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Small Business Committee Request for Status Update on FAR Subcontracting Rule.

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A Member sent me this letter from the House Small Business Committee to the Acting Administrator of the Office of Federal Procurement Policy.  You can find the letter at the bottom of the committee press release.

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Frogs that own small businesses have been hopping mad about the lack of progress on that rule for years. It's mostly SBA's fault, in PepeTheFrog's opinion. 

Congress passed a law that helps small business teaming arrangements ("similarly situated entities") and provides clarity on the murky rules for calculating the limitations on subcontracting percentages or work-shares. Then, nobody can actually use it because there is no FAR clause.

As one frog who is far less famous and fabulous than PepeTheFrog once said, "It's not easy being green."

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"hopping mad" is an understatement! I was finally seeing some progress for the past couple of months but now, like the letter pointed out, they changed it to proposed rule from final rule. Frustrating. There was a cryptic update in the latest open far cases report from yesterday - " 09/25/2018 Proposed FAR rule to FARSEC for preparation of FR notice." whatever that means ! I have been venting about this in a separate thread and I just posted there. Got to admit - that was a very well written by the committee!

 

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On ‎9‎/‎21‎/‎2018 at 2:05 PM, PepeTheFrog said:

nobody can actually use it because there is no FAR clause.

Pepe, have you thought about drafting your own clause and inserting it into a proposal?  Alternatively, have you considered protesting the use of the current Limitation on Subcontracting clause in a proposal?

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No rules go final until the Office of Information Regulatory Affairs (OIRA) say it goes final. If a policy or new rule doesn't track with the current administration's agenda then it doesn't get published. Elections matter.

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No rules go final until the Office of Information Regulatory Affairs (OIRA) say it goes final. 

OIRA is located within the Office of Management and Budget (OMB) which is located within the Executive Office of the President.   

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20 hours ago, Retreadfed said:

Pepe, have you thought about drafting your own clause and inserting it into a proposal?  Alternatively, have you considered protesting the use of the current Limitation on Subcontracting clause in a proposal?

No, but PepeTheFrog likes those ideas. The first is worth a shot.

The second might help for visibility (agencies will see there is GAO bid protest activity surrounding the lack of implementation of the new clause), but PepeTheFrog doubts that GAO will determine that an agency was unreasonable for the using the current clause. GAO does work for Congress, so maybe GAO will turn up the heat on agencies by snitching to Congress about the failure to implement Congress' law.

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Pepe, note that the NDAA made changes to the Small Business Act in regard to limitations on subcontracting.  Thus, the SBA has primary jurisdiction to implement the statutory changes, which it has done.  I would argue that SBA's rules take precedence over what is in the FAR particularly since the FAR Councils have had more than enough time to implement the SBA rules, which is what they are doing.

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Contracting officers have to use the clauses prescribed in the FAR -- they cannot decide to omit or change contract clauses mandated by 48 CFR simply because it seems to them that 13 CFR differs.

Once the FAR Councils and the SBA come to agreement, all will be well.  In the meantime, contracting officers have to follow the FAR, right?  

48 CFR = the FAR; 13 CFR = SBA Regulations.

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FAR 1.602-1(b) "No contract shall be entered into unless the contracting officer ensures that all requirements of law, [which includes the NDAA amendment of the SBA] executive orders, regulations, [which includes 13 CFR] and all other applicable procedures, including clearances and approvals, have been met."  If the contracting officer wants to be safe, (s)he should ask for a deviation.

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8 hours ago, Retreadfed said:

FAR 1.602-1(b) "No contract shall be entered into unless the contracting officer ensures that all requirements of law, [which includes the NDAA amendment of the SBA] executive orders, regulations, [which includes 13 CFR] and all other applicable procedures, including clearances and approvals, have been met."  If the contracting officer wants to be safe, (s)he should ask for a deviation.

Technically, I think the safest thing to do would be to request a deviation. That way, the CO would be compliant with the FAR, the NDAA, and the SBA regulations. However, I don't think it's practical for the contracting officer to ask for a deviation every time they're going to do a small business set-aside. I think a CO should take ji's approach. If someone protests, request a deviation.

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Talk of deviations for this matter is wholly impractical — even absurd.  The onus should not and cannot be on individual contracting officers.  We need reason, not pettifoggery.

This is a matter solely for the FAR councils.  

The GAO and the Congress are already aware of the apparent differences between 48 CFR and 13 CFR.  Every single member of the FAR councils is aware.  Most agency SADBUs are aware, and I have heard none of them call for deviations.  It is foolishness to hope for GAO to sustain a bid protest by recommending that an agency deviate from the FAR.  If the SBA wants resolution, it can use the already-established OMB process for resolving differences among executive branch agencies.

This is a political matter and it will be handled, or not, in political ways.  Anyone upset by the matter and wanting to speed resolution should contact the FAR councils and/or his or her Representative or Senators.  

Until then, contracting officers have to use the clause texts mandated by the FAR.  That’s a reasonable approach.

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2 hours ago, ji20874 said:

Until then, contracting officers have to use the clause texts mandated by the FAR.  That’s a reasonable approach.

I presume you are speaking from the government's perspective.  However, most of the small business contractors with whom I deal would disagree.  In this regard, we need to recognize that this is generally an issue when a small business or 8(a) set aside is used.  The clauses for SDVOSB set asides, FAR 52.219-27(d) and HUBZone set asides, FAR 52.219-3(d), already allow those contractors to make unlimited subcontract awards to similarly situated subcontractors.  However, the method for calculating the 50% requirement is different in those clauses than as required by the NDAA and SBA rules.

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1 hour ago, Retreadfed said:

I presume you are speaking from the government's perspective.  

Certainly, and appropriately.  Contracting officers prepare solicitations, not prospective offerors.  Contracting officers follow the FAR.

Here is a serious question:  Would you advise a small business offeror client, in its offer in response to a set-aside solicitation, to object to the standard FAR set-aside clauses and to condition its offer on the Government's acceptance of substitute set-aside clauses faithfully implementing the 13 CFR and NDAA texts?

7 minutes ago, jwomack said:

That's what class deviations are for.

Class deviations are a matter for agencies and agency heads -- individual contracting officers need not be involved.  If the FAR Councils wanted agencies to issue class deviations on this matter, they could easily instruct agencies to do so (such as was done for all the class deviations being done in civilian agencies on the raising of the micro-purchase and simplified acquisition thresholds).  They haven't.

Really, this is a political matter and it will be handled, or not, in political ways.  Anyone upset by the matter and wanting to speed resolution should contact the FAR councils and/or his or her Representative or Senators.  It is unfair and unreasonable to expect individual contracting officers to solve this problem.

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4 hours ago, ji20874 said:

It is foolishness to hope for GAO to sustain a bid protest by recommending that an agency deviate from the FAR.

The GAO has already opened the door for this in MCS Portable Restroom Service, B-299291, March 28, 2007.  There the GAO sustained a protest that asserted the Air Force had improperly refused to make a sole source award to an SDVOSB concern based on the then current version of FAR 19.1406(a).  In sustaining the protest, GAO stated that "a regulation must be interpreted so as to harmonize with and further and not conflict with the objective of the statute it implements."  The GAO went on to say that "We think the FAR should be read consistent with the SBA statutory and regulatory language."

While MCS did not present  the same facts as here, it does provide a basis for a protest to GAO.  Thus, I do not accept that it is foolishness to file a protest challenging the use of the current Limitation on Subcontracting clause in solicitations.

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How about we just abolish the portion of the SBA that deals with federal contracting policy, and let the FAR Council implement federal statutes that deal with small business contracting? Or do whatever is necessary to delete #2 below?

The way it works now is a bureaucratic disaster.

1. Congress passes a law with the words "contract" and "small business."

2. First, SBA implements the law at Title 13 of the CFR.

3. Then, after SBA implement the law, the FAR Council implements the law and the SBA regulation at Title 48 of the CFR (the FAR), usually resulting in a provision or clause. The FAR Council is stuck, to some degree, with whatever nonsense the SBA cobbled together.

SBA is slow and suspiciously good at writing regulations that (a) provide more jurisdictional or administrative power for SBA and (b) guarantee lucrative business opportunities for ex-SBA officials and (c) perpetuate the need for more SBA employees. SBA suspiciously sucks at writing regulations that are actually good for small businesses (small businesses constantly complain about the complexity and volume of federal regulations). SBA is notorious for writing regulations that have an unreasonably burdensome effect on federal contracting officers. SBA has no skin in the game because they barely spend any money, yet they dictate pivotal small business contracting policy that affects the rest of the federal agencies. 

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2 hours ago, ji20874 said:

The GAO decision in B-299291 did not require or recommend a FAR deviation, or any re-writing of the FAR.

GAO cannot require agencies to do anything, but the COFC and CAFC can.  In any event, read footnote 3 of the decision.  The FAR Councils did amend the FAR based on this decision.

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I wrote about conflicts between the FAR and SBA regulations in the September 2015 Nash & Cibinic Report:

 
Quote

 

Conflicts Between FAR And SBA Regulations: What’s A CO To Do?
In responding to a public comment alleging a conflict between FAR and SBA regulations under FAR Case 2006-032, Small Business Size Representation, 74 Fed. Reg. 11821 (Mar. 19, 2009), the FAR councils stated their position with respect to such conflicts—
The stated purpose of the interim rule is to improve the accuracy of small business size status reporting, at the prime contract level, over the life of certain contracts. Contracting officers under the Executive Branch are required to follow the FAR. In cases where there are inconsistencies between Title 13 (SBA regulations) and Title 48 (FAR) of the Code of Federal Regulations, contracting officers follow the FAR. [Emphasis added.]
This is a questionable position given that both the U.S. Court of Federal Claims and the GAO have viewed the SBA regulations as controlling when they conflict with the FAR. In C & G Excavating, Inc. v. U.S., 32 Fed. Cl. 231 (1994), 36 GC ¶ 599, the court dealt with a FAR rule that limited the scope of SBA review to those areas of responsibility identified as lacking by the CO when considering an application for a COC. The SBA regulations contained no such limitation. In resolving the conflict, the court stated:
With regard to the direct conflict between 13 C.F.R § 125.5(e) and FAR § 19.602–2(a)(2), the court finds that the restrictive language in the FAR concerning the scope of SBA’s site investigation cannot be interpreted to limit the scope of SBA’s general review authority. The clear intendment of 13 C.F.R. § 125.5(e) is that the SBA may perform a site investigation examining all elements of responsibility. This interpretation is consistent with the [Small Business Act] and shall be given deference.
In Adams Industrial Services, Inc., Comp. Gen. Dec. B-280186, 98-2 CPD ¶ 56, 1998 WL 546000, 40 GC ¶ 460, the GAO sustained a protest where the agency, relying on FAR 19.302(j) (48 C.F.R. § 19.302(j) (1998)), argued that size protests received after award had no effect on the award—they only have prospective applicability. The GAO stated:
While FAR Sec. 19.302(j) treats size status protests received after award of a contract as having no applicability to that contract, SBA’s regulations, which we view as controlling in this area, provide that “[a] timely filed protest applies to the procurement in question even though a contracting officer awarded the contract prior to receipt of the protest.”
See also Diagnostic Imaging Technical Education Center, Inc., Comp. Gen. Dec. B-257590, 94-2 CPD ¶ 148, 1994 WL 588043, 36 GC ¶ 609 (timely filed postaward size protest applied to instant award despite FAR stating that decisions on such protests have only prospective applicability).
 
Thus, if a conflict exists between the FAR and the SBA regulations, it seems that a CO would be in the difficult position of having to deviate from the FAR to comply with the law as interpreted by the Court of Federal Claims and GAO. See FAR Subpart 1.4, “Deviations from the FAR.”
 
[...]
 
In C & G Excavating, the Court of Federal Claims stated:
While the parties did not specifically raise this regulatory conflict, and the discrepancy was unnecessary to decide in [Reel–O–Matic Sys., Inc. v. U.S., 16 Cl. Ct. 93, 99 (1989)], the Government has been on notice since 1989, when Reel–O–Matic was decided, that the conflict exists and poses problems. The Government’s regulatory machinery has perpetuated a conflict that should have been resolved to avert future litigation.

 

 
 
Having said that, I don't think its practical or reasonable to require COs to request deviations for every small business set-aside (what ji said).
 
However, if the issue were protested, the GAO and the COFC would likely defer to the SBA regulations to resolve the conflict. But maybe not. In this case, there is a proposed rule in the pipeline to revise the FAR. In the cases I cited above there was a conflict that the FAR Council was ignoring.

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1 hour ago, Don Mansfield said:

However, if the issue were protested, the GAO and the COFC would likely defer to the SBA regulations to resolve the conflict. But maybe not.

And the likely way to get the answer is to file a protest.  Six years is long enough to wait.

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Retreadfed,

  • So, would you advise a small business offeror client, in its offer in response to a set-aside solicitation, to object to the standard FAR set-aside clauses and to condition its offer on the Government's acceptance of substitute set-aside clauses faithfully implementing the 13 CFR and NDAA texts?
  • And, would you advise a small business offeror client to file a protest of the terms of a set-aside solicitation before the date for submission of offers?

Personally, I don't think the GAO would rule in the protestor's favor -- I'm not so sure about COFC.

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15 minutes ago, ji20874 said:

Retreadfed,

  • So, would you advise a small business offeror client, in its offer in response to a set-aside solicitation, to object to the standard FAR set-aside clauses and to condition its offer on the Government's acceptance of substitute set-aside clauses faithfully implementing the 13 CFR and NDAA texts?

No. One must file a protest concerning an objection to the terms of a solicitation before offers are due.  

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16 hours ago, ji20874 said:

So, would you advise a small business offeror client, in its offer in response to a set-aside solicitation, to object to the standard FAR set-aside clauses and to condition its offer on the Government's acceptance of substitute set-aside clauses faithfully implementing the 13 CFR and NDAA texts?

If it was significant to the SB, I would advise the SB to object to the standard clause and to request that the agency negotiate a clause that is consistent with the NDAA and SBA rules.  If the agency refused, I would suggest that the SB then file a protest against the terms of the solicitation which would have to be filed before the time set for receipt of proposals.  Who knows what the GAO or COFC will do?  It's always a crap shoot anytime you go before either.  I have lost on issues that I thought were a slam dunk in my favor and won on what I thought were weak arguments.

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