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  1. Koprince Law LLC
    An agency may modify a contract without running afoul of the Competition in Contracting Act, so long as the the modification is deemed “in scope.” An “out of scope” modification, on the other hand, is improper–and may be protested at GAO.
    In a recent bid protest decision, GAO denied a protest challenging an agency’s modification of a contract where the modification was within scope and of a nature that competitors could have reasonably anticipated at the time of award. In its decision, GAO explained the difference between an in scope and out of scope modification, including the factors GAO will use to determine whether the modification is permissible.

    The GAO’s decision in Zodiac of North America, Inc., B-414260 (Mar. 28, 2017), involved a U.S. Army Contracting Command solicitation for a contractor to produce a seven-person inflatable combat raiding craft (I-CRC) and a 15-person inflatable combat assault craft (I-CAC). The Army initially issued the solicitation in February 2013.
    The solicitation included purchase descriptions, which set forth the product requirements for the boats and motors. Specifically, the submersible outboard motors for the I-CRC and I-CAC required “they propel a fully-loaded craft (2,120 pounds and 4,000 pounds, respectively) at 16 knots during sea state 1 (calm water) within two minutes.” As part of the solicitation, offerors were also informed that they were required to provide two units of each the I-CRC and I-CAC for article testing in accordance with FAR 52.209-4. If the government disapproved the first article, upon the government’s request, the contractor was required to make any necessary changes, modifications, or repairs to the first article or select another first article for testing.
    The Army evaluated proposals and awarded the contract. Zodiac, an unsuccessful offeror, protested the award to GAO arguing that the Army should have found the awardee’s proposal technically unacceptable because the awardee’s proposed boats were insufficient to meet the speed requirements detailed by the solicitation. GAO denied the protest in Zodiac of North America, B-409084 et al. (Jan. 17, 2014) finding that Zodiac had proposed the same motors as the awardee, and the Army had reasonably relied on the awardee’s test reports demonstrating the product’s compliance with the solicitation’s speed requirements.
    Likely unsatisfied with GAO’s decision, Zodiac subsequently filed a Freedom of Information Act request in October 2016. Through this request, Zodiac learned the Army had modified the contract requirements after the awardee twice failed product testing. The modification revised both the purchase description for the boats and the motors. It resulted in a 10 percent reduction in the propeller weight of the motors, a three-inch dimensional increase in the hard deck floor and storage bag, and removal of the airborne transportability requirement. Believing these revisions of the contract terms amounted to an improper sole source award contract, Zodiac protested again.
    GAO explained that the Competition in Contracting Act ordinarily requires “the use of competitive procedures” to award government work. However, “[o]nce a contract is awarded…[it] will generally not review modifications to the contract because such matters are related to contract administration and are beyond the scope of [its] bid protest function.”
    While a modification that changes the contract’s scope of work is an exception to this rule, such a modification is only objectionable where there is a “material difference” between the modified contract and the original contract. A material difference exists when “a contract is so substantially changed by the modification that the original and modified contracts are essentially and materially different.” A material difference typically arises when an agency enlarges a contract’s scope of work, the relaxation of contract requirements post-award (as alleged by Zodiac) can also be a material difference.
    In assessing whether there is a material difference, GAO will look to:
    “[T]he extent of any changes in the type of work, performance period, and costs between the modification and the original contract, as well as whether the original solicitation adequately advised offerors of the potential for the change or whether the change was the type that reasonably could have been anticipated, and whether the modification materially changed the field of competition for the requirement.”
    In this case, considering these factors, GAO found that the modification did not substantially change the scope of the original contract, competitors for the initial solicitation could have reasonably anticipated the changes to the contract, and the changes to the contract would not have had a substantial impact on the field of competition for the original contract award. Importantly, the deliverables still functioned as seven-person I-CRCs and 15-person I-CACs, and the awardee remained subject to the same performance period. GAO held that there was not a material difference, and denied Zodiac’s protest.
    Zodiac of North America is a useful primer on when a modification crosses the line into an improper sole source award. As demonstrated in Zodiac, the key is whether there is a material difference between the modified contract and the awarded contract.

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  2. Koprince Law LLC
    The 2018 National Defense Authorization Act (NDAA) has generated lots of headlines regarding the so-called “Amazon amendment” and the Act’s prohibition on the Russian IT company Kaspersky Labs products. But gone under reported is a huge change to how the government makes small purchases.
    The 2018 NDAA, signed by President Donald Trump on December 12, increases the standard micro-purchase threshold applicable to civilian agencies from $3,000 to $10,000. Last year, the NDAA increased the Department of Defense (DoD) micro-purchase threshold to $5,000. This larger jump for civilian agencies is likely to have large impact on government purchasing.

    A micro-purchase is one for goods or services that, due to its relatively low value, does not require the government to abide by many of its ordinary competitive procedures, including small business set asides. Because the contract is, theoretically, such a low amount, the contracting officer can pick virtually whatever company and product he or she wants to satisfy the procurement, so long as the price is reasonable.
    Now the civilian micro-purchase threshold is increasing—a lot.
    Specifically, Section 806 of the NDAA, titled “Requirements Related to the Micro-Purchase Threshold” states the following: “INCREASE IN THRESHOLD.—Section 1902(a)(1) of title 41, United States Code, is amended by striking ‘$3,000’ and inserting ‘$10,000’.”
    Title 41 of the Code generally refers to public contracts between Federal civilian agencies such as the Department of Agriculture, the Department of Education, the Department of State, the Department of Labor, and so on. Title 10, on the other hand, generally refers to the Department of Defense components, such as the Army, Navy, and Air Force, but also a number of smaller components such as the Defense Logistics Agency and the Missile Defense Agency.
    Following the change, Section 1902(a)(1) shall read: “Definition.–(1) Except as provided in sections 2338 and 2339 of title 10 . . . for purposes of this section, the micro-purchase threshold is $10,000.”
    The NDAA therefore, specifically exempts (or at least does not change) the sections of Title 10 relating to the DoD micro-purchase threshold (sections 2338 and 2339) which will therefore hold steady at $5,000—for 2018 at least (more on that later).
    Section 1902 specifies in paragraph (f) that the section shall be implemented by the FAR. The NDAA changes the U.S. Code, but it does not change the FAR. The FAR, meanwhile, currently sets the civilian micro-purchase threshold at $3,500, because it is occasionally adjusted to keep pace with inflation. Although the law has now officially been changed, it’s not clear that civilian contracting officers will begin using the new authority until the corresponding FAR provisions are amended.
    Our guess is that, in practice, this change will take some time to implement. We believe most contracting officers will stick to what the FAR says until they are told otherwise. It is just a guess, but it is logical because unlike the U.S. Code, procurement officials rely on the FAR every day. Congress may have said that civilian procurement officials have the authority to treat anything below $10,000 as a micro-purchase, but contracting officers often wait until the FAR Council implements statutory authority before using that authority. As such, until the FAR, or the specific agency the procurement officials work for, recognize the change, our guess is that most COs will follow the FAR until it catches up with the U.S. Code.
    Nevertheless, whether it happens today or a year from now, this change is likely to have a big impact on some federal procurements. The 233% increase in the threshold for civilian agencies (a 186% increase if you count from $3,500) will open the door for many more products to be purchased without competition: FAR 13.203 specifies that “[m]icro-purchases may be awarded without soliciting competitive quotations” so long as the contracting officer (or similar authority) considers the price to be reasonable. Just think about the different types of things you can buy with $10,000 as opposed to $3,000, or $3,500.
    This change to the micro-purchase threshold, plus the “Amazon amendment” which sets up an online marketplace for sellers, and the fact that the FAR encourages the use of a Governmentwide commercial purchase card to make micro-purchases (FAR 13.301) means that procurement officials will simply be able to swipe, or click for relatively significant buys. Altogether, it could be bad news for some small businesses, particularly those that engage in a lot of “rule of two” set-aside simplified acquisitions under FAR 19.502-2(a). When this change is implemented, and presuming FAR Part 19 is updated accordingly, a chunk of those simplified acquisitions will no longer be reserved for small businesses.
    With this change to the civilian threshold, it is hard not to wonder whether the DoD threshold will soon grow to meet it. DoD procurement officials sometimes enjoy greater freedom in purchasing than their civilian counterparts. It would not be shocking to hear DoD voices begin lobbying for the same change on their end soon.

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  3. Koprince Law LLC
    A common misconception in government contracting is that to be eligible under a particular solicitation, a small business must have the solicitation’s assigned NAICS code listed under its SBA System for Award Management (“SAM”) profile.
    Not so. GAO, in a recent decision, affirmed this misconception to be false—it found that an awardee’s failure to list the assigned NAICS code under its SAM profile did not make its proposal technically unacceptable.

    Veterans Electric, LLC, B-413198 (Aug. 26, 2016) involved a VA solicitation seeking electrical upgrades at the Wood National Cemetery. The solicitation was set-aside for service-disabled veteran-owned small businesses. The VA issued the solicitation under NAICS code 238210 (Electrical Contractors and Other Wiring Installation Contractors), which carries a size standard of $15 million.
    Before getting to the merits of the protest, a brief primer on NAICS codes might be helpful. NAICS codes—short for North American Industry Classification System codes—are simply industry classification codes assigned by the procuring agency for the purpose of collecting, analyzing, and publishing statistical data relating to government contracts. A contracting officer is required to assign the NAICS code that “best describes the principal nature of the product or service being acquired,” and identify and specify the operative size standard for the procurement. FAR 19.102(b). The SBA, moreover, assigns pertinent size standards (either in terms of annual receipts or number of employees) for the different NAICS codes, on an industry-by-industry basis. The codes, then, are particularly relevant in small business set-aside solicitations: if a company exceeds the corresponding size standard, it is “other than small,” and not an eligible offeror.
    In Veterans Electric, two offerors—Veterans Electric and Architectural Consulting Group (“ASG”)—submitted offers. After evaluating proposals, the VA awarded the contract to ASG.
    Veterans Electric protested the award, challenging ASG’s technical acceptability on two related grounds: first, that ASG’s failure to include NAICS code 238210 in its SAM profile demonstrated that it lacked the requisite technical experience and, second, that ASG’s failure to certify that it met the relevant size standard rendered its proposal unawardable.
    GAO rejected Veterans Electric’s arguments. Taking Veterans Electric’s second allegation first, GAO acknowledged that ASG’s proposal and its SAM profile did not list NAICS code 238210. But GAO found convincing the contracting officer’s determination that, because ASG listed several other NAICS codes at or below the relevant the $15 million size standard, ASG obviously certified that it complied with the size standard for this procurement. Veterans Electric did not present any evidence to show otherwise. The contracting officer’s determination was therefore reasonable.
    This finding also compelled GAO to deny Veterans Electric’s first allegation. A technical evaluation is within the agency’s discretion, and GAO found no basis to question ASG’s level of technical experience simply because it did not identify the primary NAICS code in its proposal or its SAM profile. GAO wrote:
    So long as a company meets the applicable size standard, we are aware of no statutory or regulatory requirement that it have the particular NAICS code identified in the solicitation as its primary code.
    GAO denied Veterans Electric’s protest.
    Small business contractors are allowed to identify in their SAM profiles their areas of experience, by NAICS codes. And as a matter of practice, companies often list all codes in which they hope to perform work. But as Veterans Electric confirms, whether a small business lists any particular NAICS code under its SAM profile is not conclusive evidence as to its technical experience or acceptability—that evaluation is instead made by the procuring agency after its review of the offeror’s proposal as a whole. So long as that evaluation was reasonable, GAO will not sustain a protest challenging the awardee’s failure to list a NAICS code.

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  4. Koprince Law LLC
    The GAO ordinarily lacks jurisdiction to consider a protest of a task or delivery order under a DoD multiple-award contract unless the value of the order exceeds $25 million.
    In a recent bid protest decision, the DoD confirmed that the 2017 National Defense Authorization Act upped the jurisdictional threshold for DoD task orders from $10 million to $25 million.

    The GAO’s decision in Erickson Helicopters, Inc., B-415176.3, B-415176.5 (Dec. 11, 2017) involved a solicitation under the U.S. Transportation Command’s Trans-Africa Airlift Support multiple-award IDIQ contract.  The agency sought to procure personnel recovery, casualty evaluation, and airdrop services in various parts of Africa.
    In May 2017, the agency issued a task order RFP to all three IDIQ contract holders.  After evaluating proposals, the agency awarded the order to Berry Aviation, Inc.  AAR Airlift Group, Inc., an unsuccessful offeror, filed a protest challenging the award.
    The agency directed Berry to suspend performance of the task order pending the outcome of AAR’s protest.  But in the interim, the agency issued a sole source order to Berry to provide the same services.
    In August 2017, three days after the agency issued its sole source justification, Erickson Helicopters, Inc. filed a protest challenging the sole source award to Berry.  Erickson alleged, in part, that the award to Berry was flawed for various reasons, such as that Berry did not provide fair and reasonable pricing.
    The GAO wrote that, under statutory authority modified by the 2017 NDAA, “our Office is authorized to hear protests of task orders that are issued under multiple-award contracts established within the Department of Defense (or protests of the solicitations for those task orders) where the task order is valued in excess of $25 million, or where the protester asserts that the task order increases the scope, period, or maximum value of the contract.”
    In this case, many of Erickson’s arguments did not allege that the task order increased the scope, period, or maximum value of the underlying IDIQ.  After a detailed analysis, the GAO concluded that the total value of the task order would be “no more than $23,189,823.90.”  This amount, GAO said, “is less than the $25 million threshold necessary to establish the jurisdiction of our Office.”
    GAO dismissed these portions of Erickson’s protest.
    For many years, the GAO had jurisdiction over DoD task order protests valued in excess of $10 million. But in the 2017 NDAA, Congress upped the threshold to $25 million.  This significantly varies from the threshold for orders under civilian IDIQs, which remains at $10 million.
    It’s easy for prospective protesters to get tripped up by these jurisdictional rules. Jurisdiction may not be the most exciting topic in the world, but anyone wishing to protest a task or delivery order at the GAO must consider whether the GAO has jurisdiction.

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  5. Koprince Law LLC
    The 2017 National Defense Authorization Act will increase the DoD’s micro-purchase threshold to $5,000.
    Under the conference bill recently approved by both House and Senate, the DoD’s micro-purchase threshold will be $1,500 greater than the standard micro-purchase threshold applicable to civilian agencies.

    A micro-purchase is an acquisition by the government of supplies or services that, because the aggregate is below a certain price, allows the government to use simplified acquisition procedures without having to hold a competition, conduct market research, or set aside the procurement for small businesses. In other words, if the price is low enough, the agency can buy it at Wal-Mart using a government credit card, without running afoul of the law.
    Although there are many different thresholds, the FAR puts the general micro-purchase threshold at $3,500. But Section 821 of the proposed 2017 NDAA will add a new section to chapter 137 of title 10 of the United States Code giving the DoD its own micro-purchase threshold of $5,000.
    It may not sound like much, but that’s nearly a 43% increase from the current micro-purchase threshold (and the threshold that will remain applicable to most agencies). Although DoD procurement officials will undoubtedly enjoy their new flexibility, some small contractors may not be so pleased–after all, once the micro-purchase threshold applies, there is no mandate that the government use (or even consider) small businesses.
    2017 NDAA: The National Defense Authorization Act for Fiscal Year 2017 has been approved by both House and Senate, and will likely be signed into law soon. It includes some massive changes as well as some small but nevertheless significant tweaks sure to impact Federal procurements in the coming year. For the next few days, SmallGovCon will delve into the minutia to provide context and analysis so that you do not have to. Visit smallgovcon.com for the latest on the government contracting provisions of the 2017 NDAA. 

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  6. Koprince Law LLC
    SDVOSBs, rejoice! Kingdomware Technologies has unanimously won its Supreme Court battle against the VA.  The Court has held that the VA’s “rule of two” is mandatory and applies to all of the VA’s contracting determinations.
    I’ll have much more analysis up on SmallGovCon in the coming hours.  For now, congratulations to Kingdomware–and all SDVOSBs and VOSBs!

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  7. Koprince Law LLC
    In 2017, Congress placed limits on the utilization of Lowest-Price Technically-Acceptable procurement procedures in Department of Defense acquisitions.
    The 2018 National Defense Authorization Act continues this trend by completely prohibiting the use of LPTA procedures for certain major defense acquisition programs.
    As we covered last year, the 2017 NDAA included a presumption against the use of LPTA procedures for DoD procurements unless certain criteria were met. The 2017 NDAA also cautioned against the use of LPTA procedures in procurements for knowledge-based professional services, personal protective equipment acquisition, and knowledge based training services in contingency operations outside the United States.
    Section 832 of the 2018 NDAA continues this trend by outright prohibiting the use of LPTA procedures for major Department of Defense engineering and development programs. Specifically, Section 832 provides the following instruction:
    The Department of Defense shall not use a lowest price technically acceptable source selection process for the engineering and manufacturing development contract of a major defense acquisition program
    This raises an important question: What constitutes an “engineering and manufacturing development contract of a major defense acquisition program?” To answer that, we need to look at two separate definitions.
    First, the definition for “Engineering and Manufacturing Development Contract” is found in Section 832 of the 2018 NDAA, and refers to “a prime contract for the engineering and manufacturing development of a major defense acquisition program.”
    Second, the definition for “major defense acquisition programs” is found in 10 U.S.C. § 2430(a) and refers to a procurement that is not classified and either has been designated a major defense acquisition by the Secretary of Defense; or the estimated total expenditure for R&D, testing, and evaluation will exceed $300 million; or the total program cost will exceed $1.8 billion.
    Using these two definitions to read Section 832, LPTA procurement procedures may not be used for Department of Defense prime contracts for engineering and manufacturing development that are either flagged as major defense acquisition programs, or will exceed $300 million in development costs or $1.8 billion in total program costs.
    The limitation in Section 832 is only triggered at high dollar thresholds, so the impact it will have on Department of Defense acquisitions is likely minimal. That being said, Section 832 is important because it clearly signals Congress’s desire to further limit the use of LPTA procedures in Department of Defense procurements. Unlike the 2017 NDAA, which merely created a presumption against LPTA procedures, the 2018 NDAA bans LPTA procedures completely for a category of acquisitions. We’ll be keeping an eye out to see whether Congress expands the list of “no LPTA” acquisitions in future years.
    Section 832 goes into effect for Fiscal Year 2019.
    It’s that time of year where families gather; friends celebrate the New Year; and SmallGovCon recaps interesting features of the new NDAA. We’re still trying to get that last one to catch on. Check back regularly as we continue to cover notable provisions in the 2018 NDAA.

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  8. Koprince Law LLC
    Sometimes you may find yourself running late. It happens to the best of us for a multitude of reasons. But what happens to federal contractors when they are running late in performing under a contract and there is “no reasonable likelihood” of timely performance?
    Unfortunately for contractors in this position, as illustrated by a recent Civilian Board of Contract Appeals (CBCA) decision, the result may be a default termination.

    In Affiliated Western, Inc. v. Department of Veterans Affairs, CBCA No. 4078 (2017), the VA awarded AWI a contract to renovate the surgical unit at a VA Medical Center in Iron Mountain, Michigan. Following mounting issues in contractual performance, the Contracting Officer issued a default termination.
    The contractual issues giving rise to the default termination began early on in contract performance. Specifically, the Solicitation “warned potential bidders, that the schedule for the project ‘is very aggressive’ and involves ‘a very important department to the facility.’” AWI, as the awardee, was to provide renovations in five phases within a 400-day deadline. Contract performance started off strained due to architecture and engineering errors and omissions in the contract specifications for which the VA required AWI to perform several changes. All the while the VA and AWI continued debate over schedule submissions, which the VA found inadequate and refused to approve.
    The relationship between the parties became further strained. Six months into contract performance, the VA issued its first cure notice. After, AWI failed to complete phase 1 on time, and the VA denied AWI’s requests for contract modification for compensation and time extensions.
    Performance issues came to a head when AWI’s subcontractor, one of only two contractors in the remote area of contract performance that held the medical gas certification necessary to perform the project, reported AWI’s failure to make prompt payment despite AWI receiving payment from the VA. Afterwards, the subcontractor walked off the job. Then, less than a year into contract performance, the contracting officer issued a show cause notice citing AWI’s failure to complete phases 1 and 2 within the time required by the modified contract and ultimately issued a default termination in accordance with FAR 52.249-10, Default (Fixed-Price Construction).
    AWI appealed the VA’s default termination to the CBCA and sought conversion to a termination for convenience. The CBCA sustained the VA’s default termination finding and denied AWI’s appeal.
    In making its decision, the CBCA noted that default termination is “a drastic sanction which should be imposed (or sustained) only for good grounds and on solid evidence.” When a default is based on the contractor’s failure to prosecute the work, the contracting officer must have a reasonable belief that there was “no reasonable likelihood” that the contractor could perform the entire contract effort within the time remaining for contract performance. A termination for failure to make progress “usually occurs where the contractor has fallen so far behind schedule that timely completion becomes unlikely.”
    In this case, since the VA established reasonable grounds to believe that AWI may not be able to perform the contract on a timely basis in issuing a cure notice as a precursor to possible default termination, and since AWI had failed to respond to the cure notice with adequate assurances, the VA had met its initial burden of proving that there were good grounds and solid evidence to support the termination.
    The burden then shifted to AWI to prove that “there were excusable delays under the terms of the default provision of the contract that render[ed] the termination inappropriate, or that it was making sufficient progress on the contract such that timely contract completion was not endangered.” To recover under this theory of excusable delay, AWI also needed to show: “(1) the delay is of an ‘unreasonable length of time,’ (2) the delay was proximately caused by the Government’s actions, and (3) the delay resulted in some injury to the contractor.”
    Applying a critical path schedule analysis to these requirements, the CBCA rejected AWI’s argument that extension of time for part of the project should automatically extend the total performance date. Thus, AWI could not rely on the VA contract modifications to excuse its delay where AWI could not prove it affected AWI’s critical path schedule. Accordingly, the CBCA found that “AWI failed to provide any evidence that it had fulfilled the contract requirement to provide the contracting officer with a schedule identifying the critical path and demonstrating how the schedule would be impacted by the VA’s alleged actions.” The CBCA concluded the VA to have properly terminated AWI for default, and denied AWI’s appeal.
    Undoubtedly, federal contractors seek to perform contracts on time and within budget. However, the facts present in AWI demonstrate that when there is “no reasonable likelihood” that the contractor could perform the entire contract effort within the time remaining for contract performance, the end result may be a default termination.

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  9. Koprince Law LLC
    SDVOSBs and VOSBs are big winners today, as the Supreme Court unanimously ruled that the VA’s “rule of two” is mandatory, and applies to all VA procurements–including GSA Schedule orders.
    The Supreme Court’s decision in Kingdomware Technologies, Inc. v. United States, No. 14-916 (2016) means that the VA will be required to truly put “Veterans First” in all of its procurement actions–which is what Kingdomware, and many veterans’ advocates, have fought for all along.
    History of the Kingdomware Case
    As followers of SmallGovCon and the Kingdomware case know, the battle over the VA’s “rule of two” began in 2006, when Congress passed the Veterans Benefits, Health Care, and Information Technology Act of 2006 (the “VA Act”).  The VA Act included a provision requiring the VA to restrict competitions to veteran-owned firms so long as the “rule of two” is satisfied.  The VA Act states, at 38 U.S.C. 8127(d):
    (d) Use of Restricted Competition.— Except as provided in subsections (b) and (c), for purposes of meeting the goals under subsection (a), and in accordance with this section, a contracting officer of the Department shall award contracts on the basis of competition restricted to small business concerns owned and controlled by veterans if the contracting officer has a reasonable expectation that two or more small business concerns owned and controlled by veterans will submit offers and that the award can be made at a fair and reasonable price that offers best value to the United States.
    The two exceptions referenced in the statute (“subsections (b) and (c)”) allow the VA to make sole source awards to veteran-owned companies under certain circumstances.  Nothing in the statute provides an exception for orders off the GSA Schedule, or under any other government-wide acquisition contract.
    Despite the absence of a statutory exception for GSA Schedule orders, the VA has long taken the position that it may order off the GSA Schedule without first applying the VA Act’s Rule of Two.
    In 2011, the issue first came to a head at the GAO.  In Aldevra, B-405271; B-405524 (Oct. 11, 2011), the GAO sustained an SDVOSB’s bid protest and held that the VA had violated the law by ordering certain supplies through the GSA Schedule without first applying the Rule of Two.  The GAO subsequently sustained many other protests filed by Aldevra and others, including Kingdomware.
    But there was one problem: the VA refused to abide by the GAO’s decisions.  GAO bid protest decisions are technically recommendations, and while agencies almost always follow the GAO’s recommendations, they are not legally required to do so.  The VA kept circumventing the Rule of Two notwithstanding the GAO’s decisions.
    Finally, Kingdomware took the VA to federal court.  But in November 2012, the U.S. Court of Federal Claims reached a different conclusion than the GAO.  In Kingdomware Technologies, Inc. v. United States, 106 Fed. Cl. 226 (2012), the Court ruled in favor of the VA.  Relying on the phrase “for purposes of meeting the goals under subsection (a),” the Court determined that the VA Act was “goal setting in nature,” not mandatory.  The Court held that the VA need not follow the “rule of two,” so long as the VA had met its agency-wide goals for SDVOSB and VOSB contracting (which, to the VA’s credit, it had).
    Kingdomware appealed to the U.S. Court of Appeals for the Federal Circuit.  In June 2014, a three-member panel upheld the Court of Federal Claims’ decision on a 2-1 vote.  Like the Court of Federal Claims, the Federal Circuit majority held that the VA Act’s “rule of two” was a goal-setting requirement, and that the VA need not apply the “rule of two” so long as its SDVOSB and VOSB goals are satisfied.  In a sharp dissent, Judge Jimmie Reyna noted that the statute uses the mandatory word “shall” and argued that the phrase “for purposes of meeting the goals under subsection (a)” was merely “prefatory language” that explained the general purpose of the statute, but did not vary the statute’s mandatory nature.
    In June 2015, the Supreme Court agreed to hear Kingdomware’s appeal.  Kingdomware and the Government began filing briefs with the Supreme Court (as did a number of Kingdomware supporters, including yours truly).  But in a surprising twist, in September 2015, the Government abandoned the “goal setting” argument that had prevailed at two lower courts.  The Government conceded that the “rule of two” applies regardless of whether the VA has met its goals–but argued that the statute’s use of the term “contract” excludes GSA Schedule orders (as well as orders under other multiple-award vehicles).
    The Supreme Court heard oral arguments on the morning of February 22, 2016.  At the Court, Kingdomware’s counsel focused primarily on the mandatory nature of the statutory language, while the VA’s counsel primarily made policy arguments, namely, that it would be difficult and cumbersome for the VA to apply the rule of two in every setting.
    After February 22, SDVOSBs and VOSBs waited for the Court’s decision.  Now it’s here–and it’s a big, big win.
    The Supreme Court’s Kingdomware Decision
    The Supreme Court’s opinion, written for an 8-0 unanimous Court by Justice Clarence Thomas, begins by recounting the history of the VA Act, the “rule of two,” and the Kingdomware case itself.  The Court then examines whether it has jurisdiction to consider the case (a technical issue raised earlier in the process), and concludes that it does.
    Turning to the merits, the Court gets right to business:
    On the merits, we hold that [Section] 8127 is mandatory, not discretionary.  Its text requires the Department to apply the Rule of Two to all contracting determinations and to award contracts to veteran-owned small businesses.  The Act does not allow the Department to evade the Rule of Two on the ground that it has already met its contracting goals or on the ground that the Department has placed an order through the [Federal Supply Schedule].
    The Court explains that any issue of statutory construction begins “with the language of the statute.”  If the language is unambiguous, and the “statutory scheme is coherent and consistent,” the Court’s review ends there.
    The Court writes that “[Section] 8127 unambiguously requires the Department to use the Rule of Two” before applying other procedures.  The Court points out that the statute includes the word “shall,” and writes "nlike the word ‘may,’ which implies discretion, the word ‘shall’ usually connotes a requirement.” Accordingly, “the Department shall(or must) prefer veteran-owned small businesses when the Rule of Two is satisfied."
    The Court then writes that other portions of the statute confirm that Congress “used the word ‘shall’ . . . as a command.”  Therefore, “before contracting with a non-veteran owned business, the Department must first apply the Rule of Two.”
    Next, the Court turns to the Government’s shifting rationales for evading the “rule of two.”  The Court notes that the Government changed its theory of the case late in the process, but nonetheless addresses the Government’s original argument regarding the goal-setting nature of the statute.  The Court writes:
    [T]he prefatory clause has no bearing on whether [Section] 8127(d)’s requirement is mandatory or discretionary.  The clause announces an objective that Congress hoped that the Department would achieve and charges the Secretary with setting annual benchmarks, but it does not change the plain meaning of the operative clause.
    The Court next rejects the VA’s argument that the word “contracts” means that the VA Act doesn’t apply to FSS orders.  The Court writes that it would ordinarily not entertain an argument that the Government failed to raise at the lower courts, “ut the Department’s forfeited argument fails in any event.”
    The Court explains that “[w]hen the Department places an FSS order, that order creates contractual obligations for each party and is a ‘contract’ within the ordinary meaning of that term.”  The Court also explains that an order is a contract “as defined by federal regulations,” particularly FAR 2.101.  The Court then goes into additional explanation about why FSS orders are types of contracts.
    Finally, the Court rejects the Government’s argument that the Court should defer to the VA’s interpretation of the VA Act.  The Court simply writes that “we do not defer to the agency when the statute is unambiguous . . . [t]hus, we decline the Department’s invitation to defer to its interpretation.”
    The Court concludes:
    We hold that the Rule of Two contracting procedures in [Section] 8127(d) are not limited to those contracts necessary to fulfill the Secretary’s goals under [Section] 8127(a).  We also hold that [Section] 8127(d) applies to orders placed under the FSS.  The judgment of the Court of Appeals for the Federal Circuit is reversed, and the case is remanded for further proceedings consistent with this opinion.
    The Aftermath of the Kingdomware Decision
    For SDVOSBs and VOSBs, the Supreme Court’s Kingdomware decision is a huge win.  Ever since the VA Act was adopted, the VA has taken the position that it may order off the GSA Schedule without prioritizing veteran-owned businesses.  That’s about to change.
    I expect that the Kingdomware decision will prove a major boon to SDVOSBs and VOSBs, ultimately resulting in billions of extra dollars flowing to veteran-owned companies.  The long battle is over–and SDVOSBs and VOSBs have won.
    View the full article.
  10. Koprince Law LLC
    Almost a year ago, we wrote of a memorandum from the Office of Federal Procurement Policy urging agencies to strengthen the debriefing process. OFPP’s rationale was simple: because effective debriefings tend to reduce the number of protests, agencies should be inclined to enhance the debriefing process.
    Congress seems to have taken note: the 2018 National Defense Authorization Act requires the Department of Defense to make significant improvements to the debriefing process.  That said, those improvements are limited to large DoD acquisitions, leaving many small businesses stuck with the much more limited debriefing rights currently available under the FAR.

    NDAA Section 818—entitled Enhanced Post-Award Debriefing Rights—imposes three significant changes of which contractors should be aware.
    First, the NDAA bolsters the amount of information offerors will receive under DoD debriefings. For small business awards valued between $10 million and $100 million—and for any contract valued over $100 million, regardless of the awardee’s status—defense agencies must disclose the agency’s written source selection award determination (redacted as necessary to protect other offeror’s confidential information).
    This is a significant increase in the amount of information disclosed as part of debriefings: currently, agencies need only disclose basic information about the awardee’s scores and a summary of the rationale for award.
    Second, the NDAA also makes clear that written or oral debriefings will be required for all contract awards and task or delivery orders valued at $10 million or more.
    This also represents a significant expansion of debriefing rights: now, the FAR only requires debriefings under negotiated procurements (FAR part 15) and for task and delivery orders valued over $5.5 million (FAR 16.505).
    Third, the NDAA requires agencies to give offerors the ability to ask questions following receipt of the debriefing—specifically, within two business days after receiving the debriefing.
    True, the FAR already requires agencies to allow offerors the ability to ask questions; but oftentimes, agencies require questions to be posed before the debriefing is received. I’ve always thought this requirement is nonsensical, as it’s tough for an offeror to know what questions to ask if it lacks any information about the evaluation. Congress apparently agrees and now wants to make clear that questions must be allowed after the debriefing is received.
    Congress also seeks to improve the debriefing process by giving some teeth to the requirement that agencies accept questions. That is, although the FAR already contemplates that offerors be given the opportunity to ask questions, agencies sometimes ignore this mandate and close the debriefing before questions can be asked. The NDAA hits back at this practice: it says that a contractor’s bid protest clock does not start ticking until the government delivers its response to any questions posed by an offeror. In other words, the longer the agency waits to allow for and respond to questions, the more time a protester will have to develop potential protest arguments.
    ***
    All told, the NDAA makes significant changes to the post-award debriefing process in DoD procurements. These changes are a big step in the right direction but not a perfect solution to the problem OFPP identified. The changes will apply only to DoD, not civilian agencies. And even for small businesses, enhanced debriefings will only be available for large acquisitions of $10 million or greater. As a result, many small businesses won’t be entitled to enhanced debriefings, even in DoD acquisitions.
    Perhaps, though, the rollout of this enhanced debriefings process will prove that, contrary to a common agency perception, better post-award communication actually decreases protests. If so, agencies might begin offering enhanced debriefings even when they’re not required, which would be a real win for everyone in the contracting community.
    President Trump signed the 2018 NDAA into law on December 12. It’s only a matter of time before these changes take effect.

    View the full article
  11. Koprince Law LLC
    Well, we thought we had this figured out. Yet here we are a week later and we keep hearing conflicting reports.
    The question remains, can a foreign-owned company receive a Paycheck Protection Program loan or not? Let’s try to figure it out.
    Last week, on the eve of the program going live, we wrote that the form being circulated seemed to disqualify companies who are 20 percent or more owned by foreign nationals or entities. At some point, either that night or early the next morning, the form was updated to ask instead whether the workers the loan would be used to pay were Americans or permanent residents of America. Problem solved, right?
    In the intervening days, we’ve heard from a number of businesses who said that they’ve been denied or instructed not to apply because of their foreign ownership.
    So, let’s just follow the bouncing ball on this and see if we can figure it out.
    We’ll start with the text of the Coronavirus Aid, Relief, and Economic Security (CARES) Act because it is what created the program. The CARES Act says that PPP loans are for small business concerns as defined by the Small Business Act.
    In other words, a small business is whatever the SBA says it is. And why shouldn’t it be? It is the expert after all.
    As we’ve noted before, the SBA Office of Hearings and Appeals has said that a foreign-owned entity can be a small business so long at it is 1) organized for profit, 2) has a place of business in the U.S., and 3) contributes to the U.S. economy by paying taxes or using American products, materials, or labor.
    Those OHA decisions were about size and eligibility to perform a contract, not about loan eligibility. So, let’s go back to the CARES Act again and see what else it says. It defines “eligible recipient” as any individual or entity that is “eligible to receive a covered loan[.]” A PPP loan is technically a 7(a) loan.
    The SBA says on its website that in order to be eligible for a 7(a) loan a business must be “engaged in, or propose to do business in, the U.S. or its territories[.]” So that does not disqualify a concern with foreign ownership.
    But is there more? Oh yes.
    Because it’s ultimately on the SBA to say who is and who is not eligible, let’s dig in to its guidance. Under the sub-headline “Who Can Apply” the SBA says any “small business concern that meets SBA’s size standards (either the industry based sized standard or the alternative size standard)”. It does not say that foreign-owned entities are excluded.
    The SBA has also published its Interim Final Rule on the PPP. So you know, an interim final rule is a rule that is effective immediately and issued without first publication and public comment. Generally, agencies will still take public comment on an interim final rule and consider changing it if warranted and this rule is no different.
    Here, the PPP interim final rule states: “You are eligible for a PPP loan if you have 500 or fewer employees whose principal place of residence is in the United States[.]” So, again, it’s concerned with protecting American jobs, not keeping foreign-owned companies out. Right?
    Well, the final rule also states that some businesses will be ineligible and redirects to the list in 13 C.F.R. § 120.110. (Bit ridiculous at this point. I feel like a ping pong ball.) There, you’ll find a list of ineligible businesses. It says specifically that businesses located in a foreign country are ineligible but that “businesses in the U.S. owned by aliens may qualify”. Again, not crystal clear but not expressly prohibitive of foreign ownership.
    Is there yet still more? Oh yes.
    On April 8, the SBA published a list of frequently asked questions. None of the answers directly address this issue, but even the lack of data is data. If foreign ownership was prohibited, wouldn’t the SBA eventually say so?
    Finally, there’s the SBA’s Standard Operating Procedure (SOP) 50 10, Subpart B, Chapter 2. This document explains that businesses are not eligible for SBA assistance if “Located in a foreign country with no activities in the United States”. So, being located in a different country is prohibitive, but being owned by people in a different country is not necessarily prohibitive.
    Again, we could be wrong, but if foreign ownership was disqualifying, wouldn’t it be easier just to say so?
    Apparently, some of the banks have not gotten the message and are denying otherwise eligible businesses. This is just anecdotal, but we’ve heard a lot this week from companies who believe they are eligible and don’t know what to do. Maybe the banks designed their application portals using the previous version of the form. Or maybe they just don’t know and are denying them to be safe. We don’t know.
    Given that the funds associated with the program will eventually run out, the sooner the SBA can provide some direct guidance on this issue the better.

    View the full article
  12. Koprince Law LLC
    Competition is the touchstone of federal contracting. Except in limited circumstances, agencies are required to procure goods and services through full and open competition. In this regard, an agency’s decision to limit competition to only brand name items must be adequately justified.
    GAO recently affirmed this principle in Phoenix Environmental Design, Inc., B-413373 (Oct. 14, 2016), when it sustained a protest challenging the Department of the Interior, Bureau of Land Management’s decision to restrict its solicitation for herbicides on a brand name basis.

    The solicitation at issue in Phoenix Environmental Design specifically named five herbicides, and contemplated that BLM would issue a purchase order to the vendor that offered to provide those five herbicides on a best value basis. Because the estimated value of these commercial—about $5,500—fell below the simplified acquisition threshold, BLM issued the solicitation using commercial item and simplified acquisition procedures (under FAR Parts 12 and 13, respectively).
    Phoenix Environmental Design, Inc. filed a pre-award GAO bid protest challening BLM’s decision to limit the solicitation to brand name herbicides. Phoenix argued that BLM’s decision was unduly restrictive of competition. To support its protest, Phoenix pointed to a list of commercial herbicides—described by Phoenix as equal to the brand names identified in the solicitation—that were approved for use on BLM land.
    BLM opposed the protest, saying that the brand name herbicides requested were currently approved for use under the agency’s pesticide use proposal (“PUP”). To use a specific pesticide on BLM land, there must be an approved PUP listing the specific pesticide. So, BLM said that it was “justified in using brand name only herbicides in this case because if it desires to use other equal pesticides that are not on the PUP, it will be required to amend the PUP to include these pesticides, which will take up to six months.”
    Resolving the protest, GAO noted that agencies are required to obtain competition to the maximum extent practicable. As part of this requirement, agencies are generally prohibited from soliciting quotations based on personal preference or from restricting the solicitation to suppliers of well-known and widely distributed makes or brands. “In a simplified acquisition,” GAO wrote, the FAR allows an agency to “limit a solicitation to a brand name item when the contracting officer determines that the circumstances of the contract action deem only one source is reasonably available.”
    Applying these principles, GAO found BLM’s decision to restrict competition to the brand name herbicides to be unreasonable. Though BLM said that all of the specified herbicides were approved for use under the PUP, it failed to support this statement with adequate documentation. To the contrary, based on the information provided, GAO concluded that “there is no current PUP that covers three of the herbicides that the agency is procuring under a brand name only specification.”
    Faced with this information, BLM said that it has discretion to purchase a product prior to the completion of a PUP. Specifically, BLM said that its purchase of the brand name items was justified because it was finalizing a (yet-to-be-approved) PUP that included them. This explanation, however, was inconsistent with BLM’s justification for restricting competition to name brands in the first place—BLM had said that it could not purchase the generic herbicides because they were not listed on the PUP. GAO found this inconsistency to be unreasonable, writing that BLM “cannot simply rely on the PUP to limit competition, where it has not provided a reasonable basis for excluding items from the PUP.”
    Because BLM failed to reasonably justify its reasons for limiting the competition to only brand name items, GAO sustained Phoenix’s protest.
    On occasion, an agency might have a good reason to limit a solicitation to only brand name items. But where it doesn’t have a good reason—or where those reasons aren’t adequately documented—GAO will often find the solicitation to be unduly restrictive of competition. That’s exactly what happened in Phoenix Environmental Design.

    View the full article
  13. Koprince Law LLC
    It’s hard to believe that August is already here. Before we know it, the end of the government fiscal year will be here–and if tradition holds, a slew of bid protests related to those inevitable last-minute contract awards.
    In our first SmallGovCon Week In Review for August, two big-wig executives who previously plead guilty to charges of conspiracy now face civil claims, some helpful tips on how to prepare for the year-end contracting frenzy, Schedule 70 looks to be improved, a major roadblock for the ENCORE III IT service contract, and much more.

    A False Claims Act complaint has been filed by the U.S. Justice Department against two former New Jersey executives accused of defrauding the military. [nj.com] A federal judge said that the U.S. Department of Health and Human Services showed a “cavalier disregard” for the truth and favoritism during the evaluation of bid proposals for its financial management. [Modern Healthcare] A watchdog found that a five-year contract originally valued at a fixed price of nearly $182 million ballooned to $423 million. [Government Executive] A GSA top acquisition official has promised an improved Schedule 70 following an audit that found price discrepancies for identical products and some offered at higher prices than they were commercially available. [Nextgov] Washington Technology offers eight tips to help contractors prepare for the last month of the government fiscal year. [Washington Technology] A growing legion of small businesses are trying make federal contracting a bigger part of their revenue as federal small business awards stay above $90 billion for the past two fiscal years. [Bloomberg] A group of men, women and corporations have been indicted for illegally winning government contracts worth some $350 million by misrepresenting themselves as straw companies controlled by either low-income individuals or disabled veterans. [The State] The final “blacklisting” rule to prevent businesses that had broken labor laws from working with the federal government is expected soon, and the National Labor Relations Board is preparing to follow the proposal. [Society for Human Resource Management] The growing number of bid protests appears unavoidable, regardless of the efforts to engage industry before, during and after the bidding process. [Nextgov] The GAO has sustained protests challenging the terms of the major ENCORE III IT services contract. [Federal News Radio]
    View the full article
  14. Koprince Law LLC
    A solicitation’s evaluation criteria are tremendously important. Not only must offerors understand and comply with those criteria in order to have a chance at being awarded the contract, but the agency must abide by them too. Where an agency does not, it risks that a protest challenging the application of an unstated evaluation criteria will be sustained.
    So it was in Phoenix Air Group, Inc., B-412796.2 et al. (Sept. 26, 2016), a recent GAO decision sustaining a protest where the protester’s proposal was unreasonably evaluated under evaluation criteria not specified in the solicitation.

    At issue in Phoenix Air Group was a Department of the Interior solicitation seeking commercial electronic warfare aircraft test and evaluation services for the Department of the Navy, at various locations throughout the United States. Under the solicitation, the successful offeror was to provide the turbo-jet aircraft, flight and ground crews, and electronic technicians needed to conduct flight operations consistent with military standards in the form the electronic warfare testing missions under a single IDIQ contract.
    Sections A and B of the solicitation provided detailed technical requirements for the scope of work. Together, these sections required offerors to propose at least five specifically-identified aircraft that would accommodate specific modifications to allow them to tow certain equipment behind them and meet several stated performance aspects.
    Evaluations would be conducted under a two-step approach. First, proposals would be reviewed for acceptability—basically, to make sure that the offeror had assented to the solicitation’s terms, provided all information requested, had not taken exception to requirements, and proposed aircraft that met the minimum aircraft requirements. For those proposals deemed technically acceptable, Interior would then conduct a best value tradeoff evaluation of each offer’s capability and its total evaluated price.
    The offeror capability evaluation was based on three subfactors, the most important of which (and the one pertinent for this post) was the aircraft operations capability subfactor. Under the solicitation, Interior was to assess this subfactor for “the performance risk associated with an offeror’s capability to perform the commercial aircraft services” described in Sections A and B.
    Interior’s evaluators established a go/no-go checklist for assessing compliance with Sections A and B. The evaluators then assigned Phoenix Air Group several weaknesses and two deficiencies, relating to its failure to submit a property management plan and include weight and balance checks performed on its submitted aircraft information forms. Interior awarded the contract to one of Phoenix Air’s competitors.
    Phoenix Air protested the evaluation and award, arguing (among other things) that the aircraft operations capability evaluation relied on unstated evaluation criteria. Phoenix Air said that the solicitation “instructed offerors to discuss general topics such as ‘overall management, maintenance, and pilot capabilities,’ ‘plans for conducting the flight services,’ and their ‘capability to provide the required storage and maintenance of Government furnished property.’” Phoenix Air’s proposal met all of these requirements by providing general narratives as to each. But instead of following this evaluation criteria, Interior graded proposals based on their “specific commitments to particular specifications, such as whether the proposal contained a property management plan, and whether the offeror responded to each of over 100 specification requirements in RFP Sections A and B.”
    GAO wrote that “[a]n agency may properly evaluation considerations that are not expressly identified in the RFP if those considerations are reasonably and logically encompassed within the stated evaluation criteria, so long as there is a clear nexus linking them.” However, “an agency may not give importance to specific factors, subfactors or criteria beyond that which would reasonably be expected by offerors reviewing the stated evaluation criteria.”
    GAO wrote that “[w]e do not think that a reasonable offeror should have understood from the stated evaluation criteria, or from the information requested in the offeror capability form, that specific responses to each of the specifications in RFP Sections A and B and a property management plan were important proposal elements.” Because Interior’s application of these unstated evaluation criteria significantly lowered Phoenix Air’s score, the GAO sustained Phoenix Air’s protest.
    Complying with a solicitation’s stated evaluation criteria is critical, for both offerors and the agency. And as Phoenix Air Group shows, an agency’s unreasonable departure from those criteria can lead to a sustained protest.

    View the full article
  15. Koprince Law LLC
    An agency was entitled to cancel a solicitation when its needs changed–even though the anticipated changes in its needs “might be characterized as minimal.”
    In a recent bid protest decision, the GAO confirmed that a procuring agency has broad discretion to cancel a solicitation when the agency’s anticipated needs change, and that discretion extends to cases in which the agency’s changed needs could be addressed by amending the existing solicitation.

    The GAO’s decision in Social Impact, Inc., B-412655.3 (June 29, 2016) involved a USAID solicitation for support for the agency’s Monitoring, Evaluation, and Learning Program in Tanzania.  After evaluating competitive proposals, USAID initially selecting Management Systems International for award.  Social Impact, Inc. then filed a GAO bid protest, challenging the award to MSI.
    In response to the protest, USAID notified the GAO that it intended to terminate the award to MSI and cancel the solicitation.  Explaining its decision to cancel the solicitation, the agency stated that “Changes in USAID/Tanzania Mission staffing, and its in-house capacity, as well as changes in Agency experience and best practices vis-a-vis monitoring, evaluation, and learning (MEL) activities, dictate that the Mission streamline its MEL activities by moving some of the underlying procurement’s related work, such as the learning component, in-house to maximize efficiency and cost-savings.”
    Social Impact filed a GAO bid protest challenging the agency’s decision to cancel.  Social Impact argued, in part, that the cancellation was inconsistent with FAR 15.206(e), which states:
    If, in the judgment of the contracting officer, based on market research or otherwise, an amendment proposed for issuance after offers have been received is so substantial as to exceed what prospective offerors reasonably could have anticipated, so that additional sources likely would have submitted offers had the substance of the amendment been known to them, the contracting officer shall cancel the original solicitation and issue a new one, regardless of the stage of the acquisition.
    Social Impact contended that the changes in USAID’s needs were minimal, and not “so substantial as to exceed what prospective offerors reasonably could have anticipated.”  Therefore, Social Impact argued, USAID should have amended the existing solicitation rather than canceling it.
    The GAO wrote that “Section 15.206(e) mandates that an agency cancel a solicitation and issue a new one” when the “so substantial” test is satisfied.  “There is nothing to suggest, however, that the converse is true, i.e., that an agency is is prohibited from canceling a solicitation when changes in the agency’s requirements do not rise to the level contemplated in Section 15.206(e).”  The GAO continued:
    To the contrary, our Office has held that, even when the changes could be addressed by an amendment, “[t]he only pertinent inquiry is whether there existed a reasonable basis to cancel, since an agency may cancel at any time when such a basis is present.”  Where the record reflects a reasonable basis to cancel, and in the absence of the criteria described in section 15.206(e), the agency has broad discretion in determining whether to cancel or amend a solicitation.
    The GAO concluded that “we find the agency’s decision to cancel the solicitation to be reasonable despite the fact that the anticipated changes to the solicitation might be characterized as minimal.”  The GAO denied Social Impact’s protest.
    As the Social Impact case demonstrates, agencies enjoy broad discretion when it comes to canceling solicitations.  Even where an anticipated change in the agency’s needs could be satisfied by amending the existing solicitation, the agency may validly decide instead to cancel it.

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  16. Koprince Law LLC
    Have you ever felt like you were screaming into the void when submitting your comments to a proposed rule in the Federal Register? That your well thought out comments were being drowned out by a mass of other comments on a proposed rule or attributed to someone else? Have you wondered what agencies do with all that information you send them when you submit a comment on a proposed rule? Well, GAO seems to have the same questions and concerns regarding the proposed rule comments process and has taken time these past few months to examine how agencies wade through comments on proposed rules, publish them, and clearly attribute identities to them.
    One foundation of federal contracting is agency regulations that set the limits for the contracting landscape. These regulations are governed by the Administrative Procedure Act (APA) rule making process consisting of basically three phases: (1) initiation of rule making; (2) developing proposed rule making actions through Notices of Proposed Rule making (NPRM); and (3) developing final rule making actions. Included in this process are opportunities for deliberations and public comments. According to GAO, about 3,700 NPRMs are published a year, many of which impact federal procurement. Consequently, federal contractors will frequently see proposed rules they may want to comment on.
    GAO decided to discuss the public comments process in a June 2019 report, and at the end of this October released a follow-up testimony focusing on how agencies determining and publish the identities of commenters in the rule making process.
    In its testimony, GAO made a point of examining rules that produce voluminous amounts of comments (e.g. the comment campaign against the FCC’s “Restoring Internet Freedom”) and how agencies could effectively publish these large amounts of comments and commenter identities for public review. Revealing commenter names would presumably help the public determine whether the comments were meaningfully made by an interested party or simply submitted to flood the commenting system, thus making comments a more useful part of the rule making process for the public at large.
    GAO focused its testimony on four topics:
    Identity information selected agencies collect through regulations.gov and agency-specific comment websites. The internal guidance of selected agencies addressing the identity of commenters. How selected agencies treat identity information collected during the public comment process. The extent to which selected agencies clearly communicate their practices associated with posting identity information collected during the public comment process. GAO selected 10 agencies to examine. The APA doesn’t require agencies to authenticate the identity of any comment-makers, and the ISP information (IP address, time submitted etc.) tied to comments submitted online cannot be linked to specific comments. Consequently, agencies must rely on those who self-report identity information.
    Agencies vary on how they store comments and identity information, but in general they will either maintain all submitted comments within the comment system itself, or they maintain some duplicate comment records outside the comment system.
    GAO found that the majority of agencies do have some sort of internal guidance associated with the identity of commenters, but the guidance varies. This leads to vastly different forms of storing and presenting identity information.
    In one instance, almost 18,000 duplicate comments were included in attachments to a proposed rule and all 18,000 were presented under one individual’s name in the comment title. None of the individual identity information attributed to those 18,000 comments could be easily found without manually opening and searching all the attachments, most of which contained approximately 2,000 comments. In another instance, it was the agency’s policy to post all the comments submitted separately. This scattered approach by agencies leads to inconsistent comment presentation to the public.
    GAO testified that although the APA allows discretion in how agencies post comments, agencies do not clearly communicate their comment publishing practices, including publishing commenter identity. This lack of publication leaves the public in the dark and “could affect their ability to use and make informed decisions about the comment data and effectively participate in the rule making process themselves.” GAO testified that there is simply not enough information posted to help the public determine whether all the identity information supplied during the comments phase is actually posted or not.
    GAO found that the inconsistent agency guidance, information storage/treatment, and communication of publishing practices needs to be remedied. In its June 2019 report, GAO suggested that five of the ten agencies examined establish a policy for posting comments, and eight of the ten agencies take action to more clearly communicate their policies for posting of comments. The eight agencies agreed with these recommendations, and identified actions they could take. However, since the June 2019 report, only one agency has taken action, clearly posting a disclaimer about collection and publishing of identity information. Without remedying these inconsistencies, GAO worries that “public users of the comment websites could reach inaccurate conclusions about who submitted a particular comment, or how many individuals commented on an issue.”
    For federal contractors, this issue can hit rather close to home. Any change to the FAR, DFARS, or other regulations that can directly affect your contracting will likely go through the APA rule making process. Your chance to voice issues or questions with these proposed rules is by submitting a comment to the proposed rule.
    If agencies consistently collected and published identity information along with comments made on rules that affect federal contracting, federal contractors could easily find what your peers in the contracting community think about an upcoming regulatory change, and determine whether they should lend their voice to the discussion. However, as GAO noted, without consistency across agencies, you may find yourself wading through attachments with thousands of names and comments to see what has already been said.
    Hopefully, the report and testimony by GAO leads more agencies to update their commenting procedures, so that becoming involved in the rule making process is less discouraging. In the meantime, don’t be surprised if you start to see more agencies asking for identity information when you submit a comment on a proposed rule, and be prepared to see varying forms of comment publishing by agencies.

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  17. Koprince Law LLC
    In its past performance evaluation, an agency typically can consider the past performance of an offeror’s affiliate, so long as the offeror’s proposal demonstrates that the resources of the affiliate will affect contract performance.
    But, as demonstrated in a recent GAO decision involving an Alaska Native Corporation subsidiary, ordinarily there is no requirement that an agency consider an affiliate’s past performance.  In other words, unless the solicitation speaks to the issue, the agency’s consideration of an affiliate’s past performance is optional.

    The GAO’s decision in Eagle Eye Electric, LLC, B-415562, B-415562.3 (Jan. 18, 2018) involved a Social Security Administration solicitation for support services at the National Records Center.  The SSA issued the solicitation as a competitive set-aside for participants in the 8(a) Program.
    The solicitation called for a best-value tradeoff considering three factors: experience, past performance, and price.  With respect to experience, offerors were to provide a description of up to three contracts that demonstrated relevant experience.  Under the past performance factor, offerors were to have references complete and submit questionnaires for each reference cited in the experience section of the proposal.  The solicitation did not state whether the SSA would consider the experience of an offeror’s corporate affiliates.
    Eagle Eye Electric, LLC submitted a proposal.  Eagle Eye is a subsidiary of Bering Straits Native Corporation, an ANC.
    In its proposal, Eagle Eye submitted information for three contracts.  Eagle Eye was not involved in the performance of any of the three.  Instead, these contracts had been performed by Eagle Eye’s parent company, Bering Straits, and other subsidiaries of Bering Straits.  Eagle Eye wrote that these companies were “committed to provide contract performance advice, assistance and resources” in the performance of the SSA contract.
    The SSA did not consider the past performance of Eagle Eye’s parent and subsidiary companies.  The agency assigned Eagle Eye a “not similar” rating for its experience and “neutral” for past performance.  The SSA awarded the contract to a competitor, which was rated “very similar” for experience and “very good” for past performance, but proposed a price more than $6 million more than Eagle Eye’s.
    Eagle Eye filed a GAO bid protest.  Eagle Eye argued that it was improper for the agency to fail to consider the experience and past performance of its affiliates.  Eagle Eye pointed out that it had submitted statements from each affiliate, stating that the affiliate was committed to assisting Eagle Eye perform the contract.  According to Eagle Eye, the agency therefore was required to evaluate the experience and past performance of each affiliate.
    The GAO wrote that “[a]n agency may consider the experience or past performance of an offeror’s parent or affiliated company where, among other things, the proposal demonstrates that the resources of the parent or affiliate will affect contract performance, and there is no solicitation provision precluding such consideration.”  But “[t]here is, however, no requirement that they do so.”
    In this case, “the solicitation did not require the agency to consider the experience and past performance of Eagle Eye’s affiliate concerns and therefore, the agency was under no obligation to do so.”
    The GAO denied Eagle Eye’s protest.
    For many government contractors (including those owned by ANCs, Indian Tribes, and NHOs), the use of affiliated companies’ past performance is commonplace.  And in many cases, agencies accept such experience and past performance, provided that the affiliated companies’ resources will affect contract performance.
    But as the Eagle Eye Electrical protest demonstrates, unless the solicitation says otherwise, an agency is not required to consider the past performance or experience of an offeror’s affiliates.  Where, as here, a solicitation is silent about how such past performance and experience will be evaluated, offerors would be wise to pose a question, if possible, during a pre-proposal Q&A, rather than assuming that the agency’s silence means that such past performance and experience will be considered.

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  18. Koprince Law LLC
    I recall sitting in a mediation one day when the mediator, a judge, told me and my client that we all have lightning in our fingers. He went on to explain that this means, once you sign a contract, it’s like magic in the sense that you can’t get out of the contract and are bound by it, absent certain exceptional circumstances.
    I was reminded of this concept while reading a recent opinion from the Armed Services Board of Contract Appeals that dealt with the effect of a contractor signing a release with the government and then trying to back out of that release by refusing payment from the government.

    In Central Texas Express Metalwork LLC d/b/a Express Contracting, ASBCA No. 61109, (Sept. 7, 2017), the ASBCA reviewed an appeal of contractor CTEM, which had contracted to repair and replace certain HVAC systems at an Air Force base for $2,457,237. After partial performance, CTEM submitted a request for equitable adjustment for $643,841.88 in increased costs due to the Air Force’s purported delays and changes, including $345,691.07 sought on behalf of a subcontractor called IMS.
    In settlement of the dispute, the Air Force agreed to pay the outstanding contract balance of $395,727.99. This resulted in, among other things, CTEM waiving its REA and the Air Force waiving a credit it should have received from reducing the scope of the contract. CTEM and the subcontractor agreed to provide a final invoice and a release of claims, and the release included no exceptions. The pertinent language of the release was “the Contractor, upon payment of the sum by the United States of America (Herein after called Government), does remise, release, and discharge the Government, its officers, agents, and employees, of and from all liabilities, obligations, claims, and demands, whatsoever, under or arising from the said contract.”
    CTEM then contacted IMS to inform IMS of what amount it would receive as part of the settlement, and IMS refused the offer. When the government sent the final payment to CTEM, CTEM had frozen its account and informed the government that CTEM was working on submitting a corrected invoice. CTEM then submitted a certified claim to the CO for $643,841.88 for the delays by the Air Force, including the $345,691.07 sought by the subcontractor IMS.
    CTEM argued that, because it did not accept the final payment from the government, the release was not binding. The ASBCA, referring to case-law dating back to 1860, wrote that “[o]nce an offer has been accepted, there is a binding contract.”  Thereafter, “neither the offer nor the acceptance generally can be revoked or withdrawn.”
    In this case, the government made a binding offer for settlement, and CTEM accepted it, so CTEM “cannot avoid its obligations under the release by refusing to accept payment.” What’s more, because CTEM entered into the settlement agreement with the government, CTEM had a duty of good faith to not interfere with the government’s performance in tendering the final payment.  Rather, “ecause CTEM cannot withdraw its offer at this point, it is bound to accept $395,727.99 for its claims, and release the remainder of the claims.”
    This decision is a good reminder of the power we all hold in our hands when we are signing a contract. This power holds sway in government contracts as equally as it does in other areas of contract law. The government often asks contractors to sign waivers and releases, and like CTEM, other contractors sometimes have second thoughts after they sign. Contractors would do well to think very carefully when they are signing a release with the government that covers all claims, because, barring relatively rare exceptions, those releases are binding.

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  19. Koprince Law LLC
    An incumbent contractor won a protest at GAO recently where it argued that the awardee’s labor rates were too low, because they were lower than the rates the incumbent itself was paying the same people.
    GAO faulted the agency for concluding that the awardee’s price was realistic without checking the proposed rates against the incumbent rates. In other words, GAO told the agency to start at the obvious place—the compensation of the current employees.

    The decision in SURVICE Engineering Company, LLC, B-414519 (July 5, 2017) involved a price realism analysis of rates proposed for workers to provide engineering, program management, and administrative services at Eglin Air Force Base. (Steve Koprince blogged about the unequal evaluation component of this case here.)
    The solicitation called for a fixed-price labor-hour contract and required offerors to submit a professional compensation plan. The Air Force said it would evaluate the plan pursuant to FAR 52.222-46, which includes a price realism component.
    Price realism, for the uninitiated, is an evaluation of whether an offeror’s price is too low. In the context of a fixed-price labor hour contract like the Air Force solicitation, “this FAR provision anticipates an evaluation of whether an awardee understands the contract requirements, and has proposed a compensation plan appropriate for those requirements.”
    The Air Force initially concluded that the price proposed by Engineering Research and Consulting Inc., or ERC, was too low, comparing the price to “Government estimates.” But after discussions and revisions, the agency decided that the revised salary ranges were acceptable. The Air Force awarded the contract to ERC.
    The protester, SURVICE Engineering Company, LLC, as the incumbent, obviously knew what it was currently paying the employees who were doing the work. SURVICE figured that the only way ERC could have proposed such a low price was to slash compensation. In fact, ERC had proposed exactly that, but still said it would retain many of the incumbent personnel. (GAO has previously noted that proposing to capture incumbents but pay lower rates brings up obvious price realism concerns.)
    SURVICE argued that the evaluation was unreasonable because the agency did not evaluate the complete plan, did not compare the plan to incumbent rates, and still found ERC’s proposal acceptable.
    GAO agreed, stating that “the record is silent as to whether, in the end, any of ERC’s rates were lower than incumbent rates but nevertheless acceptable to the Air Force.”
    It concluded, “the Air Force did not reasonably compare ERC’s salaries to incumbent salaries, a necessary step to determine whether the proposed salaries are lower than incumbent salaries. Accordingly, we find that the agency failed to reasonably evaluate whether ERC offered ‘lowered compensation for essentially the same professional work,’ as envisioned by FAR provision 52.222-46. We therefore sustain this aspect of [SURVICE]’s protest.”
    SURVICE won this aspect of the protest because GAO faulted the Air Force for not taking an obvious step, but it is also a good reminder that seeking to underbid the competition by slashing incumbent pay rates can raise significant price realism concerns.

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  20. Koprince Law LLC
    The VA will “immediately comply with the Court’s decision” in Kingdomware Technologies, Inc. v. United States, according to a top VA official.
    In written testimony offered in advance of a Senate committee hearing tomorrow, the Executive Director of the VA’s Office of Small and Disadvantaged Business Utilization tells Congress that the VA will work to implement the Kingdomware decision, including by improving its market research processes.

    In his testimony, Executive Director Thomas J. Leney states that his office has “already engaged VA’s acquisition workforce with new guidance, focusing most urgently on procurements currently in progress, but not yet awarded.”  Unfortunately, however, Mr. Leney doesn’t specify what guidance the acquisition workforce has been given regarding ongoing procurements; hopefully that’s something that the Committee members will be able to flesh out at the oral hearing.
    Mr. Leney devotes much of his written testimony to pledges to strengthen the VA’s market research processes to identify qualified SDVOSBs and VOSBs.  “This means,” he writes, “market research must consist of more than merely finding firms in a particular industry code listed in the System for Award Management.”  Mr. Leney explains that VA Contracting Officers “can make better use of Requests of Information, or RFIs, for data-driven decision making.”  Additionally, Contracting Officers “need to meet with procurement-ready VOSBs to understand their capabilities and what they are already accomplishing.”
    Mr. Leney concludes his written testimony by stating, “embracing the Court’s decision in Kingdomware . . . improves the Veteran experience, both as Veteran small business owners and as Veteran customers receiving the health care and benefits they have earned and deserve.”
    Mr. Leney won’t be the only one testifying at tomorrow’s hearing.  LaTonya Barton of Kingdomware Technologies will also go before the Senate.  In her written testimony, Ms. Barton states:
    We hope the VA takes the Supreme Court decision and Rule of Two mandate seriously and diligently works to implement it.  We have already lost almost ten years.  It is time for the VA to stop looking for loopholes and to redirect that energy into making the mandate work.
    Hopefully, Mr. Leney’s comments reflect a genuine change of heart on the VA’s part, and a commitment to truly “embrace” Kingdomware, as Ms. Barton hopes.  Time will tell.

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  21. Koprince Law LLC
    It’s Friday, which means it’s time for the SmallGovCon Week In Review. In this edition, we’ll look at a potential impact to the change to DUNS numbers, cybersecurity requirements, and increased opportunities with the Corps of Engineers.
    Have a great weekend, everyone!
    Army Corps of Engineers turns to private sector in face of budget cuts. [FederalNewsNetwork] How DUNS Number Changes Could Affect Your Business. [Nav.com] Keeping up with DoD cybersecurity compliance demands. [GTPAC.org] Sunnyvale firm to pay $545,000 to settle claims it sold Chinese-made equipment to U.S. government. [EastBayTimes] How oversight issues led to ineligible contract awards. [FederalTimes] GSA has adjusted some components of its IT Schedule 70 contract, the federal government’s largest IT purchasing vehicle, to give agencies a more efficient way to buy software services. [Federal Times]


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  22. Koprince Law LLC
    You’ve hit send on that electronic proposal, hours before the deadline and now you can sit back and feel confident that you’ve done everything in your power – at least it won’t be rejected as untimely – right?
    Not so fast. If an electronically submitted proposal gets delayed, the proposal may be rejected–even if the delay could have been caused by malfunctioning government equipment. In a recent bid protest decision, the GAO continued a recent pattern of ruling against protesters whose electronic proposals are delayed. And in this case, the GAO ruled against the protester even though the protester contended that an agency server malfunction had caused the delay.

    Western Star Hospital Authority, B-414216.2 (May 18, 2017) involved an Army RFP for emergency medical services.  The RFP required that proposals be submitted no later than 4:00 pm., EST on January 30, 2017, to the Contracting Officer’s email address.
    The RFP incorporated FAR 52.212-1 (Instructions to Offerors-Commercial Items).  Paragraph (f)(2) of that clause provides that any “offer, modification, revision, or withdrawal of an offer received at the Government office designated in the solicitation after the exact time specified for receipt of offers is ‘late’ and will not be considered.”
    On the date the proposals were due, Western Star emailed four proposal documents to the CO’s email address. The emails were sent at 2:43 p.m., 2:57 p.m., 3:01 p.m. and 3:06 p.m., well before the 4:00 p.m. deadline. For reasons unknown, the emails did not arrive at the initial point of entry to the Government infrastructure until after 6:00 p.m., well after the deadline. The Army rejected the proposal as late.
    Western filed a GAO bid protest challenging the Army’s decision. Western argued that it was “guilty of no fault” and that it was “completely unfair and unreasonable to reject its bid because of factors beyond its control.”
    Western argued that the agency’s servers were “not accessible,” and furnished a mail log from its service provider supporting its position. The Army disputed Western’s position. The Army provided a statement from its Information Assurance Manager, who said that the emails were “delayed by the protester’s servers” and that the delay “was not the fault or responsibility of the Government, which has no control over commercial providers used by the Protester.”
    The GAO declined to resolve the question of whose servers had malfunctioned. Instead, the GAO indicated that Western’s proposal would be considered late regardless of whose equipment had malfunctioned. Citing its own prior authority, the GAO wrote, “[w] have repeatedly found that it is an offeror’s responsibility to ensure that an electronically submitted proposal is received by–not just submitted to–the appropriate agency email address prior to the time set for closing.” Because Western’s proposal “was not received at the agency’s servers until after the deadline for receipt of proposals,” the proposal was late.
    The GAO also cited FAR 52.212-1(f)(2)(i)(A), which states that a late proposal, received before award, may be accepted if it was transmitted electronically and received at the initial point of entry to the Government infrastructure no later than 5:00 p.m. one working day prior to the due date. But Western did not submit its proposal by 5:00 one working day prior to the due date, so it could not avail itself of that exception.
    The GAO declined to discuss any of the other exceptions to FAR 52.212-1(f)(2), such as the important “government control” exception, stating that the exceptions were “not pertinent” to the issue in Western. As we’ve written before, the Court of Federal Claims disagrees with the GAO when it comes to the question of whether these exceptions apply to electronic proposals, and we think the Court has the better position.
    For now, though, Western Star Hospital Authority stands as an important warning to contractors who submit proposals electronically. Under the GAO’s current precedent, a late-submitted electronic proposal is late–even if the lateness was due to malfunctioning government equipment. The only exception recognized by the GAO under FAR 52.212-1 is the “5:00 p.m. one working day prior” exception, and contractors would be wise to take that into account when determining when to submit electronic proposals.

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  23. Koprince Law LLC
    The SBA has finalized its “universal” mentor-protege program for all small businesses.
    In a final rule scheduled to be published in the Federal Register on July 25, 2016, the SBA provides the framework for what may be one of the most important small business programs of the last decade–one that will allow all small businesses to obtain developmental assistance from larger mentors, and form joint ventures with those mentors to pursue set-aside contracts.
    First things first: while I’ve been using the term “universal” mentor-protege program for the last year and a half, the SBA apparently has had a change of heart when it comes to terminology.  The SBA now calls its new program the “small business mentor-protege program,” so that’s what I’ll call it, too, from now on.
    The SBA’s final rule creates a new regulation, 13 C.F.R. 125.9, entitled “What are the rules governing SBA’s small business mentor-protege program?”  The new regulation sets forth the framework of the small business mentor-protege program.
    Program Purpose
    The SBA broadly explains the purpose of the new program in this way:
    The small business mentor-protege program is designed to enhance the capabilities of protege firms by requiring approved mentors to provide business development assistance to protege firms and to improve the protege firms’ ability to successfully compete for federal contracts.  This assistance may include technical and/or management assistance; financial assistance in the form of equity investments and/or loans; subcontracts (either from the mentor to the protege or from the protege to the mentor); trade education; and/or assistance in performing prime contracts with the Government through joint venture arrangements.  Mentors are encouraged to provide assistance relating to the performance of contracts set aside or reserved for small business so that protege firms may more fully develop their capabilities.
    Just like the longstanding and popular 8(a) mentor-protege program, the new small business mentor-protege program creates a framework under which mentor firms will provide a wide variety of potential benefits to their proteges.
    Qualification as Mentor
    As a general matter, “[a]ny concern that demonstrates a commitment and the ability to assist small business concerns may act as a mentor and receive benefits ” from the mentor-protege program.  Mentors may be large or small businesses.
    In order to qualify, a prospective mentor must demonstrate that it is capable of meeting its commitments to the protege.  The SBA will evaluate a prospective mentor’s financial health, such as by reviewing the mentor’s tax returns, audited financial statements, and/or SEC filings (for publicly traded companies).  A mentor must “[p]ossess good character” and cannot appear on the government’s list of debarred or suspended contractors.  Once approved, a mentor must “annually certify that it continues to possess good character and a favorable financial position.”
    A mentor “generally” will have only one protege at a time.  However, “SBA may authorize a concern to mentor more than one protege at a time where it can demonstrate that the additional mentor-protege relationship will not adversely affect the development of either protege (e.g., the second firm may not be a competitor of the first firm).  While mentors may, with SBA permission, have more than one protege, “Under no circumstances will a mentor be permitted to have more than three proteges at one time . . ..”  In its commentary, the SBA explains:
    SBA continues to believe that there must be a limit on the number of firms that one business, particularly one that is other than small, can mentor.  Although SBA believes that the small business mentor-protege program will certainly afford business development to many small businesses, SBA remains concerned about large businesses benefiting disproportionately.  If one firm could be a mentor for an unlimited number (or even a larger number) of proteges, that firm would receive benefits from the mentor-protege program through joint ventures and possible stock ownership far beyond the benefits to be derived by any individual protege.
    Importantly, the “three-protege limit” is an aggregate of proteges under the small business mentor-protege program and the separate 8(a) mentor-protege program.  In other words, if a mentor already has two proteges under the 8(a) mentor-protege program, the mentor would be limited to a single additional protege under the small business mentor-protege program.
    If control of a mentor changes (such as through a stock sale), the mentor-protege agreement can continue under the new ownership.  However, after the change in control, the mentor must “express[] in writing to SBA that it acknowledges the mentor-protege agreement and [certify] that it will continue to abide by its terms.”
    Finally, in its proposed rule, the SBA suggested that a firm could not be both a mentor and a protege at the same time.  In my public speaking on the mentor-protege program, I questioned this proposal, noting that a firm may be well-established in one line of work, but require mentoring in a secondary line of work.  For instance, a company may be a longstanding, well-established plumbing contractor, and well-positioned to mentor a firm in that industry–while at the same time requiring mentoring to break into electrical work.
    Perhaps the SBA was listening, because the final rule deletes that restriction.  The final rule provides that “SBA may authorize a small business to be both a protege and a mentor at the same time where the firm can demonstrate that the second relationship will not compete with or otherwise conflict with the first mentor-protege relationship.”
    Qualification as Protege
    To qualify as a protege, a company “must qualify as small for the size standard corresponding to its primary NAICS code or identify that it is seeking business development assistance with respect to a secondary NAICS code and qualify as small for the size standard corresponding to that NAICS code.”  However, if the prospective protege is not a small business in its primary NAICS code, “the firm must demonstrate how the mentor-protege relationship is a logical business progression for the firm and will further develop or expand current capabilities.”  Further, “SBA will not approve a mentor-protege relationship in a secondary NAICS code in which the firm has no prior experience.”
    The portion of the final regulation involving secondary NAICS codes is an important change from the SBA’s proposed rule.  The SBA initially proposed that a protege would be required to qualify as small in its primary NAICS code, and could not obtain a mentor if that standard wasn’t met.  The final rule appropriately recognizes that a small business may desire mentorship to develop in a new or secondary line of work carrying a larger NAICS code (think of a plumbing contractor that wants to expand to general contracting, for example).
    A protege ordinarily will have no more than one mentor at a time, although the SBA may approve a second mentor where certain conditions are met.  In no case will the SBA approve more than two concurrent mentors for any single protege.
    Written Mentor-Protege Agreement Required
    In order to participate in the mentor-protege program, “[t]he mentor and protege firms must enter into a written agreement setting forth an assessment of the protege’s needs and providing a detailed description and timeline for the delivery of the assistance the mentor commits to provide to address those needs . . ..”
    Interestingly, as in the 8(a) program, the parties must “[a]ddress how the assistance to be provided through the agreement will help the protege firm meet its goals as defined in its business plan.”  I say “interestingly” because 8(a) program participants are required to submit 8(a)-specific business plans to the SBA; other small businesses are not.  It’s unclear, then, whether this regulation implicitly requires prospective proteges to have written business plans (which of course is a best practice, and often required for various types of financing–but still, not all small businesses have written business plans).
    The mentor-protege agreement must provide that the mentor will provide assistance to the protege for at least one year.  However, the agreement must also provide “that either the protege or the mentor may terminate the agreement with 30 days advance notice to the other party . . . and to SBA.”
    The written mentor-protege agreement must be approved by the SBA before it takes effect.  Additionally, the SBA “must approve all changes to a mentor-protege agreement in advance, and any changes made to the agreement must be provided in writing.”  If changes are made to the mentor-protege agreement without the SBA’s permission “SBA shall terminate the mentor-protege relationship and may also propose suspension or debarment of one or both firms . . ..”
    The SBA states that it will “establish a separate unit within the Office of Business Development whose sole function would be to process mentor-protege applications and review MPAs and the assistance provided under them once approved.”  If this office becomes overwhelmed with applications (a concern a number of commenters raised in response to the proposed rule), SBA could consider using “open enrollment periods” in which mentor-protege applications would be accepted.  The final rule does not establish any open enrollment periods at this time, however.
    Term of Mentor-Protege Agreement
    A single mentor-protege agreement “may not exceed three years, but may be extended for a second three years.”  The SBA’s apparent intent is to cap, at six years, the length of time that two companies can be involved in a small business mentor-protege relationship.
    In its commentary, the SBA explains:
    The mentor-protege program should be a boost to a small business’s development that enables the small business to independently perform larger and more complex contracts in the future.  It should not be a crutch that prevents small businesses from seeking and performing those larger and more complex contracts on their own.  
    Annual Reporting
    Small business proteges must make annual reports to the SBA.  Within 30 days of the anniversary of the SBA’s approval of the mentor-protege agreement, the protege must make a report concerning the previous year, including a detailed list of assistance provided by the mentor, federal contracts awarded to the mentor-protege as joint venturers, and so on.  The protege must also submit a narrative “describing the success each assistance has had in addressing the developmental needs of the protege and addressing any problems encountered.”
    The SBA will review the protege’s annual report to determine whether to reauthorize the mentor-protege agreement (provided that it has not expired).  However, no news is good news: “nless rescinded in writing as a result of the review, the mentor-protege relationship will automatically renew without additional written notice or continuation or extension to the protege firm.”
    If the SBA determines that the mentor has not provided the promised assistance, the SBA will give the mentor the opportunity to respond.  If the SBA is unconvinced by that explanation (or if the mentor offers no explanation), the SBA will terminate the mentor-protege agreement and bar the mentor from acting as a mentor for two years.  The SBA may also take other actions to penalize the mentor.
    After the mentor-protege relationship has concluded, the SBA will require the protege to submit a final report to the SBA about “whether it believed the mentor-protege relationship was beneficial and describe any lasting benefits to the protege.”  If the protege fails to submit the report, the SBA will not approve a second mentor-protege relationship, either under the small business mentor-protege program or the 8(a) mentor-protege program.
    Joint Venturing
    The small business mentor-protege program allows the mentor and protege to form joint ventures and compete for set-aside contracts based solely on the protege’s size:
    A mentor and protege may joint venture as a small business for any government prime contract or subcontract, provided the protege qualifies as small for the procurement.  Such a joint venture may seek any type of small business contract (i.e., small business set-aside, 8(a), HUBZone, SDVOS, or WOSB) for which the protege firm qualifies (e.g., a protege firm that qualifies as a WOSB could seek a WOSB set-aside as a joint venture with its SBA-approved mentor).
    The SBA must approve the joint venture agreement before a mentor-protege joint venture may avail itself of the special exception from affiliation provided by the small business mentor-protege program.  The joint venture agreement, in turn, must satisfy the requirements of another new regulation the SBA has finalized, which will be codified at 13 C.F.R. 125.8.  And because this blog post is already approaching “War and Peace” length, we’ll discuss those new joint venturing requirements in a separate post.
    According to the final regulation, “[o]nce a protege firm no longer qualifies as a small business for the size standard corresponding to its primary NAICS code, it will not be eligible for any further contracting benefits from its mentor-protege relationship.”  In my mind, though, this prohibition is inconsistent with the SBA’s decision to allow proteges to qualify for the small business mentor-protege program based on secondary NAICS codes.  If outgrowing the primary NAICS code precludes joint venturing for set-aside contracts carrying NAICS codes with higher size standards, the value of mentorship in a secondary NAICS code is greatly diminished.  Perhaps the SBA will clarify this piece of the rule moving forward.
    The final rule provides that “a change in the protege’s size status generally does not affect contracts previously awarded to a joint venture between the protege and its mentor.”  The SBA specifies that “[e]xcept for contracts with durations of more than five years (including options), a contract awarded to a joint venture between a protege and mentor as a small business continues to qualify as an award to small business for the life of that contract and the joint venture remains obligated to continue performance on that contract.”  For contracts with durations of more than five years, recertification will be required as provided for in 13 C.F.R. 124.404(g)(3)
    Affiliation Exception
    As is the case under the 8(a) mentor-protege program, the small business mentor-protege program provides a broad “shield” from affiliation.  The SBA’s new regulation states that “[n]o determination of affiliation or control may be found between a protege firm and its mentor based solely on the mentor-protege agreement or any assistance provided pursuant to the agreement.”  The affiliation exception is not unlimited, however.  The new regulation provides that “affiliation may be found for other reasons set forth” in the SBA’s affiliation regulation, 13 C.F.R. 121.103.
    Transfer of 8(a) Mentor-Protege Agreements
    The final rule provides that when a protege graduates or otherwise leaves the 8(a) Program, but continue to qualify as small, that protege “may transfer its 8(a) mentor-protege relationship to a small business mentor-protege relationship.”  The mentor-and protege do not need to reapply, but must “merely inform SBA” of the intent to transfer the mentor-protege relationship to the small business mentor-protege program.
    The Road Ahead
    The SBA’s new small business mentor-protege program will become effective 30 days after the final rule is officially published on July 25.  Whether the SBA will begin accepting applications in late August, however, remains to be seen.
    The small business mentor-protege program will be a game-changer in the world of small business contracting.  For small and large contractors alike, now is the time to get working to take advantage of this extraordinary new opportunity.
     
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  24. Koprince Law LLC
    Under FAR Part 15 negotiated procurements, an agency must give notice and an opportunity to request a debriefing to offerors eliminated from the competitive range. But the notice requirement does not apply for task and delivery order procurements under FAR Part 16 where FAR Part 15 is inapplicable.
    A recent GAO decision highlights this distinction.

    The Department of Education issued multiple solicitations to meet IT requirements. One RFQ, the PIVOT H solicitation, was for hosting of applications, data, and IT systems services. The PIVOT H solicitation was issued for a task order pursuant to a multiple-award, IDIQ contract program.
    Under PIVOT H, NTT DATA Services Federal Government, Inc. protested issuance of a task order to IBM, and GAO considered this protest in NTT DATA Services Federal Government, Inc., B-416123 (Comp. Gen.  2018). The RFQ was a best-value tradeoff, considering price and several non-price evaluation factors. The evaluation factors, in descending order of importance, were:  technical approach, past performance, and price and subcontracting goals.
    NTT argued that the agency engaged  in improper additional rounds of discussions with IBM and Offeror A, but not with it. The agency erred, according to NTT, because it never made a formal competitive range announcement.
    GAO rejected this argument, noting that the requirement to notify firms of the competitive range is a FAR Part 15 requirement, which was inapplicable to this RFQ because it was conducted under FAR Part 16. The RFQ stated:
    Furthermore, “FAR § 16.505(b) states, among other things, that the requirements of FAR subpart 15.3 are inapplicable to task order competitions such as the instant acquisition.” GAO noted that “the record shows that the agency effectively established a competitive range comprised of the firms the agency determined had a reasonable chance for award.” The agency’s documentation stated that
    Based on this evaluation, GAO determined that eliminating NTT from the competitive range was reasonable. The notice requirements for the competitive range were inapplicable:
    Under FAR 16.505, then, an agency can effectively establish a competitive range without notifying an offeror or allowing the opportunity for a debriefing, because those are requirements found only under FAR Part 15.  As task and delivery order procurements become increasingly popular, offerors should remember that their notification and debriefing rights may be different than expected.

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  25. Koprince Law LLC
    After September 30, 2016, unsuccessful offerors will lose the ability to challenge some task order awards issued by civilian agencies.
    With the House of Representatives and Senate at odds over the extent to which task orders should be subject to bid protests in the first place, it’s unclear whether that protest right will be restored.

    Under the Competition in Contracting Act, a protest challenging a task order award issued by a civilian agency is not permitted unless it falls under either of the following exceptions:
    (A) the protest alleges that the order increases the scope, period, or maximum value of the contract under which the order was issued; or
    (B) the protest challenges an order valued in excess of $10 million.
    41 U.S.C. § 4106(f)(1).
    The statute, however, provides that the second exception—allowing protests challenging orders valued at greater than $10 million—expires on September 30, 2016. After that date, an offeror’s ability to protest a task order issued by a civilian agency will be limited to only those protests alleging that the order increases the scope, period, or maximum value of the underlying contract.
    It is important to note that this expiration applies only to task orders issued by civilian agencies; offerors can still challenge task orders issued by the Department of Defense, so long as the awards meet the same $10 million minimum. See 10 U.S.C. § 2304c(3)(1).
    Congress has started discussing how to address this issue. But the House and Senate remain worlds apart: the House proposes to allow civilian task order protests again, while the Senate wants to do away with task and delivery protests at GAO altogether and instead require the task and delivery order ombudsman to resolve any complaints. H.R. Rep. No. 114-537, § 1862 (p. 348); S. 2943, 114th Cong. § 819.
    In fiscal year 2015 (the last year for which statistics are available), GAO closed 2,647 cases; only 335 of them arose from GAO’s special task order jurisdiction. And as we have reported, 45% of protests resulted in a favorable outcome for the protester, either through a formal “sustain” decision or by way of voluntary corrective action. It would be unfortunate to permanently eliminate GAO’s ability to decide protests regarding larger task orders when the statistics indicate that such protests aren’t pervasive and are often meritorious.
    So what’s the bottom line? Unless Congress acts, unsuccessful offerors in civilian task order competitions will be able to protest only in very limited circumstances; these offerors must instead bring their complaints before the agency’s task order ombudsman. In the meantime, affected offerors might consider discussing the issue with their elected representatives.

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