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Is this allowed by 52.203-5?

Small company pays Big Company, the current prime contractor, to write a proposal with Small Company as the intended prime.  Small Company will pay a fee to Big Company contingent upon Small Company becoming the awardee, and will also have Big Company as a subcontractor.

My interpretation is yes, it is allowed.

I presume it makes no difference if Big Company hands the proposal to Small Company which then submits it, or if Big Company does the submitting for Small Company.

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Based on what you wrote, Big Company does not seem to be a bona fide agency under FAR 52.203-5, which is defined as "an established commercial or selling agency, maintained by a contractor for the purpose of securing business."  You described Big Company as the incumbent contractor and a prospective subcontractor, rather than "an established commercial or selling agency, maintained by a contractor for the purpose of securing business."

Can you explain your interpretation that it is allowed?

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Is the proposal technical in nature, or does it just amount to furnishing Small Company's product literature?  Which exception to the prohibition on contingent fees are you relying upon?  I guess more to the point, have you reviewed Brian A. Darst, "Sales Commissions & Contingent Fees In Government Contracts," 05 Briefing Papers 10 (September 2005)?

EDIT: If you don't have access to that, take a look at Nash & Cibinic, Formation of Government Contracts, ch. 1, section VII.B.6 (appearing at page 163 of the Third Edition). 

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On ‎2‎/‎28‎/‎2020 at 2:40 PM, lotus said:

I presume it makes no difference if Big Company hands the proposal to Small Company which then submits it, or if Big Company does the submitting for Small Company.

I don't know of any prime that would allow a subcontractor to submit a proposal in the prime's name directly to the Government.

However, toward answering your question, here's what Darst says in the article I referenced above, "Although the lack of contact with Government procurement personnel does not automatically mean that a fee is permitted by 'Covenant Against Contingent Fees,' if there is no contact, either directly or indirectly, there is much less possibility of improperly influencing Government contracting personnel."

EDIT:  The GAO decision quoted here suggests more of a bright line test that, where there is no contact, there can be no violation.

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It is an apparent front. To me it is an obvious front.

If the perspective prime contactor can’t write its own proposal and must rely upon its subcontractor to do that, combined with the fact that the subcontractor is the current prime, then I have huge doubts as to whether the proposed prime contractor would actually be a bona fide prime contractor

The prime contractor is expected to manage and control the project-performing it’s required amount of work, if this is a preferential type solicitation.

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I would not be surprised if the proposal would include management personnel presently working for the current prime contractor. In my experience, the proposal would often have such arrangements, stating that the proposed prime contractor would hire those personnel from the current contractor. 

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1 hour ago, Jacques said:

Thanks @joel hoffman for not limiting your response to the specific question posed.  My response was myopic..

You are welcome. It is something that I would recommend that the OP look further into for advice. 

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14 minutes ago, joel hoffman said:

It is something that I would recommend that the OP, look further into for advice. 

I don't think @lotus works for the Government, so I'm not sure who he would be looking to for advice, but I think the question posed by the OP is probably less important than the concerns you raise.  I would add excessive pass through to the list.

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Good point, Jacques.

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The OP refers to the potential prime as “Small Company” and the subcontractor (who would be receiving the contingent fee) as “Big Company.”  If the acquisition is set aside, another concern would be the ostensible subcontractor rule.  See, e.g., here.  

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Based on what’s been said, I see the subcontractor/prime share of performance rule as key.  Otherwise the described arrangement may be okay.  

I assume this is about an agency recompeting a requirement as a set-aside.  Lots of reasons for that including the existing prime may not be a stellar performer.  If so the existing company needs to do lots of due diligence with the client including finding out where performance is lacking and what things the agency is looking for that’s not being done now as part of the current effort.

Proposal writing and winning requires specialized skills and experience.  Many small business can’t afford acquiring those resources on a permanent basis and resort to paying outside sources.  It’s easy to spend $50,000 on a small to mid-size procurement.  So I can see agreements between companies doing something like paying for proposal writing and a bonus if they win.  

I’m not disagreeing with any posts made so far but saying they be more to the original question to consider.

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I may be off base in reading the comments so far but I wondered as this thread moved on how the All Small Mentor Protege Program, teaming agreement, and joint venture might fit into the OP accomplishing the desired result?  The aforementioned after all are acceptable ways for small and big's to get together, of course with the side boards of the already mentioned  regulations whether the reference is FAR 19 or 13 CFR. And of course there is the fact of whether the OP is in the position of the small or the big.

 Using the aforementioned may in fact address the questions some have raised about the appropriateness of the arrangement beyond 52.204-5.

 

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