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Hello, SmallGovCon readers. Our thoughts go out to those effected by the hurricane, this week. We hope you are safe. Some articles we’ve highlighted this week include current trends in the GovCon market and DoD considering a faster acquisition pathway for AI. You can read more about these topics and news from this week in the links below. GSA Unveils List of 100 Apparent Awardees on Polaris IT GWAC Small Business Pool Lawmakers want more time off for service members GovCon Index Registered Consecutive Winning Weeks as Defense Stocks Advanced A new tool to help startups get a foot in the door at the Pentagon While things aren’t as busy, contractors can take this time to get out there for some face time Biden-Harris Administration Announces 6 Contracts to Spur America’s Domestic HALEU Supply Chain as Part of Investing in America Agenda Current trends in the GovCon market A Profile of the Nation’s Hispanic-Owned Businesses DHS issues Hatch Act reminder to federal workers GSA’s emerging tech radar keeping tabs on future needs DoD considers faster acquisition pathway for AI The post SmallGovCon Week in Review: October 7-11, 2024 first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

SBA recently issued a proposed rule purportedly concerning the HUBZone Program and its regulations–but actually, covering a bevy of other discussions and proposed changes relating to size, SBA’s other small business socioeconomic programs, and even teaming. Specifically, regarding teaming, SBA revealed that it has apparently decided to take a deeper look into the immense success of mentor-protégé joint venture teaming. It is also requesting comments on this concern, as well as potential policy changes for joint venturing in SBA programs, more generally. The proposed rule’s commentary says: Specifically, SBA is seeking input on the perception that mentor-protégé joint ventures are winning an inordinate number of orders issued under small business multiple award contracts and seeks suggestions on how to incentivize a more equitable marketplace for individual small businesses who compete against mentor-protégé joint ventures for multiple award, small business contracts. SBA is not off-base, by any means, with its concern that it can be difficult for small businesses to compete with large and small business mentor-protégé teams. But it is a bit surprising to hear this concern posited as an issue with the mentor-protégé teams–rather than the standard encouragement for more small businesses to take advantage of the mentor-protégé program and its joint venture opportunities themselves, which is what we are more used to. SBA did elaborate a bit more on its concerns and why it has directed industry attention to potential policy changes in that regard. It said, “[t]here is also a perception that small businesses often enter joint ventures to seek multiple award contract awards because procuring agency past performance and experience requirements make it difficult for many small businesses to qualify for the awards individually.” SBA also had some potential policy changes to propose for consideration, including whether or not it should eliminate the exception to affiliation for SBA-approved mentors and protégés for multiple award contract vehicles. SBA said: Such a change would continue to allow joint ventures to seek and be awarded single award small business contracts, but would make joint ventures ineligible for multiple award contracts. If that would occur, SBA would expect the past performance and experience required for award of future multiple award contracts to be adjusted to allow individual small businesses to more easily qualify for award. Another potential policy change SBA proposed for consideration would be to more strictly limit the term for which mentor-protégé joint ventures can receive the exception from affiliation–specifically, only allowing the affiliation exception “for contracts or orders that do not exceed five years.” In that regard, SBA said: As SBA has previously stated, SBA believes that a joint venture should not be an on-going entity, but something with limited scope and limited duration. Thus, SBA has limited the duration that a joint venture can submit offers for the award of contracts to two years from the date of its first contract award. SBA is questioning whether a joint venture performing a contract or order that exceeds five years is truly a limited duration entity. Now, because this is technically a HUBZone proposed rule, SBA did bring the HUBZone Program into the conversation a little bit. For qualified HUBZone mentor-protégé joint ventures, SBA is considering how to “clarify the applicability of the HUBZone price evaluation preference to” HUBZone mentor-protégé joint ventures. SBA reiterated what the HUBZone price preference does, stating: Under the HUBZone price evaluation preference, where a procuring agency will award a contract on an unrestricted basis (i.e., full and open competition), the agency must deem the price offered by a certified HUBZone small business concern (including a HUBZone joint venture that complies with the requirements of § 126.616) to be lower than the price offered by an apparent successful large business offeror if the price offered by the certified HUBZone small business concern is not more than 10% higher than the price offered by the large business. SBA then brought up its concern that it may not be “appropriate for a HUBZone mentor-protégé joint venture to benefit from the HUBZone price evaluation preference when the joint venture is already benefitting from its large business mentor’s lower cost structures and pricing.” And yet again, SBA doesn’t just come with a problem, it suggests a solution, stating: SBA is considering whether to propose eliminating the HUBZone price evaluation preference’s applicability to all joint ventures formed under the Mentor-Protégé Program or, alternatively, to offers submitting by a HUBZone joint venture where the mentor exceeds the applicable size standard corresponding to the North American Industry Classification System (NAICS) code assigned to the contract. SBA is also requesting comments and input in that regard. Again, since this was a HUBZone proposed rule, some of these concerns and possible policy changes might sneak up on the unsuspecting government contractor reader (like it did me). So, please make sure to give any input to SBA if you feel strongly about any of these concerns, proposed options for solutions, or maybe other solutions SBA hasn’t thought of yet. SBA says that any of the policy changes described above are to be addressed in a separate proposed rulemaking after it has a chance to address and consider industry input, as well as any testimony from the tribal consultation meeting in that regard. Finally, make sure you keep your eyes open for any subsequent blogs on these topics, as they develop–because you know we will keep you posted on something this significant. Questions about this post? Email us or give us a call at 785-200-8919. Looking for the latest government contracting legal news? Sign up for our free monthly newsletter, and follow us on LinkedIn, Twitter and Facebook. The post Are Mentor-Protégé Joint Ventures Just Too Successful, Asks SBA first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

One of the perks of being certified in any of the SBA’s small business socioeconomic contracting programs is the fact that there is potential for a sole source award. What is a sole source award? Well, it’s a non-competitive award used when there is no expectation that two or more offerors will submit proposals, or using a dollar cap in the 8(a) program. (In this post we’re not talking about other exceptions to competition, such as only one responsible source). We most frequently see them used for contracts made to participants in the 8(a) Small Business Development Program, but the other programs (WOSB, SDVOSB, and HUBZone) have the ability to make sole source awards as well. So, let’s take a look and see what the FAR and SBA rules have to say about sole source awards in each of these programs. 8(a) Sole Source Awards Since the majority of sole source awards are made to 8(a) Program participants, let’s start there. While the 8(a) Program is generally the most difficult SBA socioeconomic program to get into, the standard for giving sole source awards to 8(a) companies is the least restrictive of all the categories. As you will see below, it is easier for contracting officers to give sole source awards to 8(a) Program participants. In fact, the 8(a) regulation in question is written as though sole source awards are the rule, not the exception. 13 C.F.R. § 124.506 states that a solicitation must be competed among 8(a) Program participants if there is a reasonable expectation that at least two eligible 8(a) Program participants will submit offers at a fair market price, the anticipated award price will exceed $7 million for manufacturing NAICS and $4.5 million or less for non-manufacturing NAICS, and the work has not been accepted by SBA as a sole source 8(a) procurement on behalf of a tribally-owned or ANC-owned concern. By looking at the situations in which an 8(a) Program set aside must be competed, we can then determine when a sole source award is permitted. Contracting officers may give 8(a) work to an 8(a) Program participant on a sole source basis if they determine that the 8(a) business is responsible, will do the work at a fair market price, and the estimated cost is $7 million or less for manufacturing NAICS and $4.5 million or less for all others. If the contract is likely to have a greater value, the contracting officer can still give a sole source award if they have no reasonable expectations that two participants will bid and the award can be made at a fair price. WOSB Sole Source Awards WOSB sole source awards are used far less frequently than 8(a) sole source awards. Contracting officers are required to consider sole source awards to WOSBs (or EDWOSBs) before competing a solicitation as a small business set-aside if: The NAICS code assigned to the solicitation is one in which SBA has determined WOSB concerns are underrepresented in federal procurements; There is no reasonable expectation that two or more WOSB/EDWOSB concerns will make offers; The acquisition’s price will not exceed the $7 million/$4.5 million threshold mentioned before; The WOSB/EDWOSB is a responsible contractor; and Award can be made at a fair and reasonable price. Notice how FAR 19.1506 states that they must merely consider doing a WOSB/EDWOSB set aside, and that it is not a requirement. Additionally, the WOSB/EDWOSB must be certified pursuant to 13 C.F.R. § 127.300. This rule does not apply to acquisitions currently being performed under the 8(a) Program, orders under indefinite-delivery contracts, or orders from the Federal Supply Schedules. SDVOSB Sole Source Awards Under FAR § 19.1406, SDVOSB/VOSB sole source awards are similar to WOSB sole source awards in that the contracting officer should consider, but is not required to use, a sole source award when they do not have a reasonable expectation that offers will be received from two or more eligible SDVOSB/VOSBs, the price of the contract does not exceed $7 million/$4 million, the SDVOSB/VOSB is responsible, and the award can be made at a fair and reasonable price. However, the Department of Veteran Affairs has slightly different rules. VAAR 819.7008 states that contracting officers can award SDVOSB sole source awards for VA contracts when: The anticipated award price of the contract (including options) will not exceed $5 million; The requirement is synopsized and the required justification pursuant to FAR 6.302-5(c)(2)(ii) is posted in accordance with FAR part 5; The SDVOSB has been determined to be a responsible contractor with respect to performance; and In the estimation of the contracting officer contract award can be made at a fair and reasonable price that offers best value to the Government. As with 8(a) and WOSB, the SDVOSB/VOSB must be certified as an eligible SDVOSB/VOSB . Additionally, SDVOSB/VOSB sole source awards are subject to the same exclusions described in the WOSB section (acquisitions currently being performed under the 8(a) Program, orders under indefinite-delivery contracts, or orders of the Federal Supply Schedules). HUBZone Sole Source Awards Just like WOSB/EDWOSB and SDVOSB/VOSB sole source awards, FAR 19.1306 states that a contracting officer shall consider a HUBZone sole source award prior to soliciting work as a small business set aside if they have no reasonable expectation of receiving two or more competitive offers from HUBZone concerns, the price will not exceed the $4.5 million/$7 million threshold, the awarded concern is responsible, and award can be made at a fair and reasonable price. Once more, the rule only requires the contracting officer to consider a HUBZone sole source award. There is no requirement that there must be a sole source award. Again, this rule does not apply to acquisitions currently being performed under the 8(a) Program, orders under indefinite-delivery contracts, or orders of the Federal Supply Schedules. The Takeaway So, what is the main difference between 8(a) sole source awards and other socioeconomic set aside sole source awards? It’s the requirement that the contracting officer must have no “reasonable expectation that offers will be received from two or more” concerns for a sole source WOSB/EDWOSB, SDVOSB/VOSB or HUBZone procurement. That’s not a hard barrier to surpass and the presumption thereafter is that the contract will be competed. The 8(a) program does not have similar language. In fact, that language is only found where a procurement is above the $4.5 million line that takes sole sourcing off the board for the other socioeconomic set aside programs. In short, the 8(a) program presumes sole sourcing will be used frequently, while the other programs presume that competition will be the rule. Questions about this post? Email us or give us a call at 785-200-8919. Looking for the latest government contracting legal news? Sign up for our free monthly newsletter, and follow us on LinkedIn, Twitter and Facebook. The post Back to Basics: Small Business Sole Source Awards first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

When it comes to effective communication, the government and industry often get it wrong. Misconceptions and misunderstandings abound and can prove very costly for contractors. In this webinar, government contracts attorneys Nicole Pottroff and John Holtz debunk some of the most common myths and misunderstandings held by contractors, including when and how you can communicate one-on-one with a contracting officer, who has authority to modify your contract, what to do when an unauthorized official gives you instructions, how the government gratuities rules differ from standard commercial practice, and much more. Register here. The post Govology Webinar: October 10, 2024 – Communicating with Government Contracting Officials: What Can (and Should) Contractors Really Say and Do? (2024 Update) first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

Happy Friday and happy October! Please enjoy the Week in Review and read up on some recent updates across government contracting. Some highlights include GSA starting the COMET II contracting process, and new guidelines on AI tool procurement for federal agencies. You can read more about these topics and news from this week in the articles below. Have a great weekend! Carahsoft raid may be a wake up call for the reseller market U.S. Small Business Administration to Host 11th Annual National Veterans Small Business Week Nov. 11-15 Biden-Harris Administration Finalizes Rule to Lower Costs for Small Businesses Labor Department Issues Federal Contractor Minimum Wages for 2025 DoD begins first long-distance moves under contentious multibillion dollar GHC contract New Guides Detail Secure Software Requirements The FAR Council drops a long awaited rule proposal for conflicts of interest How the micro-purchase threshold might get a little less micro Report Calls on GSA to Strengthen Price Analyses in MAS Contracts GSA begins COMET II contracting process White House issues guidance for purchasing AI tools to US agencies The post SmallGovCon Week in Review: Sept. 30-Oct. 4, 2024 first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

The small business rule of two requires agencies to restrict procurements for small businesses when there is a “a reasonable expectation of obtaining offers from two or more responsible small business concerns that are competitive in terms of fair market prices, quality, and delivery.” FAR 19.502-2. Agencies often use market research to assess whether the small business rule of two is met. But what happens when an agency amends its solicitation terms after conducting market research? Can the new terms render the agency’s market research, and therefore its set-aside decision, unreasonable? In a recent decision, GAO concluded that yes, market research may be insufficient to establish a set-aside if an agency amends the solicitation’s terms. In Knudsen Systems, Inc., B-422433.2 (Comp. Gen. Aug. 9, 2024), GAO considered a protester’s challenge to the Navy’s set-aside decision. The protester argued the Navy failed to perform new market research following an amendment to the terms of the solicitation, making the old market research insufficient to establish that at least two small business concerns could meet the amended solicitation’s requirements. The initial solicitation sought proposals for SONAR equipment. The market research report found that two or more small businesses had been identified as being capable of meeting the requirements and issued the initial request for proposals (RFP) as a total small business set-aside under NAICS code 334511. The RFP did not include FAR clause 52.219-33 Nonmanufacturer Rule (read more about this rule here). Rather, the RFP stated that SBA had issued a nonmanufacturer rule class waiver for NAICS code 334511. Knudsen Systems Inc. (KSI), a woman-owned small business, submitted a proposal that explained its intention to use SONAR equipment manufactured in Canada. A few months later, the Navy discovered that the class waiver rule in the RFP did not apply to the SONAR sounding sets being procured, and the solicitation should have included the nonmanufacturer rule. Since KSI did not comply with the nonmanufacturer rule, it was no longer eligible for award. KSI filed a GAO protest stating that its ineligibility based on the FAR nonmanufacturer rule clause was inconsistent with the terms of the solicitation. The Navy then amended solicitation to remove the class waiver and include the FAR nonmanufacturer rule clause. No further market research was conducted, and the solicitation remained a total small business set-aside. KSI protested, arguing the market research previously conducted did not establish that at least two small businesses could satisfy the amended terms of the solicitation. Therefore, the solicitation should have been listed as full and open competition. In response, the Navy argued it was “under no obligation to revisit its market research in light of the addition of the nonmanufacturing rule through amendment” and further argued that “it is not necessary for an agency to redo its market research regarding the ‘rule of two’ should the agency later become aware that ‘only one responsible small business offer will be received in response to amended solicitation.’” GAO disagreed because the Navy “did not properly comply with the rule of two analysis in making the initial set-aside decision because its market research failed to consider whether prospective small business offerors could comply with the nonmanufacturing rule.” In other words, the earlier market research was flawed as it didn’t look at an important aspect of a small business set-aside under the nonmanufacturer rule. GAO sustained the protest and ultimately concluded, We find that the Navy’s market research was insufficient to conclude that the agency would receive offers from at least two responsible small business concerns that could meet the requirements of the solicitation at a fair market price. For this reason, the agency’s decision to restrict the solicitation to small businesses was unreasonable. Contractors should be aware of this ruling in reviewing an agency’s set-aside decision. Was the market research based on a proper review of small business rules? Did the small business situation change due to an amendment to the solicitation? In such a case, a protest may well be in order. Questions about this post? Email us or give us a call at 785-200-8919. Looking for the latest government contracting legal news? Sign up here for our free monthly newsletter, and follow us on LinkedIn, Twitter and Facebook. The post GAO: Small Business Rule of Two Must be based on Accurate Market Research first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

The Indian Country Business Summit (ICBS) is hosting its annual “Diversity in Government Contracting” ICBSSHOW in Oklahoma City this month. And our very own Gregory Weber will be attending and presenting on federal contracting legal updates. Legal updates is always a great presentation. So, please stop by our table to say hello or if any questions come up after the presentation. The ICBSSHOW offers informational sessions featuring experts in government procurement, connection and networking opportunities, and a day of matchmaking to introduce you and your business to government decision makers. It also provides invaluable access to government agency buyers and policy leaders, prime contractors, and tribal procurement representatives looking to expand their vendor pools. If you are attending, please stop by our table and say hello. The post Conference Announcement: ICBS Show, Oklahoma City, October 7-9, 2024 first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

We are excited to announce that Annie Birney has joined the firm and will also be a regular SmallGovCon contributor! She is a recent graduate of the University of Kansas School of Law. You can read her full biography here. Annie was very accomplished during her law school days, including plenty of practical experience. This included assisting with tax preparation services for the Volunteer Income Tax Assistance program. Additionally, Annie participated in the Elder Law Field Placement Program where she assisted with document preparation for estate planning. Prior to law school, Annie attended the University of Arkansas in Fayetteville, Arkansas, where she received her B.A. in Journalism. In her spare time, Annie can be found spending time with her family, friends and her dog, Sir Bruiser and is an avid fan of the KU Jayhawks, especially during basketball season. We are excited to have Annie join our team here at SmallGovCon and Koprince McCall Pottroff LLC! The post Annie Birney Joins Koprince McCall Pottroff LLC as Associate Attorney and SmallGovCon Contributor! first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

Happy Friday and happy fall! We hope you had a productive week and are looking forward to the weekend. The federal government contractors have been quite busy wrapping things up at the end of this fiscal year and preparing for a new one to begin. We hope everything is “falling” into place. Have a great weekend! This week in federal government contracting news looked at a new CR, cloud procurement requirements, and another push towards category management. OPM asks agencies to review 2024 special salary rates Army’s demand for GenAI surging, with focus on integration GAO Looks Into Agencies’ Compliance With OMB’s Cloud Procurement Requirements Congress has a 3-month CR, but it’s not all good news for contractors State Dept transforming procurement with category management, streamlined processes FBI raids government IT and cyber contractor Carahsoft SAP faces probe in the US over alleged price fixing in government contracts Western Global Airlines to pay $84K to resolve gender wage discrimination alleged in federal review GAO pushes forward on intelligent automation to improve cybersecurity, CX Federal Contractors: Actions Needed to Improve Quality of Performance and Integrity Data Virginia-Based Defense Contractor To Pay $2.25 Million Fine for Bribery Conspiracy Highway Contractor to Pay $950,000 to Settle False Claims Act Allegations The post SmallGovCon Week in Review: September 23-27, 2024 first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

In a proposed rule in August of 2024, SBA has unveiled a brand new regulation related specifically to recertification of size and status. A frequent question of federal contractors is whether they can continue to be small, or maintain a specific socio-economic status (i.e., WOSB, SDVOSB etc.) after a change in ownership or business structure. The SBA’s size and status recertification standards are currently found in multiple places: the size determination timing regulations, each socio-economic status regulation, and of course in case law. But this would presumably create a one stop shop for size recertification questions, while also changing some of the long relied-upon standards. This SBA proposed rule has created quite a buzz among federal contracting. In fact, we alone have blogged about it multiple times in the past few weeks: Overview of HUBZone changes and SBA Changes (including the regulation discussed further here); Joint Venture Past Performance; 8(a) Program Changes; Mentor-Protégé Program Changes; and a two part examination of HUBZone Changes (Part 1 and Part 2). Now we will examine in more detail the new proposed size and status recertification regulation. As explained in our first blog on this proposed rule, the SBA is proposing a new regulation that will contain both size recertification and small business program status recertification standards. Currently, contractors must look at each specific socioeconomic program’s regulations to determine standards around status recertification. And, for size recertification, contractors would have to wade through the SBA regulation regarding when size of a business is determined, and its accompanying case law (such as this case we blogged on regarding size under a GSA schedule). SBA now wants to change this as well as some of the recertification standards themselves. SBA, in the proposed rule, notes the widespread confusion, and frankly frustration, with its current piecemeal size and status recertification standards. SBA also has taken issue with the applicable case law, (such as the one mentioned above that we blogged on). SBA in response states “the rules regarding recertification should be the same for size and status, across all SBA small business government contracting and business development programs.” Through this new regulation, SBA is trying to create that kind of uniformity, but may actually produce more issues for small businesses. New 13 C.F.R. § 125.12 The new proposed regulation, 13 C.F.R. § 125.12, sets forth disqualifying size events, which would render a business “ineligible for future set-aside or reserved awards, including awards of set-aside or reserved orders against pre-existing unrestricted or set-aside multiple award contracts” if it causes the business to be other than small. Right off the bat, when reading the proposed regulation, in section (a) the SBA would require a size and status recertification “within 30 calendar days of an approved novation, merger, acquisition, or sale, including agreements in principle, of or by a concern or an affiliate of the concern, which results in a change in controlling interest.” As you may note, there is not an exception to this for GSA schedule contracts or other contracts, which is in contrast to many SBA OHA cases. This recertification applies to recipients of small business contracts, and if in a JV, “from any partner to the joint venture that has merged or is party to the sale or acquisition” Next, the regulation at section (b) re-affirms the need to recertify size and status on long-term contracts within 120 days of the end of the fifth year of the contract (the so-called five year required recertification). The contracting officer however may “request size and/or status” as they deem appropriate “prior to the 120-day point in the fifth year of a long-term contract or order.” So, a Contracting Officer could trigger this required recertification outside of the 120 day window, so long as it is the fifth year of the contract. The regulation then further confirms that the other commonly known required recertification that could effect the ability to bid as a small business (or a certain status) is when the solicitation for an order or agreement (such as a BPA) explicitly asks for such re-certification. The regulation additionally carves out an exception to these required recertifications if a company that is “at least 51% owned by an Indian Tribe, Alaska Native Corporation, or Community Development Corporation changes to or from a wholly-owned business concern of the same entity, as long as the ultimate owner remains that entity.” These recertifications in sections (a) and (b) sort of set up the new standard of required recertifications which can affect whether a business can bid as small business or not (referred to as “disqualifying recertifications” in the proposed regulation). The regulation then includes a section about the effects of a disqualifying recertification, which contains what to do if an event in (a) and/or (b) occurs within 180 days of a bid. The proposed regulation then states that if a business is disqualified from bidding as a small business due to a CO’s explicit request for recertification, the business is then unable to bid on that specific order, but “remains eligible for other set aside or reserved awards and unrestricted awards.” So generally, a specific CO requested recertification would have a limited negative effect. However, any other required recertification would have much deeper impact. If a business is found as other than small as part of a required recertification, or no longer the applicable socio-economic status, that business will be “ineligible to submit an offer for a set aside or reserved award under a multiple award contract after the triggering event occurs.” SBA also summarized this update as follows: “when the requirement for recertification is triggered, the date to determine size shifts to a date that coincides with either the triggering event or the date of initial offer for a particular award.” So a contractor would not be able to bid on any set-aside after that event. For a single award contract, if a disqualifying recertification occurs, that contractor can still receive options for that contract, the agency simply can’t count that option towards its small business goals. However, the proposed regulation makes it clear that such options would not be given to disqualified contractors on a multiple award small business contracts. Finally, the regulation specifically addresses a question many contractors face, how does a joint venture recertify? The SBA’s proposed regulation states that for a joint venture, it can recertify as small if “all parties to the joint venture qualify as small at the time of recertification, or the protégé small business in a still active mentor-protege joint venture qualifies as small at the time of recertification” and that recertifications of size can still occur more than two years after the joint venture’s first award. Of note, the SBA proposes that to recertify as small, the joint venture formed under an MPA must still have an active MPA, even though there are likely situations in which a mentor-protege joint venture is performing under a contract and the MPA expires while the joint venture is performing. The SBA appears to be trying to make a proverbial one stop shop for size and status recertifications, but this attempt may create more confusion. The SBA’s displeasure with the SBA OHA and GAO decisions related to when size is determined is well noted in the long line of cases, but through this regulation SBA upends lines of cases and practice that contractors have come to rely on. SBA, through this proposed regulation does of course confirm some already existing size and status recertification events (i.e., the five year recertification and explicit CO request), but in updating the effect also risks small business participation by seemingly punishing small businesses for their success during contracts, especially when that success comes with an acquisition by another company. This proposed rule seems to especially impact mentor-protégé joint ventures, who would under the proposed rule have to seemingly time their MPA approval and duration with any sort of contract award. For example, if a mentor-protégé joint venture is finally awarded its first multiple award contract towards the end of its MPA, it could have very limited small business opportunities on that contract as the MPA is soon to expire, which would now be a requirement for the joint venture to be seen as small. This proposed rule also hampers the ability for many small businesses on GSA schedule contracts to conduct any sort of novation, or structure change. While well-intentioned, this proposed rule seems to provide more confusion in an effort to be efficient. This is simply a proposed rule, so it is not final yet, and comments are open until October 7, 2024. If you have questions about your business’ size, or status, please reach out to a federal contracting attorney, such as ourselves. Questions about this post? Email us. Need legal assistance? Call us at 785-200-8919. Looking for the latest government contracting legal news? Sign up here for our free monthly newsletter, and follow us on LinkedIn, Twitter and Facebook. The post SBA Proposed Rule: New Size and Status Recertification Standard first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

Back in 2023, we wrote about Congress’s late-2022 mandate to update and clarify various rules surrounding organizational conflicts of interest (or OCIs). At that time, Congress, in a short piece of legislation, asked that OCI rules be updated to address a number of areas. In this post, I’ll provide some predictions about how the OCI rules will be updated, as we wait for the new proposed rule to come out. In addition, I’m discussing this topic at the Judicial Conference for the U.S. Court of Federal Claims. Once the proposed rule is released, SmallGovCon will also do a run-through of those changes. The OCI statute The Preventing Organizational Conflicts of Interest in Federal Acquisition Act was made effective on December 27, 2022. The entire law, however, was less than two pages. It focused on a few key aspects: Examples. Congress would really like the FAR to focus on additional examples Definitions. the FAR must update “definitions related to specific types of organizational conflicts of interest, including unequal access to information, impaired objectivity, and biased ground rules.” OCI Disclosures and Procedures. New rules were requested to “update such procedures as needed to address agency-specific conflict of interest issues.” As well as add more procedures to require contractors “to disclose information relevant to potential organizational conflicts of interest.” Private Sector. The law specifically required “an example of the awarding by a Federal regulatory agency of a contract for consulting services to a contractor if employees of the contractor performing work under such contract are permitted by the contractor to simultaneously perform work under a contract for a private sector client under the regulatory purview of such agency.” Professional Standards. One other specific update was for the new rules to “take into consideration professional standards and procedures to prevent organizational conflicts of interest to which an offeror or contractor is subject.” Existing OCI Rules There are three main categories of OCIs: Unequal access to information. An “offeror has access to non-public information (including proprietary information and non-public source selection sensitive information) that may provide the offeror with a competitive advantage in a competition for a different government contract.” Trace Sys. Inc. v. United States, 165 Fed. Cl. 44, 58 (2023). Biased ground rules. A company, “by participating in the process of setting procurement ground rules, ha[s] special knowledge of the agency’s future requirements that may skew the competition in its favor.” Turner Const. Co., 645 F.3d 1377 (Fed. Cir. 2011). Impaired objectivity. A contractor is tasked with “evaluat[ing] its own offers for products or services, or those of a competitor.” And it does so “without proper safeguards to ensure objectivity to protect the Government’s interests.” FAR 9.505-3. The terms are not not all expressly used in the FAR, but have developed under case law as categories of examples related to the FAR language. Congress has encouraged the FAR to be updated with more examples related to each category. So we should see more examples related to each of these categories. The current examples are skewed toward biased ground rules, but based on recent decisions, the unequal access to information category is much more common. The cases often involve a former government official who leaves to work for a federal contractor bidding with that agency. Predictions for New Rules The FAR Council has drafted rules and they are currently in the internal review process. The Open FAR Cases report indicates the following status: 09/19/2024 Draft proposed FAR rule from FAR analyst to CAAC Legal. CAAC Legal reviewing.” While Congress gave the FAR council until June 27, 2024, by my calculations, the actual proposed rules are not out yet. The FAR Council could undertake Congress’s mandate in different ways. After all, the entire law is less than two pages. So, it definitely leaves some gaps to fill. However, the Act also had some very specific mandates regarding the private sector, and some more general requirements to update both definitions and examples. Here are some ways in which the FAR Council might implement these updates. Definitions. This one could be as simple as incorporating definitions of the various categories of OCIs from existing case law. Those definitions are not currently spelled out in the OCI regulations. More Procedures. The FAR council has indicated that each agency should address OCI procedures for its own agency. The Act agencies to “update such procedures as needed to address agency-specific conflict of interest issues.” Therefore, we are less likely to see agency rules as part of the FAR proposed rules. Private Sector. The current examples in FAR 9.508 don’t address the specific issue of work involving a “private sector client.” However, FAR 9.508 does have an example about a situation where a contractor is developing a licensing system for an agency and then advises private sector clients on that same system. That example refers to a contractor helping to “develop a system for evaluating and processing license applications.” One likely update is that agency OCI solicitation clauses will now specifically require disclosure and mitigation of potential conflicts involving private sector clients. And there should be additional examples dealing with this type of scenario, as the current examples only refer to a specific licensing situation. This update would likely have a larger impact on those federal contractors that also work commonly with private sector clients, or that have affiliated companies that work with private sector clients. Mitigation plans and approaches will have to expand to cover wider areas of conflicts involving private clients. Solicitation clauses should be updated to require contractors to address private sector potential conflicts. Professional Standards. Current FAR 9.506 simply commands contracting officers to review OCIs, but with little guidance for agencies. The FAR does mention reviewing “Non-Government sources [such as] publications and commercial services, such as credit rating services, trade and financial journals, and business directories and registers.” But this is different than professionals standards and procedures. While it’s hard to know exactly what Congress is referring to, it could mean professional standards such as those established by industry groups including public accounting rules. Those standards are already applicable to review of certain financial statements for publicly traded companies under 17 C.F.R. § 210.10-01. Other sources of standards could include business standards, legal, IT, and other professional groups. Will the proposed rule specifically list examples, or will it leave it up to federal contractors to address how professional standards fit into their OCI mitigations plans? Stay tuned to SmallGovCon as we will provide a run through of the new proposed OCI rules once those are released. Questions about this post? Email us. Need legal assistance? call at 785-200-8919. Looking for the latest government contracting legal news? Sign up for our free monthly newsletter, and follow us on LinkedIn, Twitter and Facebook. The post Predictions: Upcoming Rules on Conflicts of Interest first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

Most of SBA’s socioeconomic programs (woman-owned small business, veteran-owned small business, HUBZone) have a requirement for the contractor to go through a recertification process, or program examination, every three years. 8(a) Participants have an annual review process, so they are reviewed even more frequently. But between these routine program recertifications, there is a possibility that the SBA will choose to perform an additional program examination to “verify the accuracy” of certification. And, as one SDVOSB firm found out, failing to cooperate with these interim program examinations can lead to decertification—a fate that no small business wants to risk. In the case of McLellan Integrated Professional Services, LLC, the appellant, McLellan, suffered such a fate when it failed to respond to the SBA’s program examination. The SBA certified McLellan for a 3-year period in July 2023. However, the letter that approved McLellan as an SDVOSB contained a provision that stated, “SBA may conduct a program examination at your office or work site during your certification period to verify the accuracy of your certification.” Such a program examination is permitted by 13 C.F.R. § 128.308. And SDVOSBs are required to respond to any program examination by 13 C.F.R. § 128.306. On April 10, 2024, McLellan was notified that it had been selected for a program examination. Accordingly, the SBA requested that McLellan provide responses and documentation that would confirm its SDVOSB eligibility. Having received no response, SBA followed-up on its request twelve days after the initial request. Finally, still not having heard from McLellan, SBA contacted them again on April 30, 2024. This final attempt at communication included a warning that participants are required to respond to any program examination initiated by the SBA to remain a certified VOSB or SDVOSB. SBA warned that if it did not receive a response by the deadline provided, SBA would be permitted to draw an adverse inference from the failure to cooperate, which could eventually result in decertification. On May 9, 2024, SBA gave McLellan one last chance to respond to, which it failed to do, and McLellan was decertified on June 14. SBA’s Office of Hearings and Appeals even gave McLellan a chance to submit relevant information while the appeal was pending, but the company failed to do so. On June 24, 2024, ten days after the decertification occurred, the appeal challenging SBA’s decision was filed. According to McLellan, it received the initial program examination of April 10. McLellan also claimed that it submitted responses to the SBA on May 20. But, it explained, McLellan had changed its address in 2023 and did not notify the SBA. Further, McLellan admitted that its response only included an answer to one of the ten questions asked in the program examination. On appeal, the appellant bears the burden of proving that the decertification is clearly erroneous. And, in this instance, the appellant failed to do so. OHA noted that McLellan attempted to cure the deficiency by claiming that it had responded with the May 20 response. But there was no evidence, provided by either the company or the SBA, that showed such a response occurred. Therefore, McLellan had failed to cooperate with a program examination which was the basis for decertification. And, even if it had submitted the response on May 20, nine of the ten questions were unanswered and therefore deficient, again creating means for decertification. So, what are the key takeaways here? Respond—fully—to all communications from the SBA. And keep good records. The facts in the case here are a bit hazy, but had the appellant responded fully to each of the ten questions posed by the SBA and if it had been able to produce documentation proving it had done so, it could have possibly been saved from being decertified. The SBA programs have their own program examination regulations, and all of them permit the SBA to conduct program examinations at any time after the concern submits its application, during the processing of the application, and at any time while the concern is a certified HUBZone, SDVOSB/VOSB, or WOSB/EDWOSB. The 8(a) Program has its own annual certification process but rest assured that you will be shown the exit of the 8(a) Program if you ignore that as well. Be sure to update any address change with the SBA. If the firm here had done so, it may have received all communications from the SBA, which could have also reduced the possibility of decertification. And, just in case you were wondering, if an SDVOSB is decertified, it can apply for re-certification “no sooner than 90 calendar days from the date of final agency decision … if it believes that is has overcome all of the reasons for denial or decertification and is currently eligible.” 13 C.F.R. § 128.305. Questions about this post? Email us. Need legal assistance? Call us at 785-200-8919. Looking for the latest government contracting legal news? Sign up here for our free monthly newsletter, and follow us on LinkedIn, Twitter and Facebook. The post OHA Reminder: Don’t ignore Program Examination Questions from SBA . . . or Else first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

For small businesses and their teammates, few topics in government contracting are as confusing as the limitations on subcontracting for set-aside and socioeconomic sole source contracts. And if that isn’t stressful enough, the “LoS” is an area with heavy potential penalties if a contractor gets it wrong. The nonmanufacturer rule is the flip side of the LoS, but for supply contracts in the federal government contracting realm. It is also one we encounter quite often in our role assisting federal contractors. In this course, Greg Weber and I will help you make sense of the limitations on subcontracting and nonmanufacturer rule. Using a step-by-step process and plenty of examples to help bring the rules to life will help you ensure that you understand and comply with these essential rules. We hope you will join us at 10:00 am MDT on October 1. Register here. The post Webinar Event! October 1, 2024 – Limitations on Subcontracting and the Nonmanufacturing Rule hosted by Texas El Paso APEX Accelerators first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

Happy Friday! There has been a flurry of activity here at SmallGovCon, as the government’s fiscal year is ending this month. In the evolving landscape of federal contracting, one needs to stay on top of recent developments. Here are some key ones. The U.S. Small Business Administration is set to implement new rules for mentor-protégé arrangements. I had the privilege of being interviewed by Tom Temin of the Federal News Network on these new mentor-protégé rules and potential ones on the horizon from SBA. You can read the full transcript below. We hope you have a great weekend! New rules coming for small business contractor mentor-protégé arrangements US Department of Labor recovers $77K for 5 employees denied prevailing wages at federally funded construction project in Massachusetts FACT SHEET: Biden-⁠Harris Administration Announces $1.3 Billion in Additional Funding and a Record of Over $17 Billion in Total Support for Historically Black Colleges and Universities (HBCUs) Department of Defense & Department of Commerce Joint Statement: Announcement in Support of the Manufacture of Microelectronics and Advanced Semiconductors for National Security Contractors prepare for appropriations to run out in two weeks Regulation changes & other issues in contracting Isabel Casillas Guzman, Lina Khan on SBA & FTC Small Business Competition Efforts What Contractors Should Know About CMMC INVESTING IN AMERICA: U.S. Department of Transportation Highlights Generational Wealth-Building Opportunities for Small, Minority- and Women-Owned Businesses on National Tour Penn State to pay $703K, enter into conciliation agreement to resolve gender pay discrimination affecting 65 employees Key procurement priorities at GSA Clarification to HUBZone Program Updates and Clarifications and Potential Reforms South Carolina Residents Ordered to Pay $50,000 Fine and More Than $400,000 in Restitution Following Their Conviction in “Rent-A-Vet” Construction Fraud Scheme Targeting the United States Department of Veterans Affairs The post SmallGovCon Week in Review: September 16-20, 2024 first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

Very recently, we went through some more of the potential changes to the HUBZone Program from SBA’s proposed rule from August 23, 2024. In this post, we will look at the remaining proposed changes. SBA’s proposed rule would change HUBZone protests appeals, principal office requirements (which we did discuss a bit before here), HUBZone map concepts, and the HUBZone price evaluation preference (PEP). Protests and Interested Party HUBZone status protests, like 8(a), WOSB/EDWOSB, and VOSB/SDVOSB status protests, can only be brought by SBA, the contracting officer for the procurement, or interested parties (essentially other bidders), per 13 C.F.R. § 126.800. Currently, any offeror on a HUBZone set-aside can bring a HUBZone protest, per 13 C.F.R. § 126.103. As the regulation is written, it doesn’t specify that the offeror has to actually be eligible for the set-aside. As such, SBA wants to change it so that only HUBZone parties can be interested parties for the purposes of a protest. In other words, only other HUBZone businesses could protest another HUBZone company’s HUBZone status. The change would still allow protests by other bidders in an unrestricted procurement where the PEP would affect the award decision as well. We think this only makes sense, and really should just clarify what should have been in the regulation in the first place. Another proposed update is for 13 C.F.R. § 126.801. With this change, the protest would focus on the HUBZone company’s status at the time of offer, in light of the proposed change that HUBZone firms must be eligible for award at the time of offer, which we discussed in our last post on this rule. Further, similar to size protests, 13 C.F.R. § 126.803 would provide that “if a concern does not provide information requested by SBA within the allotted time provided, or if it submits incomplete information, SBA may draw an adverse inference and presume that the information that the applicant failed to provide would demonstrate ineligibility and sustain the protest on that basis.” Principal Office SBA’s rules would require additional showing for conducting work at the principal office. In addition, it “would require firms to provide a lease that commenced at least 30 days prior to the date of SBA’s review and ends at least 60 days after the date of SBA’s review.” This change is one where we think some revisions should be made with the language. The idea is fine, but as written, it could cause issues, since it requires that the company provide an active lease. It would make sense to require either that the lease have begun 30 days prior to the review or 60 days after, as that would eliminate short-term leases (Which it appears is what SBA is concerned about). As currently proposed, this would mean that if a company’s lease renewal just happened to begin either less than 30 days prior the date or review or the company’s current lease happened to expire less than 60 days after the date of review, that contractor would be ineligible for HUBZone status, regardless of if that contractor’s principal office had been located at that location for decades. The proposed rule would also implement updates to the long-term investment rule under 13 C.F.R. § 126.200, which states that firms that “make long-term investments in qualifying HUBZones” can “maintain their principal office for up to 10 years and continue to be considered to meet the principal office requirement even if the area loses its HUBZone designation.” One change would say that the 10-year period “starts to run on the firm’s HUBZone certification date (if the investment was made prior to the firm’s certification) or on the firm’s recertification date that follows the execution of the lease or deed (if the investment was made after the firm’s certification).” As an example, if a firm was certified on May 1, 2020, and purchased a building on December 1, 2020, the 10-year clock would start when the firm recertifies prior to May 1, 2023.” But only certain zones get this treatment, “a firm is not eligible to take advantage of the long-term investment provision if its principal office is in a Redesignated Area or a Qualified Disaster Area at the time of the investment.” This language brings some clarity on the 10-year period which we think was greatly needed. One additional thing to note, however: a residence will not work for this long-term investment rule. Maps SBA proposes to add 13 C.F.R. § 126.105 as a new regulation. Under this regulation, “Qualified Census Tracts and Qualified Non-Metropolitan Counties will be updated every 5 years.” This change essentially just incorporates the statutory requirement that SBA update the same on every five years. Furthermore, “Redesignated Areas will be added to the HUBZone Map when areas cease to be designated as Qualified Census Tracts or Qualified Non-Metropolitan Counties, in accordance with the 5-year cycle, and will expire after 3 years.” In other words, once added to the map, the Redesignated Area would then expire three years later. Ownership Changes SBA is seeking to update the rule about updates from ownership or related changes by modifying 13 C.F.R. § 126.501. What SBA wants to add is, to be sure, already current policy for SBA, but this will codify things. The “proposed rule would provide that a certified HUBZone small business concern that acquires, is acquired by, or merges with another business entity must provide evidence to SBA, within 30 calendar days of the transaction becoming final, that the concern continues to meet the HUBZone eligibility requirements.” We imagine that, if the only thing that changes for a company is ownership and those new owners are U.S. citizens, this shouldn’t cause too much trouble for the company. But, it is worth being aware of nonetheless if this proposed rule is put into effect. In addition, SBA wants to make it so that the above regulation provides that a company that “that is performing a HUBZone contract and fails to ‘attempt to maintain’ the minimum employee HUBZone residency requirement must notify SBA notify SBA via email . . . within 30 calendar days.” This is an area that was unclear in the current regulations, and would impose additional mandate on a HUBZone company to inform SBA quickly if it’s no longer meeting the attempt to maintain requirements. In a practical sense, this basically only applies when a company’s workforce is made up of less than 20% HUBZone residents or is below the 35% mark after the first year. It is hard to see a company both not making a good faith effort to get to 35% and acknowledging the same, although the regulation would apply all the same in such a case. PEP (Price Evaluation Preference) Finally, we look at proposed changes to the HUBZone PEP. Here, SBA is seeking to add clarity in 13 C.F.R. § 126.613. The rule would add examples to show how “a non-HUBZone small business concern is not affected by the application of the HUBZone PEP where such non-HUBZone small business is not the lowest offeror prior to the application of the preference.” It is important to note here, and this is the current rule: The price preference only comes into play where the lowest, responsive, responsible offeror for an unrestricted contract is a large business. As SBA notes: “This is because the HUBZone PEP is intended neither to harm nor to benefit a non-HUBZone small business.” Thus, “a contracting officer should not apply the HUBZone PEP where the lowest, responsive, responsible offeror is a small business concern, even if a large business concern submitted an offer.” Further, for clarification, for best value procurements, the agency must “first apply the 10% price preference to the offers of any large businesses and then determine which offeror represents the best value to the Government.” Summary As we noted in our last post, SBA really is looking to tighten its grip on the reins of the HUBZone program. Many of the changes discussed in this post are more clarifications than anything, but some of them show that HUBZone will be stricter going forward. Comments on these changes must be received by October 7, 2024, so if you wish to get a comment in, now is the time to do so. Questions about this post or need legal assistance? Email us here. Looking for the latest government contracting legal news? Sign up for our free monthly newsletter, and follow us on LinkedIn, Twitter and Facebook The post Rezoning (Part 2): Updates to the HUBZone Program first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

Happy Friday the 13th! We hope you have a good week. This week has been busy in the federal government contracting world with multiple developments highlighting key areas of government procurement, spending transparency, and small business support. There are updates on a new federal spending bill, but also concerns about a shutdown, something contractors will be watching closely. You can read more about these topics in the articles below. Have a great weekend and be careful out there today on Friday the 13th! Audit of the Federal Bureau of Investigation’s Contract for Ballistics Research Assistant Services Civilian Agencies Projected to Set Procurement Record for FY24 A bill with the potential to improve federal spending transparency What You Should Know About NGA’s $700M AI Contract Opportunity GSA announces new political appointees, promotions Contractors handicap the possibility of a government shutdown IRS Supervisor Pleads Guilty To Accepting Bribes From A Government Subcontractor A revised and expanded guide for de-risking government technology projects OMB guidance on federal AI acquisition coming soon Isabel Casillas Guzmán Wants to Boost Businesses for All Americans Speaker Johnson postpones vote on a bill to avoid a partial government shutdown Small Business Size Standards: Revised Size Standards Methodology The post SmallGovCon Week in Review: September 9-13, 2024 first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

A few weeks ago, SBA released a proposed rule that would, among other things, modify the HUBZone program. We took a look at some of these changes when the proposals were released. As we promised in that post, we stated we were going to discuss some other aspects of the proposed rule in later posts. Today, we’ll be looking at some of the other changes that SBA is proposing for the HUBZone program, as there’s a lot. In this post, we’ll be focusing on other changes to how HUBZone employees are determined, new rules on certification and decertification, and changes to the “attempt to maintain” rule with regards to maintaining 35% HUBZone resident workforce. Some of these changes reflect a stricter approach from SBA that contractors should be on the lookout for. Employees As we noted in that earlier post, SBA wants to increase the requirement that HUBZone employees work a minimum of 40 hours per month to 80 hours per month. In addition to this, it seeks further changes to 13 C.F.R. § 126.200. The proposed rule would eliminate in-kind employees, meaning the rule would eliminate the provision that “that someone receiving in-kind compensation may be considered an employee.” SBA feels the provisions simply isn’t being utilized. The proposed rule also would clarify that individuals obtained “from a concern primarily engaged in leasing employees” (emphasis added) are generally considered employees. So, just leasing employees from any other company would not work, it must be from an employee leasing company. Those aren’t the only proposed changes. One important proposed change concerns the legacy employee rule, which we have briefly discussed before. The rule would clarify that a “Legacy HUBZone Employee is an individual who: (a) resided in a HUBZone (other than a Redesignated Area) for at least 90 days preceding, and 180 days following, the concern’s HUBZone certification date or most recent recertification date, and (b) remains an employee at the time of the concern’s current recertification date.” An individual who resides in a Redesignated Area will not count once they move out of that area. However, if the area was originally a regular HUBZone when that individual resided there, the fact it later became a Redesignated Area will not be an issue: They can still be a legacy employee. The second, and even more important change, is a proposed limit on the number of legacy employees. SBA seeks to limit HUBZone companies to having one legacy employee at a time. This could have a major impact for many companies whose employees have benefited from company growth so much they were able to move elsewhere. SBA also noted it is considering whether the legacy employee rule should have a time limit. Finally, SBA wants to codify one of its current practices. It notes: “The proposed rule would clarify the existing requirement that an individual must be performing work for the concern in order to be considered an employee for HUBZone purposes. This proposed rule would provide that in order to ensure that an individual is performing work for the business concern, SBA may request a combination of job descriptions, resumes, detailed timesheets, sample work product and other relevant documentation.” This means SBA can ask for all sorts of details about the employees, beyond the basic job title and description. Decertification and Certification Again, SBA is seeking to change up the HUBZone program significantly. The biggest change could be a challenge for many firms to deal with. A “proposed § 126.601(a) would require a firm to be both a certified HUBZone small business and one that continues to be eligible as of the date of its offer for a HUBZone contract. In light of this change, the rule also proposes to amend § 126.500 to require firms to recertify to SBA every three years, rather than annually.” Further, “[t]he proposed rule would clarify that an offeror on a competitively awarded HUBZone contract need not be eligible on the date of award of such contract.” However, for a sole-source HUBZone contract, “a firm must be HUBZone-certified at the time of award.” Further, pending applications won’t cut it to make an offer. So, “unlike the WOSB Program, a firm cannot submit an offer on HUBZone contract while its application is still pending.” On the one hand, HUBZone firms wouldn’t have to do recertification every year, which would certainly be less burdensome for those firms. On the other hand, firms would now have to make sure they are compliant with the HUBZone eligibility requirements each time they submit an offer on a HUBZone set-aside (or where the price evaluation preference applies), instead of being able to just rely on their certification. This would greatly affect HUBZone protests. This rule change would make the program more like the WOSB and SDVOSB programs, but for those programs, eligibility depends more on static things like ownership and company control. With HUBZone, eligibility depends primarily on workforce makeup. That is something that can be hard for companies to completely control. One thing that could benefit a number of businesses is a change to 13 C.F.R. § 126.309 for reapplying when your firm has been decertified. SBA “would keep the 90-day wait period for firms whose application has been declined, but would eliminate that wait period for firms that have been decertified.” So, a firm that was denied certification would have to wait to reapply, but a firm that was decertified would not have to wait to reapply. “Given how many small businesses are being affected by the expiration of the Redesignated Areas—whether as a result of its principal office no longer being located in a HUBZone or employees no longer residing in a HUBZone—SBA believes it is best to eliminate the waiting period that currently applies after decertification.” Attempt to Maintain SBA is also seeking to make the “attempt to maintain” rule stricter. We discussed this rule a bit in a previous post. As SBA puts it, the current rule means “a HUBZone firm can have less than 35% HUBZone residents at the time of its annual recertification if the firm is performing a HUBZone contract. This means that a firm being awarded HUBZone contracts in essence never has to demonstrate that it is employing at least 35% HUBZone residents.” SBA no longer likes this and thinks a grace period or ramp up is the better approach. As such, SBA now proposes that the grace period be 12 months following the award of a HUBZone contract. In other words, “a HUBZone firm that was awarded a HUBZone contract during the year preceding its recertification date would have to represent that, at the time of its recertification, it is attempting to maintain compliance with the 35% HUBZone residency requirement and the concern’s principal office is located in a HUBZone.” The firm must meet the 20% minimum in the first year after contract award and 35% on each certification date after the first year. When it comes to its reasoning, SBA stated: “SBA does not believe that the 35% HUBZone residency requirement should be watered down to as low as 20% over the course of a firm’s participation in the HUBZone program merely because a HUBZone small business concern received one or more HUBZone contracts. However, SBA also believes that it must give some meaning to the ‘attempt to maintain’ statutory language, which is why allowing a firm to drop below the 35% residency requirement (but no lower than 20%) for a year makes sense to SBA.” So, the 20% floor will stay in place if you have won a HUBZone contract in the last year. SBA welcomes comment on all these proposals, so we encourage contractors to get their comments in. The Federal Register site for the proposed rule has a place where you can submit comments. Summary Looking at the proposed changes, SBA is definitely moving towards a stricter implementation of the HUBZone program. While some of the proposed changes place less of a burden on HUBZone firms, most appear to be additional requirements. SBA has, in recent years, indicated it has great concern about what it feels is significant abuse of the HUBZone program. It is clearly trying to address this concern with these proposed rules. We think this is understandable, but we also think SBA may want to take a close look at these proposed changes to be sure they don’t throw out the baby with the bathwater. We will further have another post coming up soon to go over the other proposed changes to the HUBZone program. Questions about this post? Email us. Need legal assistance? Call us at 785-200-8919. Looking for the latest government contracting legal news? Sign up for our free monthly newsletter, and follow us on LinkedIn, Twitter and Facebook. The post Rezoning (Part 1): A Look at SBA’s Proposed Changes to the HUBZone Program first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

In August, the Small Business Administration issued a proposed rule that was packed to the brim with changes to many of the SBA’s small business contracting programs. We’ve mentioned a few of the changes in prior blog posts. Gregory Weber, discussed potential changes to the SBA’s 8(a) Business Development Program that may result in more relaxed requirements. While Shane McCall, recently took a deep dive into proposed changes to past performance requirements for joint ventures. Today, we will focus on a two additional proposed changes to the SBA’s Small Business Mentor-Protégé Program. Can a non-profit entity be a mentor? The first proposed revision addressed by this particular blog post looks at whether a non-profit entity is permitted to be the mentor in an SBA-approved mentor-protégé agreement. As the proposed rule states, the introductory language to 13 C.F.R. § 125.9(b) provides that a mentor only needs to be a concern that can demonstrate a commitment and the ability to assist small business concerns. But there has been some confusion. Reading the rule, it doesn’t seem to explicitly rule out non-profit entities as mentors. At least, not clearly. However, if you are familiar with other SBA rules, a “concern” is specifically “a business entity organized for profit per 13 C.F.R. § 121.105(a)(1). Therefore, a mentor must be for-profit because a mentor must be a “concern.” Following that reasoning, the proposed rule update will ensure that the definition for “mentor,” found at 13 C.F.R. § 125.9(b) explicitly states that a mentor must be a for-profit business. If the proposed rule goes into effect, 13 C.F.R. § 125.9(b) will then state: Mentors. Any for-profit business concern that demonstrates a commitment and the ability to assist small business concerns may act as a mentor and receive benefits as set forth in this section. This includes other than small businesses. How long can a protégé be a protégé? The next change proposes that the rule regarding the time limit for a protégé to be in a mentor-protégé relationship be relocated within 13 C.F.R. § 125.9 and helps to clarify a misunderstanding regarding the time that a protégé may be a protégé. Currently, 13 C.F.R. § 125.9(e)(6) states: A protégé may generally have a total of two mentor-protégé agreements with different mentors. (i) Each mentor-protégé agreement may last for no more than six years, as set forth in paragraph (e)(5) of this section. … (iv) Instead of having a six-year mentor-protégé relationship with two separate mentors, a protégé may elect to extend or renew a mentor-protégé relationship with the same mentor for a second six-year term. In order for SBA to approve an extension or renewal of a mentor-protégé relationship with the same mentor, the mentor must commit to providing additional business development assistance to the protégé. As mentioned, the SBA proposes that 13 C.F.R. § 125.9(e)(6) be redesignated to be located in the protégé-specific provisions as 13 C.F.R. § 125.9(c)(4). Further, the SBA believes that there has been some confusion regarding the time limit that protégé firms may be the protégé in an SBA-approved mentor-protégé arrangement. The proposed rule would add clarifying language to the new 13 C.F.R. § 125.9(c)(4)(iv) to make clear that a concern cannot be a protégé for a total of more than 12 years. The SBA stated: There has been some confusion that if a protégé elects to extend its mentor-protégé relationship with the same mentor for an additional six-year period that the protégé could somehow be able to participate in the mentor-protégé program as a protégé for more than 12 years. To dispel any possible contrary interpretation, the proposed rule would specify that a firm could be a protégé for up to 12 years, whether the concern has a mentor-protégé relationship with two different mentors or the same mentor for second six-year period. Therefore, the proposed new 13 C.F.R. § 125.9(c)(4)(iv) will state: Instead of having a six-year mentor-protégé relationship with two separate mentors, a protégé may seek to extend or renew a mentor-protégé relationship with the same mentor for a second six-year term. In order for SBA to approve an extension or renewal of a mentor-protégé relationship with the same mentor, the mentor must commit to providing additional business development assistance to the protégé. Whether a protégé has a mentor-protégé relationship with two different mentors or the same mentor for a second six-year period, a concern cannot be a protégé for a total of more than 12 years. Thus, a protégé can only be a protégé for a total of 12 years, regardless of whether all 12 years are with the same mentor, or if there are two six-year terms with different mentors. What rights does a protégé have if its mentor is acquired? Currently, the rules allow a mentor to have more than three protégés when it purchases another mentor and commits to honoring the obligations under the seller’s mentor-protégé relationship. But there is no avenue that allows the protégé of that relationship to have any recourse, or even choice, in that same situation. As SBA notes in the proposed rule, sometimes things just don’t work out for a number of reasons, and the protégé of the acquired firm should not be required to continue the mentor-protégé relationship with the “new” mentor if it will not benefit the protégé. After all, the primary benefactor of the Mentor-Protégé Program is intended to be the protégé. This rule proposes that a new provision be created to allow the protégé to have a voice in whether it wants to continue the mentor-protégé relationship. If the “new” mentor does not have the capability to fulfill the requirements of the existing mentor-protégé agreement, and the protégé does not want to continue that relationship, the protégé would be permitted to either negotiate a revised mentor-protégé agreement with the purchasing firm or terminate the relationship if the protégé believes the purchasing firm is not a good fit. However, SBA emphasizes that this new rule would only be applicable where the “new” mentor cannot fulfill the existing mentor-protégé agreement. And, when the mentor-protégé relationship will continue after the acquisition, any revisions made to the existing mentor-protégé agreement must be approved of by the SBA. The rule allows the protégé to enter into a new mentor-protégé relationship if the agreement is terminated, but that relationship will be limited to a duration “not to exceed six years minus the length of the mentor-protégé relationship with the former mentor.” SBA notes the possibility of a situation where “the initial or selling mentor may be a contract holder as a joint venture with a protégé on the same multiple award contract where the acquiring mentor is also a contract holder as a joint venture with its protégé.” And, as you may or may not know, 13 C.F.R. § 125.9(b)(3)(i) states that “a mentor with more than one protégé cannot submit competing offers in response to a solicitation for a specific procurement through separate joint ventures with different protégés.” But what happens if the acquiring firm’s mentor-protégé joint venture and the acquired firm’s mentor-protégé joint venture are both awardees on the same multiple award contract? In a situation like the one directly above, the mentor would have the ability to dictate which mentor-protégé joint venture would pursue which solicitation, in opposition to the benefit of a protégé. Therefore, the proposed rule would require the mentor to exit one of the conflicting joint venture relationships. SBA recognizes that this may harm the protégé from the joint venture that the mentor exits. To alleviate any harm, the new rule would provide a couple of options for the protégé. Permit the protégé to seek to acquire the new mentor’s interest in the underlying multiple award contract and work with the contracting officer to determine whether novation of such contract to itself would be appropriate; or The protégé may seek to replace the new mentor with another business in the joint venture such that the revised joint venture continues to qualify as small. Finally, the proposed rule would add a new § 125.9(d)(1)(iv) which would “give a protégé firm a right of first refusal to purchase a mentor’s interest in a mentor-protégé joint venture where the mentor seeks to sell its interest in the joint venture. *** To sum things up: A non-profit entity may not be a mentor in an SBA-approved mentor-protégé agreement; and Protégés are limited to 12 years as a protégé and one 12-year long mentor-protégé relationship counts just like two six-year mentor-protégé relationships, so choose your mentor wisely. Protégés of acquired mentors will be permitted to terminate the mentor-protégé relationship when the acquiring mentor cannot fulfill the terms of the mentor-protégé agreement. If a mentor ends up with two mentor-protégé joint ventures that are both awardees on the same multiple award contract, the mentor will be required to terminate one of the relationships. Remember: These rules are only proposed at this point in time. If you would like to submit comments to the SBA regarding these changes, or any others in this proposed rule, you can do so until October 7, 2024. Questions about this post? Or need help with a government contracting legal issue? Email us. Looking for the latest government contracting legal news? Sign up for our free monthly newsletter, and follow us on LinkedIn, Twitter and Facebook. The post SBA Proposed Rule Clarifies Mentor-Protégé Misunderstandings first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

The Buy Indian Act is a law that gives contracting preference to companies owned by Native American tribes. This law has been on the books for a century and it seems to be finally getting some teeth through regulatory changes and updates. This webinar, presented by myself and Nicole Pottroff will discuss the Buy Indian Act, as well as other rules and regulations that provide advantages to tribal entities. Hope you can join us! Register here. The post Govology Webinar: September 19, 2024 – The Buy Indian Act: Regulatory Updates and Their Implications for Tribal-Owned Businesses first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

It’s Friday and it’s time for our week in review. We hope you had a wonderful Labor Day and were able to enjoy some time with friends and family. Now it is time to transition into fall and football season which we are very excited about here at SmallGovCon! We hope you have a great weekend. This week in federal government contracting news saw some interesting storis about IT and cyber security, the feds avoiding fraud payments, and a potential boost for WOSB contracts. SOCOM cuts years out of some SBIR phase 3 awards Army set to require SBOMs for new software by early next year Government backs record number of clean energy projects Contractors, Agencies Enter Final Procurement Stretch DoD to add more providers, streamline contracting for JWCC Army’s Doug Bush Signs Memo to Require Software Bills of Materials in Related Contracts Treasury avoids paying $4B to fraudsters this year in ‘whole of government’ strategy The Army tests whether sustainable building materials have lasting value SBA Veterans Small Business Advisory Committees Set to Host Quarterly Public Meetings on Sept. 10 and 12 Major agencies are close to meeting September zero trust deadline, federal CIO says Another FTC rule is in trouble, at least industry hopes so CIA looks to fast track AI adoption through cloud contract Spanberger-backed bill would boost federal contracts for women-owned small businesses The post SmallGovCon Week in Review: September 2-6, 2024 first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

The SBA recently dropped a large proposed rule that it grouped mainly under the HUBZone program, but actually touches on almost every SBA socioeconomic certification. So, it should come as no surprise that the SBA’s 8(a) Program is facing some potential changes based on this proposed rule. There are quite a few proposed updates to the 8(a) Program. We wanted cover just a few that really stood out to us here at SmallGovCon. Be sure to review the whole rule if you want to comment on any of these 8(a) changes. We have already covered some of the HUBZone changes, and other SBA changes, proposed in the proposed rule here. I suggest you take a look at that post, but the proposed changes to the 8(a) Program are also quite important to review. In that recent proposed rule the SBA has put forth many changes to the 8(a) Program, with these changes affecting eligibility, applications, and ownership. Below are just some of the changes that stood out to us: Ownership SBA has seemingly realized that inconsistent standards among programs leads to confusion for many contractors. In the rule, SBA notes that the ownership regulations related to Partnerships in the 8(a) Program, WOSB, and SDVOSB programs are not consistent program to program. SBA now states it will take action to “harmonize the provisions so that a firm simultaneously applying to be certified in more than one program must meet the same requirements.” Specifically, changes will be made to “ownership requirements for partnership to be identical for the 8(a) BD, WOSB and VetCert programs.” Presumably, this will help contractors who qualify for multiple programs, more easily stay compliant with all the different regulatory requirements. Additionally, many 8(a) Program contractors have likely looked at selling portions of their company and ran into roadblocks imposed by regulations. Currently, the regulation states that a non-disadvantaged individual or another business “in the same or similar line of business” generally cannot own more than a 10% interest in a 8(a) Program business that is in the developmental stage or more than a 20% interest in an 8(a) Program business in the transitional stage of the 8(a) program. SBA now proposes to up those percentages to 20% and 30% respectively. This should give contractors more leeway to take on new ownership from other 8(a) Program participants, or a contractor in their same industry. On top of this, SBA also is updating some of the requirement for receiving prior SBA approval for an ownership change. The regulation at section (i)(2) currently lists three exceptions and four examples to the requirement of gaining SBA’s prior approval of a change in ownership. This regulation will now be updated to require prior approval “where a non-disadvantaged individual owns more than a 30 percent interest in the 8(a) Participant either before or after the transaction” to be consistent with the percentage updates discussed above. Also, SBA is adding a fourth exception to SBA’s prior approval of an ownership change. This new fourth proposed exception would be: “SBA approval is not required where the 8(a) Participant has never received an 8(a) contract.” Once again, SBA is seemingly trying to make ownership changes less burdensome on 8(a) Program participants. Primary Industry A major part of the 8(a) Program application process is showing income for two years in the company’s “primary industry.” Primary Industry is a defined term in the 8(a) Program, and as such can be somewhat restricting for applicants. The current regulation states that a contractor applying for the 8(a) Program must show “income tax returns for each of the two previous tax years” that contain “operating revenues” in the contractor’s “primary industry.” SBA now proposes that applicants simply supply “income tax returns for each of the two previous tax years” must” which “show operating revenues.” SBA pointed out that often tax returns are not descriptive enough to meet that requirement. So, if this rule is finalized, a contractor would then just have to show they have been operating for the previous two years, which is much less high a hurdle. This would eliminate what a lot of applicants have faced–having to get a letter from their accountant showing that the NAICS code listed on the tax return was incorrect. Good Character The 8(a) Program regulation also currently requires the SBA to review any contractor who applies to the program to determine if the company and all of its “principals” possess “good character.” In the proposed rule, SBA notes that for other programs (WOSB and SDVOSB), SBA does not do a “good character” review. But because the 8(a) Program is special in it developing contractors, SBA is wanting to keep some form of good character review. Thus, SBA is proposing limiting the grounds that “would serve as an automatic, mandatory bar from participation” in the 8(a) Program. SBA plans to remove the automatic bar from participation related to “possible criminal conduct” and change the “lack of business integrity” to “lack of business integrity as demonstrated by conduct that could be grounds for suspension or department.” SBA discussed different studies about the difficulty of employment for individuals with previous convictions, and how entrepreneurship can be a way out of that cycle. SBA argues that changes such as this will help increase the federal government’s ability to meet its small business contracting goals. Reapplication Finally, one of the biggest hurdles contractors may face when trying to get into the 8(a) Program is that under the regulations, if a contractor’s application to the 8(a) Program is officially denied, they have to wait 90 days to re-apply; and if that contractor was denied three times in 18 months, that contractor must wait a whole year to re-apply after that third denial. While not getting rid of the 90 day waiting period, SBA has stated that it plans to get rid of that year long waiting period, as “[n]o other program has such a restriction and SBA does not seek to thwart firms who have made legitimate attempts to overcome deficiencies from again applying” to the 8(a) Program. These are but a portion of the changes to the 8(a) Program that SBA is proposing, and the proposed rule hits on changes to many SBA programs. So while we may circle back to this proposed rule in a later post, we strongly recommend that contractors take a read of the proposed rule. Since it is a proposed rule, there is still time to submit your comments on all the different changes proposed. Comments will be accepted until October 7, 2024. When it comes to the 8(a) Program, the changes discussed here seem to indicate that the SBA wants to: 1) make the 8(a) Program fall more into line with its other programs; 2) encourage more applicants to the 8(a) Program; and 3) grant more flexibility to current participants. This indicates quite a contractor-friendly shift by SBA to the 8(a) Program, which has faced its own well documented outside challenges over the past few years. Of course, the 8(a) Program still remains quite complicated. So, make sure to check out our 8(a) Program toolkit for more of our thoughts about the 8(a) Program. And of course, if you find yourself with legal questions about the 8(a) Program, make sure to reach out to a federal government contract attorney, such as ourselves. Questions about this post? Or need help with a government contracting legal issue? Email us. Looking for the latest government contracting legal news? Sign up for our free monthly newsletter, and follow us on LinkedIn, Twitter and Facebook. The post SBA Proposed Rule: SBA Plans to Relax 8(a) Program Restrictions first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

Happy Friday! In this week in review, we have included some noteworthy articles including the Small Business Administration’s (SBA) proposed rule with significant updates to the HUBZone program and other SBA rules. We dive into this proposal here. Other updates include the Defense Logistics Agency (DLA) enhancing its mentor-protégé program and dealing with the end of the fiscal year. You can read more about these changes and other federal contracting news in the articles below. We hope you have a wonderful long Labor Day weekend! Enjoy! News Flash: SBA Issues Proposed Rule with HUBZone and Small Business Changes FedRAMP has a permanent director for first time in 3 years DLA’s mentor-protégé program to help small businesses with contracting, technical processes Time for contractors to deal with the fiscal year-end DoD set to start ramping up new military moving contract Army preps rollout of new continuous ATO approach for software Intelligence community sparks new efforts to deepen ties with private sector Big or small business, ‘this’ type of federal contractor does the best job Submission for OMB Review; Federal Acquisition Regulation Part 47: Transportation Requirements HUBZone Program Updates and Clarifications, and Clarifications to Other Small Business Programs SBA Administrator Announces $1 Million for Grant Awardees to Expand Resources for Veteran Entrepreneurs GSA taps TMF, USDS alum as new FedRAMP director The post SmallGovCon Week in Review: August 26-30, 2024 first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

How agencies evaluate past performance of joint ventures has been a somewhat confusing topic for federal contractors over the past few years. We’ve written about many of the key aspects of the evolution of this rule on SmallGovCon, from the earlier final rule to recent decisions interpreting that rule. The proposed rule would clarify how SBA thinks agencies should review past performance for joint ventures, but it also invites comment from contractors. This is an area where input from the federal contracting community could really have an impact on the final version of SBA’s rule. First, a little background on the current rule. The version of the rule dealing with joint venture past performance went into effect in November 2020. That rule currently states: When evaluating the capabilities, past performance, experience, business systems and certifications of an entity submitting an offer for a contract set aside or reserved for small business as a joint venture established pursuant to this section, a procuring activity must consider work done and qualifications held individually by each partner to the joint venture as well as any work done by the joint venture itself previously. A procuring activity may not require the protégé firm to individually meet the same evaluation or responsibility criteria as that required of other offerors generally. The partners to the joint venture in the aggregate must demonstrate the past performance, experience, business systems and certifications necessary to perform the contract. 13 CFR 125.8(e). As we’ve discussed, agencies could vary on how each agency qualitatively considers each venturers’ qualifications and experience on each contract. The rule did not specify how the agency must count the work that each venturer (not in a mentor-protégé relationship) brings to the table. In some cases, an agency might give more evaluation credit to joint ventures where both venturers bring relevant experience and capabilities to the table. In a recent GAO case, for example, GAO noted that SBA regulations simply require agencies to “consider the work and qualifications of the individual members of the MPJV as well as the MPJV, itself, and provides that ‘partners to the joint venture in the aggregate must demonstrate the past performance, experience, business systems and certifications necessary to perform the contract.’” GAO interpreted the updated terms as providing mentor-protégé joint ventures with flexibility, through the ability to “replace any experience project from the protégé or the MPJV with one from the mentor or a subcontractor–while still providing details about the protégé’s capabilities.” The SBA federal register commentary specifically mentions the Court of Federal Claims case SH Synergy, LLC v. United States, 165 Fed. Cl. 745 (2023). We wrote about that case here, noting that the judge looked at the primary experience projects that each offeror had to submit and all all offerors were required to submit primary relevant experience projects with the same contract value: $10M. With an even application, protégés would be harmed if they were required to submit the same size project as a large offeror. Therefore, because the solicitation assigned points in the same manner to all offerors, the solicitation violated § 125.8(e). And, in the end, COFC agreed, and required GSA to amend the solicitation to be in compliance with § 125.8(e). SBA looked at how agencies, GAO, and courts have interpreted the requirement for agencies to consider past performance of joint venturer members. Cases such as SH Synergy have “caused some confusion as to what past performance a procuring activity can require of a protégé joint venture partner and how that past performance should be evaluated.” SBA noted that, because of the 40% workshare requirement for a protege member of a joint venture, “some procuring activities require protégé joint venture partners to demonstrate some level of past performance as part of a joint venture’s offer.” SBA continued: “Although SBA’s current regulation provides that a procuring activity may not require the protégé firm to individually meet the same evaluation or responsibility criteria as that required of other offerors generally, it does not provide guidance on what a procuring activity could require. This rule proposes to provide such guidance.” So, SBA is proposing that the agency can “require some past performance at a dollar level below what would be required of joint venture mentor partners or of individual offerors.” SBA provides an example: The procuring activity may require a protégé joint venture partner to demonstrate one or two contracts valued at $10 million or $8 million, but may not require the protégé to demonstrate successful performance on five similar contracts and may not require the protégé to demonstrate successful performance on contracts valued at $20 million. In addition, if a procuring activity requires a protégé joint venture partner to demonstrate successful performance on two contracts valued at $10 million or more, successful performance by the protégé firm on those $10 million contracts shall be rated equivalently to successful performance by the mentor partner to the joint venture or any other individual offeror on $20 million contracts. The rule proposes to remove the language in 125.8(e) that currently states: “A procuring activity may not require the protégé firm to individually meet the same evaluation or responsibility criteria as that required of other offerors generally.” In its place, the rule would expand on this concept by using this language: “A procuring activity has discretion whether to require a protégé member of a joint venture to demonstrate some level of past performance and/or experience. Where it does so, the procuring activity may not require a protégé firm to individually meet all the same evaluation or responsibility criteria as that required of other offerors generally.” Therefore, this language would make clear that the agency can’t require the protege member of the joint venture to meet the same past performance or experience requirement as the mentor or offers generally. It also seems to say that an agency can require no protege experience, and that is acceptable. The example is a little confusing. Does it mean the value of the experience project must be 50% or less than the minimum value? Also, does it mean total number of projects is capped at 40% of the total needed? Or, is the SBA merely provided an example of what might be acceptable but leaving interpretation up to later decisions? This is a good start, but a little more clarity would be welcomed. Please remember to comment on this issue on or before October 7, 2024. Questions about this post? Or need help with a government contracting legal issue? Email us. Looking for the latest government contracting legal news? Sign up for our free monthly newsletter, and follow us on LinkedIn, Twitter and Facebook. The post SBA Proposed Rule: Joint Venture Past Performance first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

The SBA has issued a new proposed rule addressing both the Historically Underutilized Business Zone (HUBZone) Program and other small business updates. It is titled: “HUBZone Program Updates and Clarifications, and Clarifications to Other Small Business Programs.” In this post, we’ll provide an overview of some of the main highlights of the proposed rule, and will do a deeper dive on some aspects of the regulation in later posts. The proposed rule was published on August 23, 2024 with comments due October 7, 2024. The rule is designed to “clarify and improve policies surrounding some of those changes” made in the 2019 comprehensive revision to the HUBZone Program regulations, which we discussed here. Here are a few main items addressed in the proposed rule. Clarify HUBZone rules addressed in the 2019 changes. The rule will “require any certified HUBZone small business to be eligible as of the date of offer for any HUBZone contract.” The rule will bring uniformity to recertification requirements and “delete the program specific recertification requirements contained separately in SBA’s size, 8(a) BD, HUBZone, WOSB, and VetCert and move them to a new section that would cover all size and status recertification requirements.” HUBZone Clarifications The 2019 changes to the HUBZone program were the largest in 20 years. As we noted back then, some of the big changes detailed in these earlier posts are: Annual recertification of HUBZone status, rather than at time of bid and award. A minimum threshold for attempting to maintain compliance with the requirement that at least 35 percent of a concern’s employees reside within a HUBZone. SBA will impose a presumption that, if the HUBZone’s employee residency drops below 20 percent, the HUBZone will have failed to use its best efforts to comply. HUBZone small businesses will be able to keep counting employees that formerly resided in a HUBZone toward the required totals for the 35 percent residency requirement, even if those employees move out of a HUBZone. SBA, in this proposed rule, is incorporating some of the guidance and FAQs it is has issued over the years. In addition, “SBA is proposing to amend the definition of the term “employee” by raising the minimum number of work hours necessary for an individual to count as an employee for HUBZone program purposes.” Employee Hours and Work. The “proposed rule would increase the number of hours that an individual must work to be considered an employee for HUBZone purposes to 80 hours per month. Under SBA’s current regulations, an employee is defined as an individual “employed on a full-time, part-time, or other basis, so long as that individual works a minimum of 40 hours during the four-week period immediately prior to the relevant date of review . . .” 13 CFR 126.103.” This would double the hours needed to maintain employee status. Along the same lines, the “proposed rule would provide that in order to ensure that an individual is performing work for the business concern, SBA may request a combination of job descriptions, resumes, detailed timesheets, sample work product and other relevant documentation.” Principal Office. Among other proposed changes is one to “clarify the requirement that a firm must conduct business from the location identified as the firm’s principal office and may be required to demonstrate that it is doing so by providing documentation such as photos and/or providing a live or virtual walk-through of the space.” And “a virtual office (or other location where a firm only receives mail and/or occasionally performs business) does not qualify as a principal office.” In addition, “SBA proposes to allow 100% of a firm’s employees to telework, but where that occurs would require the firm to have 51% of its employees reside in a HUBZone instead of the normal 35%.” Another change is the principal office rule, and “the proposed rule would provide that a firm is not eligible for this provision if its principal office is owner-occupied ( e.g., a location that also serves as a residence). In such a case, SBA does not believe that the investment in the HUBZone was primarily to develop a certified HUBZone small business.” HUBZone Date of Eligibility SBA is again proposing a big change to timing of eligibility. The 2019 changes, if you recall, required annual recertification of HUBZone status, rather than at time of bid and award. So, it got rid of the eligibility check at time of offer. SBA would reverse some of this change and have an eligibility check at time of offer. “The proposed rule would revise §§ 126.500 and 126.601 to eliminate the one-year certification rule and instead require firms to be eligible on the date of offer for HUBZone contracts and only recertify once every three years.” “Under the current rules, once a firm annually recertifies its HUBZone status, it generally can submit offers for HUBZone contracts for one year without being required to meet the 35% HUBZone residency and principal office requirements at the time of offer.” SBA is worried about the annual recertification: SBA believes that the current process can permit abuses that were not intended for the program. A firm could hire one or more individuals who reside in a HUBZone for four weeks prior to its application for certification and immediately dismiss those individuals from its employ after becoming certified and be eligible throughout the year for HUBZone contracts. Similarly, a firm could again re-hire one or more individuals who reside in a HUBZone for four weeks prior to its certification anniversary date and immediately release those individuals after the certification anniversary date and be eligible for additional HUBZone contracts for another year. The proposed rule would focus on time of offer: “As long as a firm is eligible as of the date of its offer for a competitively awarded HUBZone contract, it will be eligible for award. This is similar to the size requirement where a firm must also be small on the date of its offer but may grow to be other than small between the date of its offer and the date of award.” SBA would also clarify that “a concern is only eligible to submit offers for HUBZone contracts after SBA has formally approved its application and updated DSBS (or successor system) showing that the concern is a certified HUBZone small business concern.” In other words, a pending application won’t cut it, unlike the WOSB program. SBA Certification Rules Negative Control. The rule would create negative control provisions that are consistent across SBA’s various socioeconomic set-aside programs: size, 8(a) Program, HUBZone, WOSB, and VetCert. “The negative control provision states that a concern may be deemed controlled by, and therefore affiliated with, a minority shareholder that has the ability to prevent a quorum or otherwise block action by the board of directors or shareholders.” As one example, the SBA would take the 5 extraordinary circumstances found in the SDVOSB rules, and apply those across the board for all small businesses as exceptions to a finding of negative control. This means that a minority investor would be able to have veto power over certain actions and not worry about affiliation because of that veto power. These circumstances are: “(1) adding a new equity stakeholder; (2) dissolution of the company; (3) sale of the company or all assets of the company; (4) the merger of the company; (5) the company declaring bankruptcy; and . . . amendment of the company’s governance documents to remove the shareholder’s authority to block any of (1) through (5).” These exceptions would be added to the 8(a) and WOSB programs as well. This would be a big change to the WOSB and 8(a) program rules, and give minority investors more rights when investing in these companies. It will also help with uniformity across the various programs. Recertification. SBA would create a new section 125.12 that would contain both size recertification and small business program status recertification. Before, they had been addressed in the sections for each particular program: parts 121 for size, 124 for 8(a) Program, 126 for HUBZone, 127 for WOSB, and 128 for SDVOSB. “SBA believes that the rules regarding recertification should be the same for size and status, across all SBA small business government contracting and business development programs.” SBA notes some aspects of its recertification rules that were unclear in the current regulations. “A concern that has recertified as other than small or other than a qualified program participant still may receive orders or agreements issued under a single award small business contract or agreement or unrestricted orders issued under an unrestricted multiple award contract.” “Conversely, for a multiple award small business set-aside or reserve, a concern that recertified as other than small or other than the required small business program would be ineligible to receive options.” SBA has taken issue with how OHA has interpreted the effect of recertification under SBA programs: [I]f a concern recertifies as other than small following a merger, sale, or acquisition, the concern may remain eligible for future set-aside orders under an unrestricted multiple award contract, but not provide goaling credit. See Size Appeal of Saalex Corp. d/b/a Saalex Solutions, Inc., SBA No. SIZ-6274 at 11 (2024). This was not SBA’s intended interpretation of a size recertification following a merger, sale, or acquisition, or following the requirement to recertify size in the fifth year of a long-term contract. Instead, SBA’s intent was that: Any disqualifying size or status recertification precipitated by § 125.12(a) or § 125.12(b) . . . renders a concern ineligible for future set-aside or reserved awards, including awards of set-aside or reserved orders against pre-existing unrestricted or set-aside multiple award contracts. Additionally, in support of this interpretation, SBA proposes to allow requests for size determinations following any size recertification made in §§ 125.12(a) and (b) as well as those is requested by a contracting officer as set forth in § 125.12(c). This is actually a big change that could allow for additional size and status protests throughout the lifetime of a multiple award contract, assuming this rule becomes final. * * * There are many smaller changes contained in this proposed rule. After all, its text runs to 175 pages. Be sure to review this rule and we at SmallGovCon will continue to dig into it more and highlight some of these other changes. In addition, remember that this is a proposed rule and SBA is welcoming comments. In our experience, SBA will routinely change or remove rules if enough commenters have legitimate questions. Questions about this post? Email us. Need legal assistance? Call us at 785-200-8919. Looking for the latest government contracting legal news? Sign up for our free monthly newsletter, and follow us on LinkedIn, Twitter and Facebook The post News Flash: SBA Issues Proposed Rule with HUBZone and Small Business Changes first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

Hello and happy Friday! Here, in Lawrence, Kansas, the kids have started school and the college students are busy moving in and preparing to start classes. It always feels like such a big shift in the energy with all the excitement and the many back to school events taking place. This week in federal government contracting, the recent headlines highlight a wide array of developments within federal operations, emphasizing both accountability and innovation. You can read more about this week’s news in the articles below. Enjoy your weekend! South Carolina Residents Ordered to Pay $50,000 Fine and More Than $400,000 in Restitution Following Their Conviction in “Rent-A-Vet” Construction Fraud Scheme Targeting the United States Department of Veterans Affairs GSA releases FY 2025 CONUS per diem rates for federal travelers Navy’s journey to new procurement system remains in peril Prime Contractors who are interested in subcontracting with small business for DHS Business Loan Program Temporary Changes; Paycheck Protection Program: Lender Records Retention Requirements Company Sentenced to Pay $6.5M Criminal Fine for Bid Rigging in Michigan Asphalt Industry Arizona Man Pleads Guilty for Making Online Threats Against Public Servants Including Federal Officials Defense Federal Acquisition Regulation Supplement: Sustainable Procurement (DFARS Case 2024-D024) Federal Government Doles Out $524 Million Contract To Develop New Agency Headquarters VA health tech leader: AI can save veterans from ‘a lot of pain and suffering’ Defense Federal Acquisition Regulation Supplement: Assessing Contractor Implementation of Cybersecurity Requirements (DFARS Case 2019-D041) The post SmallGovCon Week in Review: August 19-23, 2024 first appeared on SmallGovCon - Government Contracts Law Blog.View the full article