left me with one big question that is not answered in the decision or the OCI regulations: What does it take to be considered “in the best interest of the government,” and, therefore, waive an OCI? *** Questions about this blog? email us at info@koprince.com Need legal assistance? Give us a call at 785-200-8919. Looking for the latest government contracting legal news? Sign up for our free monthly newsletter, and follow us on LinkedIn, Twitter and Facebook. The post GAO Upholds Low Agency Bar to Waive OCI first appeared on SmallGovCon - Government Contracts Law Blog.View the full article
  17. SBA has issued a final rule updating some of its rules relating to the 8(a) Program. The final rule will have an impact on some aspects of ownership and control requirements for the 8(a) Program, including providing some flexibility for change of ownership and making some 8(a) set-aside processes a little cleaner. The rule would also allow for populated joint ventures between similarly situated joint venture members. We wrote about the proposed rule last year. Below are some of the key takeaways from the final rule and any changes from the proposed rule. 8(a) Ownership Under the new rule, SBA has included “a process for allowing a change of ownership for a former Participant that is still performing one or more 8(a) contracts.” The old rule used to say that “any Participant that was awarded one or more 8(a) contracts may substitute one disadvantaged individual for another disadvantaged individual without requiring the termination of those contracts or a request for waiver under § 124.515.” The updated rule specifies that a change of ownership could apply to a former Participant as well as to a current Participant under 13 C.F.R. § 124.105(i). This is most likely to benefit “an entity (tribe, ANC), Native Hawaiian Organization (NHO), or Community Development Corporation (CDC)) [that] seeks to replace the principal of a former 8(a) Participant.” The one-time eligibility rule would mean that if a disadvantaged individual or a disadvantaged principal of a former 8(a) Participant, the buyer would use up its one-time eligibility for the 8(a) Program. In addition, the rule makes clear that an SBA-approved mentor can own up to 40% of its protégé. This would allow a mentor in the same line of business as its 8(a) protégé to own up to 40% of the 8(a) protégé. Under the ownership rules, an 8(a) Participant can change its ownership “where all non-disadvantaged individual owners involved in the change of ownership own no more than a 20 percent interest in the concern both before and after the transaction.” To avoid issues where two or more immediate family members try to purchase ownership and get around the 20% cap, rule will “aggregate the interests of all immediate family members in determining whether a non-disadvantaged individual involved in a change of ownership has more than a 20 percent interest in the concern.” Tribal, ANC and NHO 8(a) Community Benefits Rule SBA did listening sessions for its proposed rule that would “require a Community Benefits Plan laying out how a tribe, Alaska Native Corporation (ANC) or Native Hawaiian Organization (NHO) that owned and controlled one or more 8(a) BD Participants intended to give benefits back to the Native community as a result of its 8(a) BD participation.” In these sessions, the participants “overwhelmingly opposed SBA imposing any target that a certain percentage of an entity’s 8(a) receipts should be distributed to benefit the affected Native community or that there should be any specific consequences if the benefit targets were not reached.” In response, SBA removed any the proposed changes on Community Benefits Plan from the final rule. 8(a) Contracting and other Rules There are a number of other changes to clean up the 8(a) regulations. For potential for success, the rule clarifies that a company “can demonstrate potential for success with prior commercial and government contracts, including state and local government contract work.” No private sector contracts are needed. Where a company had federal debts, “if the Government has settled a debt (i.e., accepting less than the full amount owed to discharge the debt), the firm/individual would not be barred from participating in the 8(a) BD program on that basis alone.” Because some tribes don’t file tax returns, the rule says that a tribally-owned applicant can submit financial statements. The final rule clarifies that an agency cannot restrict “there is a prohibition on “a contracting activity from restricting “an 8(a) competition to Participants that are also certified HUBZone small businesses, certified WOSBs or eligible SDVO small businesses.” Also, the final rule will provide that “an agency may award an 8(a) sole source order against a multiple award contract that was not set aside for competition only among 8(a) Participants.” Joint Venture and Size Rules Populated Joint Ventures The final rule essentially revives populated joint ventures in limited circumstances. SBA had years ago decided that a joint venture must be unpopulated, meaning that if a joint venture exists as a formal separate legal entity, it may not be populated with individuals intended to work on contract performance for the joint venture. The joint venture could employ administrative personnel. As SBA put it, “a populated joint venture could be awarded a contract set aside or reserved for small business where each of the partners to the joint venture were similarly situated (e.g., both partners to a joint venture seeking a HUBZone contract were certified HUBZone small business concerns).” In other words, two small businesses with the same socioeconomic designation as the set-aside designation for the solicitation could have a populated joint venture. Dissimilar joint venture partners, such as those commonly in a mentor-protégé relationship, could not form a populated joint venture. For populated joint ventures, the rule also states that revenues must be divided according to the same percentage as the joint venture partner ownership share in the joint venture. In addition, for size purposes a populated joint venture will aggregate the size of both members: “Where two or more parties form a separate business entity (e.g., a limited liability company or partnership) and populate that entity with employees intended to perform work on behalf of that entity, SBA similarly views that as an ongoing business entity and will aggregate the receipts/employees of the parties that formed the separate business entity in determining its size.” Contracts versus Orders The new rule cleared up the age old question about orders versus contracts. SBA said its current policy has been that the two-year rule applies only to contracts, not orders. But SBA was fed up with getting this same question over and over. (Government contracts attorneys also receive the question frequently). The rule at 12 C.F.R. 121.103(h) will now clearly state: “a joint venture may be issued an order under a previously awarded contract beyond the two-year period.” Unsurprisingly, all commenters praised this clarification. Joint Venture Management SBA has also clarified that “initiating contract litigation is outside the scope of the management of daily contractual performance and instead represents a decision that reasonably falls into the exception that allows other joint venture partners to participate in commercially customary decisions.” So, a non-managing venture could have a a veto power over this decision by a joint venture. SBA feels the same way about deciding contract opportunities: “SBA believes that requiring the concurrence of a non-managing joint venture partner in deciding what contract opportunities the joint venture should seek is also something that would be commercially customary.” This is an important insight for those forming joint ventures, as it has not been clear from past SBA precedent. The final rule says that “A non-managing venturer’s approval may be required in, among other things, determining what contract opportunities the joint venture should seek and initiating litigation on behalf of the joint venture.” Good on SBA for clarifying this, although I wish they would have done so when they updated the rule back in 2020. Ostensible Subcontractor Rule The final rule will specify what counts as the primary and vital parts of a contract for construction contracts for purposes of ostensible subcontractor affiliation. As SBA explains: [T]he primary role of a prime contractor in a general construction project is to superintend, manage, and schedule the work, including coordinating the work of various subcontractors. Those are the functions that are the primary and vital requirements of a general construction contract and ones that a prime contractor must perform. . . . In addition, the “The prime contractor must retain management of the contract but may delegate a large portion of the actual construction work to its subcontractors.” SBA said that meeting the limitations on subcontracting is generally enough for overcoming ostensible subcontractor affiliation: “For a services, specialty trade construction, or supply contract or order, SBA believes that meeting the applicable limitation on subcontracting requirement is sufficient to overcome any claim of the existence of an ostensible subcontractor.” (That is an interesting clarification from SBA, as it seems to make ostensible subcontractor analysis much easier based on simple percentages). But for general construction, the 15% minimum under the limitation on subcontracting is so low that a subcontractor could “subcontract out all the supervision and oversight responsibilities to another business entity.” In addition, for unusual reliance on an ostensible subcontractor, the new rule will specifically mention two risk factors when affiliation is more likely: reliance on incumbent contractor’s management personnel and the reliance on the subcontractor’s experience. These would just be part of the overall consideration in a size determination. In response to comments, SBA added a provision that “that no single factor is determinative” for ostensible subcontractor analysis. For contracts below the Simplified Acquisition Threshold, SBA will now clarify that “a small business can subcontract to any business for such contracts and it does not matter who is performing the primary and vital functions of the contract.” Other Size Rules SBA requires recertification in connection with sales or mergers. SBA clarifies that recertification “in connection with a ‘sale’ or ‘acquisition’ is required only where the sale or acquisition results in a change in control or negative control of the concern.” The rule at 13 C.F.R. § 121.404 will now state: “In the case of a merger, acquisition, or sale which results in a change in controlling interest under § 121.103,” a recertification is required. The new rules will make clear that “if a protest is pending before GAO [or COFC or the agency], the SBA Area Office will suspend the size determination case.” Once a GAO decision is issued, SBA will resume the size determination. 13. C.F.R. § 121.1009. “If the award is cancelled and re-evaluation or other corrective action takes place, interested parties may file a timely size protest with respect to the newly identified apparent successful offeror after the notification of award.” *** This rule, effective May 27, 2023, clarifies a number of aspects of rules relating to 8(a) Program ownership and contracting issues. It also addresses some joint venture and size rules to make them clearer. (and there are many more provisions in the rule that we didn’t touch on this blog, so be sure to check these updated rules when they come out). Kudos to SBA for continuing to sharpen the clarity of its rules. Those in the 8(a) Program or working with joint venture would do well to review it in full. Questions about this blog? email us at info@koprince.com Need legal assistance? Give us a call at 785-200-8919. Looking for the latest government contracting legal news? Sign up for our free monthly newsletter, and follow us on LinkedIn, Twitter and Facebook. The post SBA Final Rule Relaxes Change of 8(a) Program Ownership, Allows Limited Populated Joint Ventures first appeared on SmallGovCon - Government Contracts Law Blog.View the full article
  18. Yet another beautiful Spring Friday for us at SmallGovCon! And you guessed it, it’s time for your week in review. As the flowers continue to blossom all around us, so do the partnerships between agencies (such as GSA and DHA). And as allergies are reaching an all-time high for many, so too is the government’s spending on AI and other technology solutions and innovation! We’ve included some fascinating articles on these topics, and many others we think you will enjoy. Have a wonderful weekend! Federal gov spending on AI hit $3.3B in fiscal 2022: study [FedScoop] RPA reducing the burden on DHS contracting officers [FedNewsNet] No, DOD didn’t contract for COVID research before pandemic [APNews] GSA and DHS formalize partnership to promote sustainability [GSA] General Dynamics, SAIC continue battle over $95M contract [WashTech] Construction Company Owner Sentenced to 78 Months in Prison and Ordered to Pay Nearly $1 Million in Restitution for Rigging Bids and Bribing a Public Official [DoJ] RPA reducing the burden on DHS contracting officers [FedNewsNet] Can you launch a govcon startup during a pandemic and thrive? Yes – just ask Iberia Advisory [FedNewsNet] Air Force Opens Solicitation for Geospatial Service Recompete [FedNewsNet] GSA Updates US Government Websites to Enhance Online Service Delivery; Robin Carnahan Quoted [ExecGov] The need for reform in federal procurement and acquisition [FedNewsNet] Two reports examine financial health of defense industrial base and speed to adopt innovative technologies [FedNewsNet] MyGovWatch Study Reveals 38% of NAICS Wrongly Assigned to Federal Bids [MyGovWatch] The post SmallGovCon Week in Review: April 17-21, 2023 first appeared on SmallGovCon - Government Contracts Law Blog.View the full article
  19. Here in Kansas, it is certainly starting to feel like thunderstorm season–and one of my favorite seasons, I might add. But over in D.C., some may say it is starting to feel like protest season! That said, anyone familiar with the protest process at D.C.’s Government Accountability Office (GAO) is probably also quite familiar with the strict timeliness rules GAO applies to such protests. And frankly, even for the seasoned GAO protesters, a refresher on the timeliness rules can be quite beneficial–especially given the answer to when a certain type of protest is due is not always an easy calculation. So, let’s take it back to the basics and run through some of those rules here. Indeed, GAO’s protest rules set forth strict filing deadlines, which are most appropriately split into the following two categories: protests to a solicitation’s terms and everything else. Notably, you might also have heard GAO protests discussed as either: pre-award protests or post-award protests (and there is another recent Back to Basics blog focused on pre-award protests here). While that is certainly a fair way to categorize GAO protests generally (i.e., you are either protesting something that happens before the final award/awards or after), it is not the schema I recommend relying on when it comes to GAO’s timeliness rules–as it is simply not the most accurate way to divide up GAO’s two main overarching timeliness rules (for reasons you will see as we dive into the rules below). So, for purposes of this blog and GAO’s timeliness rules, we will stick with the safer (albeit more vague) categorization of protests to a solicitation’s terms and everything else. The good news is, both categories of GAO’s timeliness rules can be found under the same time for filing regulation. GAO Protests to Solicitation’s Terms The first section of the regulation discusses the protest to a solicitation’s terms. Those are generally described by GAO as: “[p]rotests based upon alleged improprieties in a solicitation which are apparent prior to bid opening or the time set for receipt of initial proposals[.]” And GAO’s timeliness rules require that such protests “shall be filed prior to bid opening or the time set for receipt of initial proposals.” This protest timeliness rule does add, however: In procurements where proposals are requested, alleged improprieties which do not exist in the initial solicitation but which are subsequently incorporated into the solicitation must be protested not later than the next closing time for receipt of proposals following the incorporation. And if a protest to a solicitation’s terms doesn’t quite fit into either of those situations, the rule also provides for one more potential situation, as follows: If no closing time has been established, or if no further submissions are anticipated, any alleged solicitation improprieties must be protested within 10 days of when the alleged impropriety was known or should have been known. So, to sum up the timeliness rule for protests to a solicitation’s terms, there are really three situations with three different deadlines: Situation One: Protests of an issue apparent in the initial solicitation–due by the time of bid opening or proposal deadline. Situation Two: Protests of an issue that becomes apparent in a subsequent solicitation document (often an amendment, incorporated Q&A, etc.)–due by the next closing time for proposals. Situation Three: Protests of a solicitation issue where there is no established closing time for proposals or there won’t be any further proposal submissions–due within 10 days of when the issue became (or should have become) known to the protester. A quick note here, the term “should have known” might be one that stuck out in reading the rules above–and rightfully so. It is not easily defined, but is rather quite fact specific. And frankly, going into the details of GAO’s history of holdings regarding “should have known” is beyond the scope of this basics blog. So, for now, just think of “should have known” as meaning the protester had information available to them that a reasonable person would have used to identify the protestable issue at that time (here is past blog on one GAO case discussing the issue). GAO Protests to Everything Else The other category of GAO protest–everything else–does indeed cover post-award protests. But that is certainly not all it covers, as it may also include protests regarding pre-award eliminations, phase-based eliminations, established competitive ranges, and oh so many more. Also, this timeliness rule is expressly defined by GAO as a catch-all. Indeed, GAO’s timeliness rules merely call these: “[p]rotests other than those covered by” the section of the timeliness regulation for protest to the solicitation’s terms (discussed above). And GAO says this type of protest shall be filed not later than 10 days after the basis of protest is known or should have been known (whichever is earlier), with the exception of protests challenging a procurement conducted on the basis of competitive proposals under which a debriefing is requested and, when requested, is required. In such cases, with respect to any protest basis which is known or should have been known either before or as a result of the debriefing, and which does not involve an alleged solicitation impropriety covered by [the pre-award protest timeliness] section, the initial protest shall not be filed before the debriefing date offered to the protester, but shall be filed not later than 10 days after the date on which the debriefing is held. So, crystal clear right? Don’t worry, we will unpack this one a bit, just as we did in the first section, here in a minute. But first, another quick note here: if you are newer to the federal procurement world and currently asking yourself what on earth a “debriefing” is–or if you are asking the slightly more complex question of when a debriefing is required (and/or how to timely request one), you can read yet another Back to Basics blog all about debriefings here. [Spoiler alert for the latter questions, those answers will generally depend on what part of the Federal Acquisition Regulations (FAR) the procurement is being conducted under and what your solicitation and/or notice of award says in that regard.] So, to sum up the post-award/everything else protest timeliness rule: generally, such a protest would be due within 10 days of the day you knew/should have known of the protestable issue. But if the procurement is one where a debriefing is both required and timely requested, that may change things a bit. So why the vague language here–when I am supposed to be making the rule clearer for you? Well, that is because the timeliness rules for protests that fit into the latter category here are intensely fact specific, and we could (and probably will at some point) do an entire blog just on that topic. But in a nutshell, the question will usually come down to whether (and to what extent) the protestable issue was known/should have been known from any type of pre-debriefing notices of award/unsuccessful offeror/elimination/etc. And this analysis may often come down to a balancing of risks for the protester. On one hand, such a protest filed before the debriefing (where the issue is covered in the debriefing) runs the risk of being dismissed as premature–but generally, without prejudice (meaning you could simply file again after the debriefing if the issue isn’t resolved therein). On the other, such a protest filed within 10 days after the debriefing (where the issue was potentially identifiable earlier) runs the risk of being dismissed as untimely–meaning the right to protest that issue would be gone. Again, we could discuss this all day, and we won’t (but if you are debating this issue/balancing these risks for your own protest, promptly talking to an expert is certainly a good idea). So, those are the two main types of GAO protest timeliness rules. But for the sake of being thorough, I will briefly note three more items covered by GAO’s time for filing regulation–and a final note regarding stays of performance/award. Additional Items Covered in GAO’s Time for Filing Regulation First, the regulation separately addresses situations where an agency-level protest is timely filed, and the protester wishes to subsequently protest the issue at GAO. Those rules are a bit unique and I won’t cover them here, as they are outside the scope of this blog (but for some information on that scenario, check out these prior blogs, found here, here, and here). Second, the regulation expressly gives GAO the right to dismiss untimely protests, and it puts the burden on the protester to establish timeliness. It states: Protests untimely on their face may be dismissed. A protester shall include in its protest all information establishing the timeliness of the protest; a protester will not be permitted to introduce for the first time in a request for reconsideration information necessary to establish that the protest was timely. But I do want to note the use of the word “may” in this quote–as it brings me to the final item covered in GAO’s time for filing regulation. Though we rarely see GAO apply this exception, the regulation does conclude with the following: “GAO, for good cause shown, or where it determines that a protest raises issues significant to the procurement system, may consider an untimely protest.” Again, this is not something wise to rely on when deciding when to file a GAO protest. But it is still important to note the existence of this exception, as it has the potential to save an untimely protest where GAO finds good cause or significant justification to do so. Stays of Performance Last but not least, GAO’s time for filing regulation does not speak to stays of performance or award (and I will not go into the details of that topic here either). But I would be remiss to not at least note in this blog that a separate rule found in the FAR covers the requirements for agencies to stay an award or performance of a contract in response to a timely-filed protest. Importantly, if a stay is something the protester hopes to impose, section (f) of this rule should be read very carefully–as it imposes a shorter, five-day filing deadline, on the protester in some situations. But the rule also explains that the right to request a stay of performance or award doesn’t always guarantee one will be imposed either. * * * If the length of this “basics” blog didn’t tip you off, let me tell you now: knowing when to file a GAO protest is not always a simple calculation of days (funny enough, even the word “days” is separately defined in another section of GAO’s bid protest regulations). And the ramifications of not knowing the timeliness rules can be pretty severe. So, knowing your timeliness rules is key. Questions about this blog? email us at info@koprince.com Need legal assistance? Give us a call at 785-200-8919. Looking for the latest government contracting legal news? Sign up for our free monthly newsletter, and follow us on LinkedIn, Twitter and Facebook. The post Back to Basics: GAO’s Protest Timeliness Rules first appeared on SmallGovCon - Government Contracts Law Blog.View the full article
  20. Typically, agencies will provide a handful of evaluation factors, sometime more, in a solicitation. Common evaluation factors are technical, past performance, and cost. A recent protest decision looked at a solicitation that contained separate factors for 1) offeror’s technical capability and 2) staffing and management approach. The question was, can an agency combine its evaluation for two different factors? If it does mix the two evaluation criteria, is that enough to sustain a protest? In Spectrum Healthcare Resources, Inc., B-421325 (Mar. 21, 2023), GAO reviewed a protest by Spectrum (or protester) of award to Dentrust Dental International (Dentrust or awardee) of a Federal Emergency Management Agency (FEMA) contract for medical and behavioral health services. The solicitation sought “medical professionals to provide Medical and Behavioral Health Services to FEMA employees” for services like “occupational health center services, medical employability and fitness for duty consultations, immunizations and travel medication.” There were four evaluation factors: (1) technical capability; (2) staffing and management approach; (3) past performance; and (4) price. FEMA rated Dentrust higher on technical capability and past performance than Spectrum and Dentrust was cheaper. Plus, “the strengths that Spectrum provides in [staffing and management approach] do not warrant or justify” Spectrum’s higher price. For Technical Capability, the Solicitation required information “detailing their EXPERIENCE by addressing” five topics, including “deploying hundreds of medical staff capable of safely providing medical and behavioral health services to dispersed locations within a 96-hour period”. Spectrum got two weaknesses: “The vendor did not adequately outline how they can deploy the medical personnel/labor categories (except nurses) within the 96-hour timeframe outlined in the PWS.” “While the vendor indicated on the chart on pg. ii that it can deploy behavioral health staff within 96 hours, the proposal does not illustrate how it plans to do that and how it has previously met that timeframe.” Under GAO precedent, an agency’s evaluation must be “consistent with the solicitation’s evaluation criteria,” and this makes common sense. Why even have criteria and a supposedly level playing field if an agency doesn’t have to follow them. To review evaluation criteria, GAO will look at “the solicitation as a whole and in a manner that gives effect to all of its provisions. “This decision rests on the specific evaluation language for the technical capability factor, on the one hand, versus the staffing and management approach, on the other. Here, as part of the technical capability factor, offers were to detail “their EXPERIENCE” and requiring offerors to use “specific examples that are verifiable” from up to five reference contracts in describing their technical capability. Additionally, FEMA ignores the solicitation’s explanation that “[m]ore weight may be given to experience serving as the prime contractor” when evaluating an offeror’s technical capability. Read together, the instructions and evaluation criteria indicate that offerors were limited to describing their technical capability through the lens of verifiable past experience. Thus, the agency’s argument that offerors “without experience in certain areas were not excepted from showing their capability” is inconsistent with the terms of the solicitation. GAO interpreted the Solicitation as requiring “that while an offeror’s technical capability was to be evaluated based on its verifiable experience, under the staffing and management approach the agency specifically would assess an offeror’s plan to achieve the objectives of the IDIQ SOW.’” So, experience for the first factor and a plan for the second factor. Under this interpretation, GAO found unreasonable the agency’s assessment of the two weaknesses under the technical capability factor for Spectrum’s failure to address how it would deploy personnel–i.e., its “plan to achieve the objectives” of the SOW, as the solicitation required the agency to assess offerors ability to meet the requirements of the SOW–or how offerors planned to perform–under the staffing and management approach factor. The agency also conflated the “the evaluation criteria under the technical capability and staffing and management approach factors” in responding to Spectrum’s challenge of 5 other weaknesses. For instance, the Spectrum’s proposal “notes that it provides FEMA with weekly reports under its current contract and that [Spectrum’s teaming partner] provides special reports within three business days of request, it does not address how it proposes to provide the daily reporting requested in the PWS.” GAO found this again mixed the experience portion of the technical factor with the planning portion of the management factor: “the evaluators did not understand that the evaluation of technical capability was to be in the context of an offeror’s past experience with the factor’s identified topic areas.” GAO recommended reevaluation of the proposal under the technical capability factor. This protest shows that agencies must keep their evaluation criteria straight. They cannot take aspects of one evaluation criteria, and apply them to evaluation for a distinct evaluation factor. Questions about this post? Email us. Need legal assistance? call at 785-200-8919. Looking for the latest government contracting legal news? Sign up for our free monthly newsletter, and follow us on LinkedIn, Twitter and Facebook. The post GAO: Agency Can’t Combine Evaluation Factors After the Fact first appeared on SmallGovCon - Government Contracts Law Blog.View the full article
  21. I hope you will join Nicole Pottroff and I as we discuss the benefits of the SBA’s Mentor-Protégé Program. We will be covering the program’s eligibility requirements, application process, options such as forming a special Mentor-Protégé Joint Venture and much more. Hope to see you there! Register here. The post Govology Webinar: Still A Game Changer: The SBA Mentor-Protégé Program (2023 Update), April 27, 2023, 1:00pm EDT first appeared on SmallGovCon - Government Contracts Law Blog.View the full article
  22. Happy Friday, Readers! Time for your week in review. The spring trees are in full bloom here in Lawrence, Kansas this week and they couldn’t be more beautiful! Other than allergy sufferers, we certainly are enjoying the beauty of spring and hope you are as well. The federal government contracting world is also very active at this time. There was a lot of buzz this week surrounding the Defense Department and how it can immediately modernize acquisition in addition to a release of the department’s finance study showing how large versus small federal contractors are faring. We’ve included those articles, and a few others we hope you find of interest, below. Enjoy your weekend! Steps to take now for defense acquisition reform [FedNewsNet] CISA’s updated zero trust model aims to help agencies walk before they run [FedNewsNet] USDA plots departmentwide cloud move with STRATUS contract [FedScoop] Lawmakers demand VA fire substandard staff faster [FedTimes] Five scenarios for the FY24 defense budget [FedTimes] Software Acquisition: Additional Actions Needed to Help DOD Implement Future Modernization Efforts [GAO] Procurement trends in small business contracting [FedNewsNet] DoD Releases Defense Contract Finance Study [DoD] New Presidential Innovation Fellows will design lasting, impactful solutions for government services [GSA] A-76 has been dormant for 14 years; can it be, should it be revived? [FedNewsNet] DoD study finds big vendors flush with cash, but concerns in the supply chain [FedNewsNet] Who should staff the arsenal of democracy, feds or contractors? [FedNewsNet] How the approaching debt-ceiling crisis could hit contractors first [FedNewsNet] Government Contractors Indicted in San Antonio for Wire Fraud, Money Laundering [DoJ] The post SmallGovCon Week in Review: April 10-14, 2023 first appeared on SmallGovCon - Government Contracts Law Blog.View the full article
  23. Please consider joining me as I participate in a round table discussion with several APEX Accelerator (formerly PTAC) procurement specialists, hosted by Nick Bernardo, President & Founder of mygovwatch.com. We will be discussing resources available for federal government contractors and answering questions that you may have regarding federal government contracting matters. Please join us for this informative roundtable discussion. Register here. Hope to see you there! The post MyGovWatch Live: The B2G Roundtable Event: April 19, 2023, 1:00pm EDT first appeared on SmallGovCon - Government Contracts Law Blog.View the full article
  24. A recent GAO case on protest costs looked at whether costs were reimbursable centered around whether a Buy American Act waiver was properly applied in the procurement process. As you likely know, the Buy American Act is something many contractors (especially supply and construction contractors) must deal with in their contracting process, and getting a waiver or an exception often may be critical to a proposal. This case arose from a protest seeking costs, but it is still a great opportunity for contractors to better understand the limits of a waiver or exception of the Buy American Act and GAO’s expectations surrounding such an action. In the events underlying Unico Mechanical Corporation – – Costs, B-420355.5, (Mar. 24, 2023), the Army initially awarded a contract to McMillen, LLC, but the award was protested by Unico Mechanical Corporation, alleging that the Army improperly waived the Buy American Act requirements, and improperly evaluated Unico’s proposal. After the filing of the Agency Report, Comments, and a Supplemental Protest, the Agency filed a Notice of Corrective Action, which led to the GAO case being dismissed, and Unico requesting costs related to the Bid Protest. The case being discussed here is basically the assessment of whether Unico is justified in receiving costs related to the bid protest that resulted in corrective action. GAO, when determining whether costs for a bid protest are reimbursable, must determine if an agency “unduly delayed taking corrective action in the face of a clearly meritorious protest.” Thus, GAO has to look at whether the protest grounds were so clearly correct or meritorious, that the Agency didn’t need to wait so long for corrective action. This leads to GAO often diving deep into the standards of the legal theories at issue, such as they did here with the Buy American Act. Thus, this case gives contractors and SmallGovCon readers a glimpse into what GAO expects of Buy American Act waivers and documentation. In the procurement process at issue in the underlying case, eventual awardee McMillen relied on the use of foreign materials for two 90 inch butterfly valves and one hydraulic power unit (“HPU”). McMillen asked for the Army to waive the Buy American Act for these specific items. Initially, the Agency denied McMillan’s request and, as expected, documented their rationale for the denial. Then during discussions, at the Agency’s request, McMillan submitted additional information in attempt to support its previously denied Buy American Act waiver request. However, the Agency did not document its analysis of this additional information, nor were there indications that such a waiver was granted to McMillen prior to their award of the contract. As GAO summarized it: “In short, the record demonstrates that the agency awarded a contract to McMillen knowing that McMillen’s proposal relied on foreign construction material, but without granting a Buy American Act waiver, and without documenting a determination that a Buy American Act exception applied.” Despite this, after McMillen was awarded the contract, the Agency issued a modification to the contract adding the butterfly valves and HPU to the list of material exempted from the Buy American Act requirements. GAO, when reviewing the record, noted that the procurement itself incorporated FAR 52.225-9, of the Buy American Act, which requires the use of domestic (i.e., American) construction material. But FAR 52.225-9 also contains certain exceptions that the contracting officer could apply if they determine that any of the specific exceptions listed could apply. In addition to these exceptions, contractors may request waivers of the Buy American Act prior to contract award, under FAR 52.225-10. McMillen, in its waiver request, argued that the cost of the domestic material was unreasonable, which under the waiver would mean that domestic manufacturer costs exceed the costs of acquiring those same materials from a foreign source by 20%. As part of this request for a waiver, contractors are expected to supply detailed information backing up their assertions, and for this specific waiver, include a “reasonable survey of the market.” There was at least one offeror who requested a waiver for butterfly valves stating that they were not available from domestic manufacturers at a reasonable cost. As such, the Agency conducted market research, contacting manufacturers, including the eventual protestor, Unico. The Agency discovered and documented that Unico and two other domestic manufacturers had indicated the ability to manufacture the butterfly valves in compliance with the Buy American Act. Accordingly, the CO documented that “there are sufficient resources existing to allow contractors to comply with the Buy American [Act] requirements” for the butterfly valves. Consequently, the solicitation did not list any Buy American Act waivers. McMillen, in its request for a waiver, only supplied a table discussing the lump sum price of the domestic material and foreign material, with no break down of the lump sum costs by supplier or item. Thus, the waiver was denied, and the CO documented the denial. The Agency then sent McMillen a negotiation memorandum requesting more information in support of its waiver request. McMillen responded with information about four additional foreign manufacturers of the butterfly valves and HPU, but no domestic manufacturers. Under the Buy American Act, if a contractor does not request, or does not receive, a waiver prior to submission of offers, then it must submit its request and supporting information with its offer, and if the CO does not grant a waiver, an agency can only evaluate offers based on the use of domestic material, only accepting offers based on foreign materials if the offer was revised during negotiations to meet domestic material requirements. There was no such record of the Agency granting McMillen’s waiver request prior to award, or that the CO determined a Buy American Act exception applied. Yet after award (surprisingly), there was a contract modification exempting the butterfly valves and HPU from Buy American Act requirements. GAO found that the Agency’s lack of documentation, as to the rationale for the eventual modification, the Agency’s documented knowledge of other domestic manufacturers that could meet Buy American Act requirements, and McMillen not looking at domestic manufacturers in its updated information, made it unreasonable for the Agency to waive the Buy American Act. As such, GAO granted Unico costs for this portion of their protest, as “a reasonable agency inquiry into Unico’s Buy American Act argument would have disclosed the lack of a defensible legal position” making Unico’s argument on these grounds “clearly meritorious.” As a note, the GAO did not find this standard met for the other aspects of Unico’s protest. While this case was technically focused on whether Unico’s reimbursement of costs was justified, upon review, it really is a roadmap for Buy American Act exceptions and waivers. If you find yourself competing for a procurement, and the Buy American Act is involved, then it may be fruitful to conduct methodical documented approaches for any sort of waiver, that takes into account the industry participants here in America. GAO has made it clear here that it expects agencies to scrutinize and document the rationale behind each waiver request. If contractors plan on arguing that there are no domestic manufacturers for an item at a reasonable cost, GAO has shown through this case that contractors must clearly show that industry participants in America cannot manufacture the item domestically, within the requirements of the Buy American Act. McMillen did not make this distinction clear in their documentation, while the Agency in their process did find some manufacturers that could possibly meet Buy American Act requirements. While the Agency here initially awarded McMillen, despite that they subsequently had to take corrective action, and GAO awarded the protestor fees for the protest. Also, contractors should keep in mind, that they are not the only ones looking at whether there are exceptions or possible waivers, Agencies themselves, through their COs, may be doing the same industry research looking for exceptions. If there are discrepancies between what the Agency finds, and what the contractor finds, there may be a waiver denial, or need for further documentation. Here, the protest process successfully shone a light on compliance with the Buy American Act. The Buy American Act and its different exceptions or waivers can be quite a thicket of regulations and hurdles for contractors. As such, waivers and exceptions often may be seen as one way to try to avoid these hurdles. But, any such waiver or exception request will require dedicated and determined analysis by contractors, as well as agencies, as GAO will expect extensive documentation and justification for any waiver or exception. If that is not present, a proposal or an award decision could be put in jeopardy. Questions about this post? Email us. Need legal assistance? call at 785-200-8919. Looking for the latest government contracting legal news? Sign up for our free monthly newsletter, and follow us on LinkedIn, Twitter and Facebook. The post Buy American? Agencies Must Carefully Document Market Research for Domestic Preference Compliance, says GAO first appeared on SmallGovCon - Government Contracts Law Blog.View the full article
  25. SBA has released its proposed rule allowing for HUBZone appeals to go to the Office of Hearings and Appeals. Below are the key items from this proposed rule, and how it will affect potential and current HUBZone companies. SBA issued the final rule on April 10 and it will become effective on May 10. As we wrote about a few months back, the HUBZone appeals rule will allow appeals from adverse status determination protests for certified HUBZone small business concerns. The inclusion of HUBZone appeals was written into the National Defense Authorization Act for Fiscal Year 2022. Notably, there were no comments on the proposed rule, which we have additional details in our earlier post, but here are some key things to look out for. Be sure to check these rules closely if you are involved in a HUBZone protest and potential appeal. Timing: HUBZone “appeals must be filed within ten (10) business days after the appellant receives the protest determination.” Note that this is a different timeline than the 15-calendar day rule for size protest appeals found in 13 C.F.R. 134.304(a). Responses are due within 15 days after the appeal. Decisions should come within 45 days after close of record. Who may Appear? A protester may appear in the appeal and file a response. Effect of an Appeal. “[W]here an appeal is filed before contract award, the contracting officer must withhold award until the appellate decision is rendered, unless the contracting officer has determined that award and performance of the contract is in the best interests of the government.” For an appeal after contract award, a CO must merely “consider whether performance can be suspended.” Standard: Whether the protest “determination was based on clear error of fact or law.” This is the same standard as used in other OHA appeals, and can be tough to meet in some circumstances. Who decides the appeals? The judges at SBA Office of Hearings and Appeals will decide HUBZone appeals, rather than the Associate Administrator for Government Contracting and Business Development. OHA appeals for HUBZone status determinations will still not include an avenue for appealing a denial of a HUBZone certification application. It will be interesting to see if this appeal process has any substantive affect on the HUBZone program. Regardless, it will add transparency to the HUBZone protest process. Stay tuned for more updates as we start seeing HUBZone appeal decisions trickle in. Questions about this post? Email us. Need legal assistance? call at 785-200-8919. Looking for the latest government contracting legal news? Sign up for our free monthly newsletter, and follow us on LinkedIn, Twitter and Facebook. The post Breaking: HUBZone Appeals Coming Soon! first appeared on SmallGovCon - Government Contracts Law Blog.View the full article
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