Jump to content
The Wifcon Forums and Blogs

Sign in to follow this  
ohnoudidnt14

Continued Contract Performance After Change of Socioeconomic Status

Recommended Posts

Scenario:

1. SDVOSB (or plug in any other socioeconomic category) performing on several FFP, competitively bid, construction contracts.

2. The ownership of the business passes from father to son, acknowledged that the business no longer qualifies as a SDVOSB.

3. Made all appropriate changes in SAM, Reps&Certs.

Clearly, the company is permitted to complete any active contracts, irrespective of the change in small business status. One particular active contract had subsequent change orders (that amounted to more than the original contract) based on unforeseen site conditions.

Now, in the process of applying for 8(a) status (for which the son would qualify), the SBA is questioning the execution of those MODIFICATIONS as if they were AWARDS under the SDVOSB program during a time when the company was clearly not a SDVOSB. The SBA is using terms such as "Presumption of Loss" clauses under 13CFR121.108 associated with "misrepresentation".

Can anyone point me to specific references where I can validate that the firm was correct to complete the contract and that the status at time of award of the original contract (and NOT any subsequent modifications) is what had to satisfy the applicable set-aside.

I'm not sure if the answer would be different if this were a services-type contract and we were talking about executing an "option"...but I don't think so. I have seen several 8(a) companies land 5-8 year IDIQ type contracts with one base year and one year extensions just prior to graduation, yet still perform throughout the option years.

Any insight would be greatly appreciated. I'm certain that we were correct to complete the performance of the SDVOSB contract and am ticked that we have to defend ourselves from these attacks, coming from the SBA of all places!

Thank you.

Share this post


Link to post
Share on other sites

Just to confirm: the mods were for change orders within the scope of the contract? They changed existing work, but did not add new work?

Share this post


Link to post
Share on other sites

Vern’s question is headed down one avenue. Here is another.

With regard to the status of the firm after the change in ownership consider reviewing 13 CFR 121.404(g). Important questions are: When the ownership passed your post implies that your son “recertifed” the company, correct? And if so what did he recertify the firm as?

Share this post


Link to post
Share on other sites

Yes, definitely. The SBA rep. is looking at every action in FPDS as a new contract action, even if it is just a mod. Apparently, for a mod., FPDS identifies the socioeconomic categories (correctly) that were applicable at the time of contract award and not at the time the mod is executed.

Share this post


Link to post
Share on other sites

To CCulham...updated reps & certs. Did not qualify as a SDVOSB any longer.

With regard to 13CFR 121.404(g), the status as "small" was never a contention ("very small" actually). I'm looking for something similar as it applies to the various socioeconomic classifications...in my case, SDVOSB.

Share this post


Link to post
Share on other sites

Here are some references that may be helpful 13 CFR 125.9 and 38 CFR 74.3(e).

My thoughts. Firm first certified as SDVOSB recertifies, if I read your comments correctly, as a SB at change of ownership. Agency does not update FPDS with your new status. SBA says that because FPDS shows the firm still as SDVOSB the firm has misrepresented itself. It would seem if this is a accurate reflection of the issue then it seems that SBA is off base on the facts in that a firm has no authority and can get no authority to manipulate the info in FPDS. Or stated another way the agency is in error by not updating FPDS as in essence they are misreporting awards to a SDVOSB when they should be reporting them as SB.

I guess one could read the regs I have provided that a SDVOSB may not change its business status while performing contracts as a SDVOSB but that seems a crazy read to me.

Share this post


Link to post
Share on other sites

CC, the references you mention have to do with who "controls" a SDVOSB for the purpose of qualifying. We really don't have an issue there. We were an SDVOSB, we had an ownership change...and we weren't a SDVOSB. There are not disagreements with that. We finished work on all prior awarded contracts, we submitted NO more bids under new SDVOSB set-asides.

I think FPDS may actually be right, in that it identifies the status at the time the contract was awarded and recognizes that changes "within the scope of the original contract" still qualify as far as any applicable goals they may be tracking, etc.

Through the 8(a) application, we are dealing with an SBA rep. that doesn't understand that we were well within our rights to finish the SDVOSB contract that was correctly awarded to the company at a time that we were a SDVOSB.

As much as our example is an SDVOSB, I would think the answer will apply to HUBZones that lose that status, companies that grow to the point they are no longer "small", companies that are purchased by other individuals or companies, and 8(a) graduates. Thus, it may be helpful to many readers of these discussions.

I'll take this a step further for SDVOSBs, the case NEIE, Inc. v. United States, No. 13-164 C (2013) confirmed that the SDVOSB status was required at the time that their proposal was submitted, even though they would not have qualified at the time of contract award.

I'm hoping we'll find out soon where Vern was going with this...

Share this post


Link to post
Share on other sites

Update for 8(a): 13CFR124.514(d) is very clear for 8(a)s:

(d) Modifications within the scope. The procuring activity contracting officer may exercise a modification within the scope of the initial 8(a) contract whether the concern that received the award has graduated or been terminated from the 8(a) BD program or is no longer eligible if to do so is in the best interests of the Government.

I'm looking for exactly this, for SDVOSBs.

Share this post


Link to post
Share on other sites

You initially asked "Can anyone point me to specific references where I can validate that the firm was correct to complete the contract and that the status at time of award of the original contract (and NOT any subsequent modifications) is what had to satisfy the applicable set-aside. "

The following language, though expanded concerning options or orders on MACs , specifically encompasses completion of the original contract construction requirement, including modification actions that are within the scope of the original contract. It would be ridiculous to assume that the contractor is not elegible to complete the original contract. If a differing site condition requires the work to be modified and is considered to be within scope, it isnt a new order is it?

"13 CFR 125.15 What requirements must an SDVO SBC meet to submit an offer on a contract?

"...(e ) Recertification.

(1) A concern that represents itself and qualifies as an SDVO SBC at the time of initial offer (or other formal response to a solicitation), which includes price, including a Multiple Award Contract, is considered an SDVO SBC throughout the life of that contract. This means that if an SDVO SBC is qualified at the time of initial offer for a Multiple Award Contract, then it will be considered an SDVO SBC for each order issued against the contract, unless a contracting officer requests a new SDVO SBC certification in connection with a specific order. Where a concern later fails to qualify as an SDVO SBC, the procuring agency may exercise options and still count the award as an award to an SDVO SBC. However, the following exceptions apply:

(i) Where an SDVO contract is novated to another business concern, the concern that will continue performance on the contract must certify its status as an SDVO SBC to the procuring agency, or inform the procuring agency that it does not qualify as an SDVO SBC, within 30 days of the novation approval. If the concern is not an SDVO SBC, the agency can no longer count the options or orders issued pursuant to the contract, from that point forward, towards its SDVO goals.

(ii) Where a concern that is performing an SDVO SBC contract acquires, is acquired by, or merges with another concern and contract novation is not required, the concern must, within 30 days of the transaction becoming final, recertify its SDVO SBC status to the procuring agency, or inform the procuring agency that it no longer qualifies as an SDVO SBC. If the contractor is not an SDVO SBC, the agency can no longer count the options or orders issued pursuant to the contract, from that point forward, towards its SDVO goals. The agency and the contractor must immediately revise all applicable Federal contract databases to reflect the new status.

(iii) Where there has been an SDVO SBC status protest on the solicitation or contract, see §125.27( e) for the effect of the status determination on the contract award.

(2) For the purposes of contracts (including Multiple Award Contracts) with durations of more than five years (including options), a contracting officer must request that a business concern recertify its SDVO SBC status no more than 120 days prior to the end of the fifth year of the contract, and no more than 120 days prior to exercising any option

.

(3) A business concern that did not certify itself as an SDVO SBC, either initially or prior to an option being exercised, may recertify itself as an SDVO SBC for a subsequent option period if it meets the eligibility requirements at that time.

(4) Recertification does not change the terms and conditions of the contract. The limitations on subcontracting, nonmanufacturer and subcontracting plan requirements in effect at the time of contract award remain in effect throughout the life of the contract.

(5) Where the contracting officer explicitly requires concerns to recertify their status in response to a solicitation for an order, SBA will determine eligibility as of the date the concern submits its self-representation as part of its response to the solicitation for the order.

(6) A concern's status may be determined at the time of a response to a solicitation for an Agreement and each order issued pursuant to the Agreement.

[69 FR 25268, May 5, 2004, as amended at 70 FR 14527, Mar. 23, 2005; 78 FR 61143, Oct. 2, 2013] "

Now, I do have a question. Did the differing site condition require remediation of hazardous materials where remediation was not part of the original contract scope? If so, then there may be a question of whether the mod is truly within the scope of the contract. But even then, I would think that one would then look at the above requirements.

Share this post


Link to post
Share on other sites

Also, you mentioned that the SBA is using terms such as "Presumption of Loss" clauses under 13CFR121.108 associated with "misrepresentation". I think that 13 CFR 125.29 would be the applicable reference, not 121.108, but I may be wrong. "...§125.29 What are the requirements for representing SDVO SBC status, and what are the penalties for misrepresentation?..."

Share this post


Link to post
Share on other sites

Following on to what Joel wrote, the SBA rep may have (e)(1)(ii) in mind. The change in ownership may have triggered a need to recertify SDVOSB status. This would have effected your ability to receive orders under an indefinite delivery contract or to have options exercised because the government would not get credit toward its SDVOSB goals in that circumestance. However, that should not have an effect on the company's ability to perform within scope modifications under the contract.

Share this post


Link to post
Share on other sites

This is getting confusing. So let me try one more thing.....

FAR 19.301 covers recertification. FAR 19.301-2(e) states "A change in size status does not change the terms and conditions of the contract." As the original poster has already stated "Clearly, the company is permitted to complete any active contracts, irrespective of the change in small business status." which is supported by this citation.

My conclusion - There is no need to have the same language as has been referenced for the 8(a) Programas the original poster has posed. If the T&C's of the contract do not change except the indication by novation or otherwise that there is a "new" contractor and that "new" contractor has recertified the rules have been followed, period. As such the existing contract can be modified with the "new" contractor under its unchanged terms and conditions.

Again I would suggest that the SBA person is on a wrong track.

Share this post


Link to post
Share on other sites

Carl, I agree with you. However, to respond properly to the SBA rep, the contractor will need to know the basis for the rep's position.

Share this post


Link to post
Share on other sites

As usual, Joel is right on the mark. Thanks Joel (again) for leading me down the right path.

To answer some of the other questions here:

1) Joel--Yes, 13 CFR 125.29 should be the right reference, 13CFR121.108 is what the SBA referenced...chalk it up to another error of their part.

2) Although the change DID involve remediation of hazardous materials, it was just an extension of remediation that WAS part of the original contract scope.

3) Retreadfed--I'm not sure that 13 CFR 125.15 (e)(1)(ii) applies as it reads "acquires, is acquired by, or merges with another concern". I guess technically it was "acquired by...another concern", the son. But this clause seems to intend to apply to IDIQ-type contracts (with subsequent orders yet to be placed against it) or services contracts with follow-on option years. In our case, it is a single, discrete, competitively bid construction contract.

4) Vern, missed your input on this one.

Thanks to everyone.

Share this post


Link to post
Share on other sites

ohnoudidnt14, I agree 13 CFR 125.15(e)(1)(ii) probably doesn't apply here, but it does apply to more than just IDIQ contracts. It applies to all contracts awarded to small business concerns. It has been implemented in FAR 52.219-28 ( B )(2). Note that all that is required to be recertified by the FAR clause is a contractor's size status, not its status as an SDVO concern. There is no FAR clause that requires an SDVOSB to recertify its veteran ownership. This raises the question as to whether there is a disconnect between 13 CFR 125.15 and FAR 52.219-28.

Share this post


Link to post
Share on other sites

Thanks for the clarification concerning my scope question, ohno. Good luck in resolving your situation.

Share this post


Link to post
Share on other sites
Guest
This topic is now closed to further replies.
Sign in to follow this  

×