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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

The Catalyst Center for Business & Entrepreneurship is hosting this helpful, virtual workshop on August 28 at 10:00am CDT. Joint ventures can be a powerful tool for companies to jointly compete for proposals and combine the best of their capabilities to perform their awards. This webinar, presented by federal government contracts attorney, Gregory Weber, will address the benefits of joint venturing, eligibility, how past performance comes into play, and the differences between a joint venture and a teaming agreement. He will also discuss how to make sure a joint venture agreement is compliant with the latest rules, how to set them up, and how to avoid some common traps in the process. Register here. The post Webinar Event: Joint Ventures A Powerful Small Business Tool hosted by the Catalyst Center for Business & Entrepreneurship, August 28, 2024 first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

The Trade Agreements Act (TAA) (along with its cousin, the Buy American Act) is one of the more complex acts to deal with in federal government contracting. We have taken a look at the TAA before, noting that it does not apply to small business set-asides and discussing how it applies in its related FAR clause, FAR 52.225-5. One of the key requirements under the TAA, as shown in FAR 52.225-5, is that the product has been “substantially transformed…into a new and different article of commerce with a name, character, or use distinct from that of the article or articles from which it was transformed” in one of the qualifying countries: the United States, various “qualifying countries”, and “designated countries”. (These countries are ones that the US has a trade agreement with, hence the law’s name) Of course, when agencies receive offers, they generally can’t go visit the assembly sites. This raises the question: When can an agency rely on a contractor’s offer and when must it do a little more digging? In HPI Federal, LLC (B-422583), GAO took a look at this very question. The Air Force was seeking tech products under a GSA Federal Supply Schedule. One of the products in question was a set of large monitors, and the other product relevant to this protest was docking stations for office notebook laptops. The solicitation required that vendors confirm that their products were TAA-compliant. The awardee for these two products was a company called Transource. With regards to the monitors, Transource said they were assembled in Mexico, which is a TAA-compliant country (being a “designated country”). As proof of this, Transource included a letter from LG, the company that made the monitors, that described itself as a “Country of Assembly Certification.” For the docking stations, Transource simply identified another country (GAO redacted its identity curiously) as the country of origin. When Transource won, HPI Federal protested. In its protest, HPI Federal stated that the agency unreasonably determined that Transource’s quotation was TAA-compliant for these items. The Monitors With regards to the monitors, HPI Federal noted a 2023 letter from LG suggesting they weren’t compliant. Transource shot back that it had a more recent letter from LG stating the monitors were assembled in Mexico. Here’s where things got interesting: HPI Federal argued that this later letter only certified that the monitors were assembled in Mexico, not that they were an end product of Mexico. GAO agreed! At first glance, this may seem odd, but it’s important to note that what matters is what the courts and GAO have called “substantial transformation,” not mere assembly. As GAO observed, “a product is not necessarily an end product of the country in which it was assembled, as assembly alone may not constitute substantial transformation.” How can this be? GAO explained further: In determining whether the combining of parts or materials constitutes a substantial transformation, the issue is the extent of operations performed and whether the parts lose their identity and become an integral part of the new article. Assembly operations which are minimal or simple, as opposed to complex or meaningful, will generally not result in a substantial transformation. The issue of whether a substantial transformation occurs is determined on a case-by-case basis. To put it more simply: Assembly can sometimes be substantial transformation, sure, but if the assembly is basically just snapping two parts together that were themselves quite complex to put together, well, that’s not really “substantial transformation.” The case doesn’t go into detail on what this could mean, but imagine for a moment that the monitor would arrive for “final assembly” and final assembly just meant putting on a final protective screen. The monitor works fine when it arrives for final assembly. You can’t really say the parts lost their identity and became an integral part of the new item just knowing it was “assembled” somewhere, you need more information. So, the fact that Transource provided a certification that the monitors were just “assembled” in Mexico wasn’t enough. The Docking Stations Now, this was an unusual GAO case where part of the award could remain with Transource, and that’s exactly what happened. Here, however, Transource’s quotation provided even less information: It didn’t say the docking station was assembled in the given country. It just “provided a confirmation that its docking stations are TAA-compliant.” So how did GAO side with Transource here and not on the monitors? Essentially, it’s a case where providing less information actually was helpful. GAO noted: [T]here was nothing on the face of Transource’s quotation to reasonably indicate that Transource would not deliver TAA-compliant docking stations… As discussed above, however, Transource’s representation regarding the docking station was materially different than that for the monitors. Transource expressly represented that the docking station’s country of origin is [DELETED], not simply that the docking station is assembled in [DELETED]. In other words, the question is basically “Is there anything in the proposal that suggests the product is non-compliant?” Concerning the monitors, the fact Transource said they were assembled in Mexico rather than just that Mexico was the country of origin is what lost them that award. GAO’s holding is that agencies are to take offerors at their word on TAA compliance unless something they provide suggests they shouldn’t. Had Transource simply stated the monitors were from Mexico without any further detail, that would have worked. Summary It’s a curious decision to be sure. But the takeaway here seems to be that, when it comes to TAA compliance, providing less information actually is better. Normally, contractors want to provide agencies as much detail as possible in a proposal. But when it comes to stating products are compliant with the TAA, it seems that contractors should keep it simple and only state that the product’s country of origin is the country in question (assuming this is true, of course). No need to delve further. Questions about this blog? email us at info@koprince.com 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 Some Assembly Required: GAO Addresses how Agencies Should Approach Trade Agreements Act Compliance first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

Happy Friday, blog readers, and welcome to the week in review. Recent legislative and agency initiatives are shaping the landscape for federal contracting, cybersecurity, and support for veterans and small businesses, this week. A bipartisan Senate bill seeks to mandate cybersecurity vulnerability disclosures by contractors, enhancing national security. In parallel, the Pentagon’s release of key Cybersecurity Maturity Model Certification (CMMC) contracting rules aims to fortify the defense supply chain against cyber threats. On the small business front, the Small Business Administration (SBA) and the Department of Veterans Affairs (VA) are collaborating to promote veteran entrepreneurship, while various committees and task forces are actively addressing regulatory fairness and development support for veteran-owned businesses. These efforts, coupled with the General Services Administration’s (GSA) celebration of the Inflation Reduction Act’s two-year anniversary, underscore the federal government’s commitment to fostering a robust, secure, and inclusive economic environment. You can read more about those topics in the articles below. Have a great weekend! Empower through Mentoring – Strengthening the Department of Energy’s Small Business Supply Chain Bipartisan Senate Bill Seeks Mandatory Contractor Cyber Vulnerability Disclosure Legislation calling for federal hiring managers to focus more on a job candidate’s skills advances to the next step in the Senate GSA celebrates two-year anniversary of Inflation Reduction Act as part of the Biden-Harris Administration’s Investing in America agenda SBA and Dept. of Veterans Affairs Join Forces to Promote Veteran Entrepreneurship Meeting of the Advisory Committee on Veterans Business Affairs Meeting of the Interagency Task Force on Veterans Small Business Development Annual Meeting of the Regional Small Business; Regulatory Fairness Boards National Regulatory Fairness Hearing California Man Indicted for Unlawfully Exporting Aircraft Components to Iran Federal court blocks Southern California logistics company’s retaliation against workers, interference with federal investigation Pentagon releases key CMMC contracting rules The post SmallGovCon Week in Review: August 12-16, 2024 first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

The SBA ostensible subcontractor affiliation rule has long confused contractors and their attorneys alike because its standards were not very clear. It was based on whether, in a small business contract, a subcontractor performs the “primary and vital requirements of a contract” or the prime contractor was “unusually reliant” on the subcontractor. SBA’s Office of Hearings and Appeals filled in the gaps on these terms. But in 2023, SBA updated its definition for these rules, declaring that if a small business prime contractor (other than under a general construction contract) met the limitations on subcontracting, it basically was not violating the ostensible subcontractor rule. A recent case looked at a circumstance where a small business prime contractor was not meeting the limitations on subcontracting. In Spartan Medical, Inc., SBA No. VSBC-366-P (2024), SBA reviewed an SDVOSB protest concerning “Intraoperative Neuromonitoring (IONM) technicians and associated instrumentation to support and monitor complex surgical procedures.” “Risen’s proposal identified Risen’s owner” as a project manager and “[n]o other Risen employees are discussed in the proposal. Of the [proposed] IONM technicians, all are employees of [subcontractor] SpecialtyCare. All of the proposed remote monitoring physicians also are SpecialtyCare employees.” The protester (Spartan) alleged that the awardee (Risen) would “be unusually reliant upon a non-SDVOSB subcontractor to perform the contract” and violate the ostensible subcontractor rule found in 13 C.F.R. § 128.401(g). Risen’s response, in part, stated that the “staff works [] under the management and supervision of Risen” and that “Risen alone will perform “’all of the day-to-day management services’”. In addition, “Risen argues that the ‘“’management and professional support services’”’ Risen will perform are key to the procurement.” Upon review, OHA noted that “Risen’s own proposal, which confirms that all of the proposed IONM technicians, as well as all of the proposed remote monitoring physicians, will be SpecialtyCare employees.” And Risen only had one employee, its owner. Plus, Risen “fails to offer any persuasive explanation as to how it will comply with the limitations on subcontracting restrictions set forth in 13 C.F.R. § 125.6.” Instead, “Risen itself concedes it will subcontract [a majority] to SpecialtyCare.” Therefore, it won’t meet the limitations on subcontracting. Risen also argued that it will handle all “management and professional support services”. But OHA did not accept this argument. Rather, OHA found that this argument is meritless since the RFP calls for “On-site Intraoperative Neuromonitoring and Instrumentation Services”, not managerial services. Indeed, the RFP did not require offerors to propose any managerial personnel, nor are there any specific managerial tasks discussed in the RFP. The fact that the CO assigned the RFP NAICS code 621399, Offices of All Other Miscellaneous Health Practitioners, further connotes that the principal purpose of this procurement is medical support services. Finally, OHA has “consistently held that a prime contractor does not perform the primary and vital requirements of a contract merely by supervising its subcontractors in their performance of work.” This case makes clear that the proposal language is crucial in responding to a size or status protest where a subcontractor is involved. The proposal must make clear that the prime contractor is not subcontracting more work than is allowed under the limitations on subcontracting. To do otherwise risks losing an ostensible subcontractor challenge. 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 SBA: Ostensible Subcontractor Affiliation Arises from Improper Limitations on Subcontracting in Proposal first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

One of the most popular programs in small business federal contracting seems to be the SBA’s Mentor-Protege Program. It is generally a great program for small businesses to utilize the resources and knowledge of a larger or more experienced business to grow. In turn, it also gives large businesses the ability to work on small business contracting opportunities, and the Government the ability to contract with more robust teams. Unfortunately, there has been a recent trend of the SBA being somewhat strict on minor language in Mentor-Protege Agreements, possibly stifling participation in the program, or at least making it take longer for SBA to approve these agreements. The SBA’s Mentor Protege Program is appealing to many contractors due to its numerous benefits. There are of course many nuances to getting into the program and meeting its requirements (check out part 1 and part 2 of our series on misconceptions of the SBA’s Mentor-Protege Program). But, the backbone of the Mentor-Protege Program is the Mentor-Protege Agreement (MPA). The MPA is not a document where the parties can set their own terms. SBA regulations set very clear standards for what must be in an MPA. The MPA must set out things like the anticipated assistance, discuss other MPAs (if applicable), establish points of contacts, and set a term for the MPA itself, among many other things. In line with that and to help contractors, the SBA publishes an MPA template. Contractors can utilize this template to work on their MPA. This document is exactly what it says it is, a template (defined as a guide or pattern). Throughout the template is advice to MPA drafters, discussions of what should be provided to the SBA with the MPA, citations, terms which could apply to certain contractors but not others, and great guidance for forming the MPA. Logically, contractors should be able to take the regulations, and the SBA’s template, and come out the other side with a unique, but compliant MPA. Typically, if an agreement made sure to hit on the items within the regulations it would not run into an uphill battle for approval. Unfortunately, some SBA reviewers (hopefully not all) have recently interpreted the MPA template as a requirement, rather than a guide. Attorneys at SmallGovCon have seen SBA pushing back on MPAs that are not a carbon copy of the SBA published template. As discussed, the template has instructions within it, terms that may only apply for certain contractors, and placeholder language. It is a fantastic tool, but it is certainly not a plug and play document for all contractors. However, over the past year SBA reviewers of MPAs have increasingly requested the MPA exactly match that specific template (or in some cases references older versions of the template from when SBA had the separate “All-Small” and “8(a)” Mentor Protege Programs). Even MPAs that utilized the template were not acceptable unless they used the exact verbiage and even formatting of the template. For example, the Template for its section on Assistance states: “1. Identify the type(s) of assistance the Protégé is seeking from the Mentor. There are six categories to choose from, and you may select any or all that apply to your situation.” The Template then lists 6 types of assistance, with titles such as “Management and Technical Assistance” and “International Trade Education.” If SBA were to require the specific language and template, then contractors would have an MPA that instead of being descriptive with a heading like “Assistance to Be Provided” or something like that, provides as its heading an instruction to identify assistance and that there are six categories to choose from. The regulations that dictate the Mentor-Protege Program and MPAs do not require this specific template. They require certain items be addressed, but not that they be in a SBA supplied format. Yet, some of the SBA’s own reviewers seem to be taking an approach that the MPA template itself should be completely replicated with the addition of the required info, rather than simply looking for the regulatory required language. While it is commendable to try to streamline government contracting processes, it should not be at the expense of the regulation. Nor should agencies place upon contractors further additional unwritten rules. Finding a partner to go into the SBA’s Mentor-Protege program with you is a delicate process, and one that is unique to each Mentor-Protege relationship. A rigid unwritten rule, focused on formatting not regulations, can only chip away at the relationships that the SBA is trying to build between contractors in this program at the very beginning stages. Hopefully, the SBA will internally address this application of unwritten rules to the Mentor-Protege Program. Until they do, Contractors need to be very careful on how any MPA is drafted or formatted, as well as prepare for SBA questions on MPA formatting. So, if you find yourself contemplating a Mentor-Protege relationship, please do not hesitate to reach out to a federal contracting attorney, such as ourselves, for assistance. 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 SBA Getting Strict on MPA Language first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

Happy Friday, All. Please enjoy our latest week in review in order to stay on top of federal contracting news. Some interesting stories include Senate efforts to enhance oversight of Other Transaction Authority (OTA) agreements and address delays in Major Acquisition Programs (MTA). Meanwhile, the GSA is pushing forward with updated standards to accelerate federal buildings toward zero emissions, reflecting a broader shift towards sustainability. In cybersecurity, CISA’s CDM program is set to tackle emerging threats in the cloud, while the Department of State is piloting AI adoption to improve operations. You can read more about these topics in the articles below. Have a great weekend! Senate Approps target OTA transparency, MTA delays Former Contracting Officer for Department of Defense Sentenced for Conspiracy to Defraud the Government Federal contractor will pay $400K, make 30 job offers to resolve DOL hiring bias claim GSA releases updated standards to accelerate federal buildings toward zero emissions The wave of new procurement regulations rolls on and on Small Business Lending Company Application Process Department of Labor offers online seminar on prevailing wages for employers, workers on federally funded projects Aug. 29 Former Interim President of Puerto Rican Steel Distributor Pleads Guilty to Eight-Year Price-Fixing Conspiracy CISA’s CDM to take on next cyber blind spot in the cloud The Department of State’s pilot project approach to AI adoption GSA: 75 years of adapting to the changing needs of agencies The post SmallGovCon Week in Review: August 5-9, 2024 first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

Submitting a proposal in the correct manner and on time are two of the most elemental aspects of any response to a solicitation. After all, if you don’t submit the proposal, there is zero chance that the agency will review your proposal. Unfortunately, every so often there are hiccups in the submission process that cause delays. And, as one disappointed offeror found out, in the vast majority of cases these delays will be held against the offeror and not attributed to the agency. The solicitation in the case of ICS Nett, Inc. called for offerors to submit their proposals by 5:00 p.m. via the Procurement Integrated Enterprise Environment (PIEE) Solicitation Module, a system used by the Department of Defense to securely receive responses from offerors. The PIEE Solicitation Module requires offerors to “upload documents into the system, enter a PIN number, and request a One-Time Password (OTP) that the system automatically generates and emails to the proposal manager.” The OTP is automatically emailed to the proposal manager once they have uploaded all proposal documents and clicked the signature button which indicates they are ready to transmit their proposal. Each OTP is valid for 15 minutes but will become invalid if the offeror requests an additional OTP. Proposals are not considered submitted via the PIEE Solicitation Module until the offeror submits both the PIN and the OTP. The PIEE system maintains user logs that show the exact time that offerors are sent the OTP. ICS Nett experienced difficulties when submitting its proposal that caused the proposal to not be submitted until shortly after the 5:00 p.m. submission deadline. Due to the errors, ICS Nett contacted the contracting officer, who requested that ICS Nett send them an explanation and any error messages received. ICS Nett promptly did so but the agency still deemed that the proposal submission was late and determined that it would not consider ICS Nett’s proposal. ICS Nett was notified that it was excluded from consideration due to its proposal being untimely. Subsequently, ICS Nett protested the agency’s decision to exclude it from competition. ICS Nett asserted that it experienced technical difficulties, consisting of “persistent technical issues with the [OTP] system from different networks and locations under the Government’s control” when submitting its proposal. Additionally, ICS Nett stated that it received multiple error messages that caused the untimely submission. ICS Nett protested its exclusion from competition because the solicitation incorporated FAR 52.215-1, Instructions to Offerors–Competitive Acquisition, which provides that: Any proposal, modification, or revision received at the Government office designated in the solicitation after the exact time specified for receipt of offers is “late” and will not be considered unless it is received before award is made, the Contracting Officer determines that accepting the late offer would not unduly delay the acquisition; and – (1) If it was transmitted through an electronic commerce method authorized by the solicitation, it was received at the initial point of entry to the Government infrastructure not later than 5:00 p.m. one working day prior to the date specified for receipt of proposals; or (2) There is acceptable evidence to establish that it was received at the Government installation designated for receipt of offers and was under the Government’s control prior to the time set for receipt of offers; or (3) It is the only proposal received. FAR clause 52.215-1(c)(3)(ii)(A). Therefore, ICS Nett argued, it had provided evidence to the contracting officer to establish that its proposal was received and under the agency’s control prior to the submission deadline, as shown by proposal attachments having been uploaded to the PIEE Solicitation Module. The submission delay was a system issue, and the proposal should be considered. Unfortunately for ICS Nett, its interpretation of FAR 52.215-1 was misplaced. The PIEE system’s user logs showed that ICS Nett received its first OTP at 4:58:11 p.m. on the submission deadline date, the second at 4:58:37 p.m., and the third at 5:01:08 p.m. ICS Nett used the third OTP to submit its proposal at 5:02:18 p.m., two minutes and eighteen seconds past the submission deadline of 5:00 p.m. FAR 52.215-1(c)(3)(ii)(A) prohibits an agency from accepting a late proposal submitted electronically unless: (1) The contracting officer determines accepting the proposal will not unduly delay the acquisition; AND (2) The agency received the proposal at the initial point of entry not later than 5:00 p.m. one working day prior to the date specified for receipt of proposals. Here, ICS Nett did not upload its proposal to the PIEE system and receive its first OTP until two minutes before the submission deadline, as opposed to 5:00 p.m. one working day prior to the date specified for receipt of proposals. As a result, the contracting officer was not required to consider IC Nett’s proposal. In fact, the agency was prohibited from considering the proposal. Further, the contracting officer noted that the screenshots received from ICS Nett all contained an OTP and that none contained the word “error.” Additionally, the agency received 54 timely proposals and there were no communications to the service desk regarding errors. Finally, as GAO has repeatedly emphasized, “it is an offeror’s responsibility to submit its proposal sufficiently in advance of the time set for receipt of proposals to ensure proper delivery of the proposal and timely receipt by the agency.” As such, the agency properly excluded ICS Nett from consideration. This decision serves as another warning to all contractors that it is in their best interests not to wait until the last minute, or the last three minutes as occurred here, to submit their proposals and give yourself plenty of time when submitting proposals so you don’t end up in a similar situation. 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 GAO Reminder: Don’t Delay, Submit Your Proposal Today first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

The SBA’s Small Business Mentor-Protégé Program (MPP) is arguably one of the federal government’s most successful undertakings when it comes to supporting our nation’s small business policies, economy, and contracting goals. It fosters the development of small business protégés, allowing many different forms of mentor assistance. It includes opportunity for eligible protégés and their mentors to joint venture (JV) for set-aside contracts—often otherwise off-limits to mentors that don’t qualify for the set-aside status/size standard and/or to protégés incapable of competing for or performing such contracts on their own. MPP JV awards may also incentivize federal government customers—simultaneously getting closer to meeting their set-aside quotas and getting the know-how, qualifications, resources, and personnel of more experienced (typically larger) contractors. While it’s easy to see why this program enjoys immense popularity amongst small and large businesses alike, confusion consistently shrouds SBA’s MPP, nevertheless (hence the need for a two-parter here). In this article, we’ll skip over the “basics” of SBA’s MPP (which you can read all about here) and instead, jump right into the last few common misconceptions surrounding the program (you can read about the first few in Part I). Just like last time, before we get started, you can reference the rules and requirements covered in this article (and the coming Part II) at 13 C.F.R. § 125.9 and 13 C.F.R. § 121.103, respectively, SBA’s MPP and affiliation regulations. But why must we reference affiliation, you might ask? Well, you can’t really discuss mentor-protégé relationships without having at least a general understanding of the concept of affiliation. In case you don’t–or you just need a refresher–check out these Back to Basics blogs covering an overview of affiliation and the different types of affiliation (for a deeper dive, you can always get ahold of our Handbook covering both size and affiliation). For this article, for now, just keep in mind that the whole purpose of SBA’s MPP is to provide protections from and exceptions to affiliation—and every type of assistance and opportunity the MPP provides depends on such protections and exceptions. We will also touch on SBA’s joint venture (JV) regulations for: small business JVs (found at 13 C.F.R. § 125.8); 8(a) Program JVs (found at 13 C.F.R. § 124.513); HUBZone JVs (found at 13 C.F.R. § 126.616); WOSB/EDWOSB JVs (found at 13 C.F.R. § 127.506); and VOSB/SDVOSB JVs (found at 13 C.F.R. § 128.402). Misconception #3 – “An SBA-approved protégé may not have an additional SBA mentor-protégé agreement in place at the same time.” Correction #3 – “An SBA-approved protégé may have one additional SBA mentor-protégé agreement in place at the same time in certain circumstances, provided certain restrictions are met.” This misconception is not misplaced–it comes from the section of SBA’s MPP rule specific to protégés. It says, “[a] protégé firm may generally have only one mentor at a time.” But this is not a blanket prohibition as most seem to think. Indeed, that same rule goes on to state: SBA may approve a second mentor for a particular protégé firm where the second relationship will not compete or otherwise conflict with the first mentor-protégé relationship, and: (i) The second relationship pertains to an unrelated NAICS code; or (ii) The protégé firm is seeking to acquire a specific expertise that the first mentor does not possess. So, note the few words I emphasized above. The first one, “may,” is emphasized, as it is important to keep in mind that SBA’s discretion is broad here–even when the elements are met. The “and” and “or” are also emphasized, as the required elements are: (1) the second MPP relationship will not compete or conflict with the first; and (2) either, the second MPP relationship is under an unrelated NAICS or the second mentor has a specific expertise the first does not, which the protégé seeks. Note, the chances of SBA approving a second mentor are likely strongest if you can say that all of the above are true. But even then, SBA could say no for other reasons. It is also crucial to keep in mind that even if SBA makes an exception allowing a protégé to simultaneously have two mentors, that does not affect the protégé’s two-mentor-lifetime-maximum (which only makes limited exceptions for early terminations or mentor substitutions by SBA). So, if a protégé choses to use up both of its mentor relationships at the same time, that is it! Misconception #4 – “An SBA-approved mentor may not simultaneously have additional protégés under SBA’s MPP.” Correction #4 – “An SBA-approved mentor may simultaneously have additional protégés under SBA’s MPP in certain circumstances, provided certain limitations are met.” SBA must agree to allow a mentor to have more than one protégé at time. And it will only do so if the mentor and proposed additional protégé are able to “demonstrate that the added mentor-protégé relationship will not adversely affect the development of either protégé firm (e.g., the second firm may not be a competitor of the first firm).” When an existing mentor applies for a second mentor-protégé relationship, SBA will require that such demonstration is actively made as part of the application process. SBA typically wants to see the full list of reasons that the two protégés are not and will not become competitors. This can include things like: having different NAICS codes; providing different types of services/product; and/or geographical distinctions or different performance locations. But none of these are hard requirements–and there are certainly other factors that could be listed to support the required demonstration for SBA’s approval of the second protégé relationship. SBA’s rules add 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.” This second restriction serves both to support the general rule prohibiting protégé competition above, as well as the FAR’s restrictions on improper business practices, such as price fixing. Finally, SBA’s rules do put a general cap on this one, stating that “[a] mentor (including in the aggregate a parent company and all of its subsidiaries) generally cannot have more than three protégés at one time.” So, the takeaway is that SBA may allow a mentor to have anywhere between one and three protégés at one time–but it is ultimately up to SBA. Misconception #5 – “Six years is the maximum term for the relationship between one SBA-approved mentor and protégé.” Correction #5 – “The relationship between an SBA-approved mentor and protégé may run over two consecutive six-year terms, provided all other limitations are met.” Until recently, this was not expressly included in SBA’s rules–though it was generally accepted (at least at our firm) that SBA would allow this. The MPP rules now state: 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. But just as I cautioned for Misconception #3 above, having two consecutive SBA-approved mentor-protégé relationships with the same mentor and protégé also uses up the protégé’s two-mentor-lifetime-maximum–yes, regardless of the fact that the protégé only had one mentor. SBA counts the relationships themselves. So, while this option is quite common, it is certainly something a protégé should think through before deciding, as a protégé has so much to potentially learn from its mentor(s). Misconception #6– “One firm cannot simultaneously be an SBA-approved mentor and an SBA-approved protégé to two different firms.” Correction #6 – “One firm can simultaneously be an SBA-approved mentor and an SBA-approved protégé to two different firms, provided SBA has authorized it and the relationships don’t compete.” This rule also comes from the section of SBA’s MPP rules for protégés, and no one is hiding the ball here. The rule says: SBA may authorize a small business to be both a protégé and a mentor at the same time where the small business can demonstrate that the second relationship will not compete or otherwise conflict with the first mentor-protégé relationship. There is that “may” word again–reminding us that SBA’s discretion in overseeing its MPP is vast–making this last misconception a fitting conclusion of this two-parter blog. * * * Sure, there are less concrete rules in SBA’s MPP than most people realize. But SBA is still king. Either way, knowing SBA’s MPP rules and where they incorporate flexibility (as well as where they don’t) could certainly help a mentor and/or protégé plead its case for SBA to allow some flexibility or rule exception. Finally, don’t forget to check out Part I of this article for other rule clarifications and to keep an eye out for more of our “Common Misconceptions” articles in the future. 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 Common Misconceptions: SBA’s Mentor-Protégé Program (Part II – Participation Rules & Limits) first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

Happy Friday! In today’s week in review blog post, we have included some of the most significant recent developments that are shaping the landscape. From reforms in the Department of Defense’s budgeting process to new Small Business Administration (SBA) lender fees and innovative proposals for small business participation in federal contracts, these updates reflect a dynamic and responsive regulatory environment. SBA Administrator Guzman also has announced a major initiative to transform the customer experience for federal contracting certifications. We hope you will enjoy the articles that explore this week’s highlights. Enjoy your weekend! Agriculture Acquisition Regulation (AGAR) At DoD, glimmers of hope for budget reform The government’s mixed messages on global supply chains, continued SBA Announces SBA Lender Fees for Fiscal Year 2025 Clarification to Direct Final Rule on Eliminating Self-Certification for ServiceDisabled Veteran-Owned Small Businesses GAO: Human Trafficking in Federal Contracts: A Call for Systematic Risk Management GSA announces first OASIS+ award decisions Rosen, Moran Introduce Bipartisan Legislation to Cut Taxes for Veterans Starting Small Businesses L3 Harris, Data Link Contracts Worth $2 Billion Survive Protest WeWork model for SCIFs could increase small business participation SBA Launches New Business Resilience Guide Avantor, Inc. Agrees to Pay $5.325 Million to Resolve Allegations of False Claims for Overcharging Federal Agencies and Allegations of DEA Violations and Lack of Compliance as to Listed Chemicals Administrator Guzman Announces Transformation of Customer Experience for Federal Contracting Certifications The post SmallGovCon Week in Review: July 29-Aug. 2, 2024 first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

On June 28, 2024, the Supreme Court issued its decision in Loper Bright Enterprises v. Raimondo, 144 S. Ct. 2244 (2024). It was a pretty notable news story as the case overturned the 1984 case of Chevron v. Natural Resources Defense Council, ending what has been called “Chevron deference.” This actually has many implications for federal contractors and how they interact with the federal government. Today, we’ll generally explore what this decision means for federal contractors. Chevron Deference It is important to note first that we are not constitutional law scholars or practitioners. We are not going to make any observation here on whether the Court’s decision was correct, nor are we going to go into any detail on the Court’s reasoning for the decision. With that said, the simplified concept of Chevron deference was as follows: If a federal statute was ambiguous or otherwise didn’t expressly address a certain issue, courts would defer to a federal agency’s interpretation of those statute provisions so long as those interpretations were reasonable (even if the court otherwise disagreed with that interpretation). As you might imagine, this gave federal agencies a good deal of power as no federal statute can touch on every single issue that might arise under it. In essence, unless the agency’s interpretation of a federal statute was completely contrary to the statute or was completely unreasonable, courts would use the agency’s interpretation of the statute. With the issuance of Loper Bright, however, this Chevron deference is gone as a legal concept. What this means is that courts no longer defer to agency interpretations of federal statutes. Each court is free to apply the interpretation of a federal statute that it sees as most reasonable (provided a higher court hasn’t already decided what interpretation applies). This has transferred a great deal of power from the executive branch to the judicial branch as a result. What This Means for Federal Contractors “Ok, interesting legal discussion, but what does that matter for me?” You might ask. Well, consider the number of federal statutes that govern federal procurements, contracts, and interactions with the federal government: The Competition in Contracting Act (CICA), the Small Business Act, and the Federal Acquisition Streamlining Act of 1994, for starters. Historically, agency interpretations of those acts, and others, would be deferred to, something we noted in some of our older blog posts. That’s no longer the case, at least in federal courts. The result is that courts might disagree with agency interpretations of statutes, which could lead to completely different outcomes for government contract litigation than would have occurred under Chevron deference. Overall, this improves the chances a federal contractor will succeed in a dispute with the federal government (although of course, it’s still something that must be evaluated on a case-by-case basis). Additionally, this should also give agencies a lot more pause when it comes to their own actions. Whereas before, they could rely on the fact that their interpretation of a statute would be deferred to and act accordingly, that is no longer the case. Agencies will likely approach matters more cautiously going forward. As to whether that will benefit federal contractors, it will really be a case-by-case thing. Sometimes it might mean agencies are more willing to acquiesce or negotiate in a dispute, but other times it might slow down procurement and award processing. This also could result in agencies trying to more closely adhere to statutes and not go beyond them when they promulgate regulations. Caveats Overall, federal agencies have lost a fair deal of power which has now gone to federal judges. But it is important to give a caveat here: Loper Bright does not mean courts will never side with an agency’s interpretation of a federal statute. The Court observed in this decision that there is an older case, Skidmore v. Swift & Co., that still stands: Courts, after all, do not decide such questions blindly. The parties and amici in such cases are steeped in the subject matter, and reviewing courts have the benefit of their perspectives. In an agency case in particular, the court will go about its task with the agency’s “body of experience and informed judgment,” among other information, at its disposal. And although an agency’s interpretation of a statute “cannot bind a court,” it may be especially informative “to the extent it rests on factual premises within [the agency’s] expertise.” Such expertise has always been one of the factors which may give an Executive Branch interpretation particular “power to persuade, if lacking power to control.” In other words, courts can still give extra weight to an agency’s interpretation of a statute, and side with it where it is otherwise unsure which interpretation applies. Loper Bright doesn’t flip the script and give deference to the non-government party in a court case, it just leaves the ultimate authority on which interpretation applies to the judge. It’s also important to note that Chevron deference concerned agency interpretations of federal statutes, not regulations. There is a separate case, Auer v. Robbins, which holds that courts will defer to agency’s interpretations of their own regulations. That case remains in good standing, at least for the time being. Finally, the Court noted in Loper Bright that while Chevron was overruled, that doesn’t mean cases that decided with Chevron deference in mind are overruled as well: “[W]e do not call into question prior cases that relied on the Chevron framework. The holdings of those cases that specific agency actions are lawful…” So, some old agency interpretations may still be controlling by virtue of being applied in a decision by a court. Summary Going forward, we think the Loper Bright decision may end up favoring federal contractors, particularly in the area of their own disputes with the federal government. As any lawyer can tell you, a court’s legal interpretation of a statute can completely change the outcome of a case. An agency may be less confident in its own interpretation of a statute, and that could in some cases make agencies more likely to settle disputes with contractors. That said, there remains a lot of mystery as to how things will look going forward, Chevron was on the books for 40 years after all. It will be interesting to see how things develop. But for now, it does appear that some power has been shifted from the agencies to contractors. Questions about this post? Email us. Need legal assistance? 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 Supreme Court Weighs in on Deference to Agencies: What the End of Chevron Deference Means for Federal Contractors first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

SAM.gov is like the home base of federal government contracting. Everything in federal government contracting seems to either start there, or require using SAM in some fashion. As a consequence, contractors are expected to register on SAM to work in federal contracting. However, it can be easy to overlook registering a joint venture entity on SAM, when contractors making up the joint venture are already registered on SAM. GAO recently took the opportunity to remind contractors of the need to register their joint venture separately on SAM through a bid protest decision. As frequent readers may notice, this is certainly not the first time we have blogged about the need to stay on top of your SAM registration. Just a few months ago, we blogged about a GAO decision that held contractors must not let their SAM registration lapse at all, even when renewal information was already submitted. In a similar fashion, GAO emphasized the importance of joint ventures being registered on SAM in a bid protest decision. GAO’s decision also reminded contractors to be careful about how they structure their proposals. In Prak Industries, LLC, B-422517 (Comp. Gen. Jul. 17, 2024), a contractor protested the agency’s decision to find a joint venture ineligible for award, as the joint venture was not registered in SAM. The solicitation at issue was set-aside for “Indian Small Business Economic Enterprise” businesses, and called for janitorial services at a dam complex in Washington. Only two proposals were received. One was from the protester Prak Industries, LLC (“Prak”). However the agency considered that offeror to be from Prak’s joint venture PrakIntegrity Joint Venture (“PrakIntegrity”) not Prak (more on this later). PrakIntegrity is a joint venture between Prak and Integrity National Corporation (“Integrity”). Both Prak and Integrity were separately registered on SAM.gov, but the joint venture PrakIntegrity was not. The solicitation at the center of this protest incorporated FAR 52.204-7 which requires offerors to be registered on SAM. In the protest, Prak asserts it, not PrakIntegrity, submitted the offer as “the offering entity of an unincorporated joint venture,” and that a box on Form 1449 identified Prak as the offeror. So, by Prak’s logic, the offeror was Prak, who was registered on SAM as required. But the agency, upon reviewing the proposal, felt it was actually an offer from Prak’s joint venture PrakIntegrity. As Prak is registered on SAM, this distinction is critical. Despite being submitted by Prak, the first page of the proposal apparently stated that PrakIntegrity was submitting the proposal, a joint venture agreement was attached to the proposal, and portions of the proposal stated the joint venture would be the “Prime Contractor” for contracts with responsibility for performance of the contract. During proposal evaluations the Agency reached out to Prak asking if PrakIntegrity had its own UEI and cage code. Prak responded that Prak submitted the proposal “as an unincorporated joint venture” and therefore didn’t have those codes. Basically, Prak admitted that the joint venture was not registered on SAM, as part of the SAM process is obtaining a UEI code (for more on SAM registration, check out our “Back to Basics” post on it here). GAO agreed with the agency that the true offeror was the joint venture, PrakIntegrity, not one of the members of the joint venture, Prak. Thus, under FAR requirements and the solicitation’s terms, PrakIntegrity was the entity that needed to be registered on SAM. As admitted by Prak, the joint venture was unincorporated, did not have a UEI, and therefore was not registered on SAM. Consequently, GAO held that the agency’s decision that the joint venture was not eligible for award as reasonable, denying Prak’s protest. As an added reminder, GAO made it clear once again that it is the offeror’s responsibility to create a unambiguous proposal, a very common issue for GAO to cite in cases which it denies a contractor’s protest. While this is a fairly short case (give it a quick read if you can), it provides a lot of good nuggets for contractors to take with them. First, the big reminder is that if a bid is coming from a joint venture, don’t forget that the joint venture itself is its own entity and must be registered on SAM.gov, even if all its members are already separately registered on SAM. Second, as always, be very careful about how you word a proposal. While this case ultimately came down to the joint venture not being registered on SAM, there was clearly confusion on who the true offeror was. GAO will often point to it being the offeror’s responsibility to create an understandable proposal, not the agency’s responsibility to read between the lines. Contractors need to remember that at the end of the day the burden is on them to make the offeror as understandable as possible, or else risk losing a bid. Questions about this post? Email us. Need legal assistance? 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 GAO Reminder: Joint Ventures Must Register on SAM first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

Happy Friday! This week saw several large contract awards that reflect the federal government’s ongoing efforts to modernize its technology infrastructure, enhance defense capabilities, and improve emergency services and IT support across various agencies. In other news, SBA will be holding a tribal consultation that seeks to reduce administrative burdens and increase autonomy for Tribal Nations in addressing their specific needs. You can read more about this week’s developments in the articles below. And we will do a deeper dive into SBA’s recent announcement in an upcoming blog post. Have a great weekend. Both parties already behind on presidential transition planning IRS embarks on ‘absolutely critical’ refresh of legacy HR systems Aligning Strategic Priorities and Foreign Military Sales to Fill Critical Capability Gaps State Street Corp. Allocates $4.2M For Future Pay Adjustments to Resolve Alleged Gender Wage Discrimination Federal contractors get some guidance on using AI when hiring Missouri-Based Defense Department Contractor Sentenced for Fraud Some highlights of provisions in this year’s NDAA that could affect contractors Employees of Monmouth County Marine Equipment and Servicing Company Admit Roles in Scheme to Defraud U.S. Department of Defense Casey Introduces Bill to Help Small Businesses Better Compete for Federal Contracts Court of Federal Claims asserts more jurisdiction over OTAs Tribal Consultation for HUBZone Program Updates and Clarifications and Potential Reforms Under Executive Order 14112 The post SmallGovCon Week in Review: July 22-26, 2024 first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

In a recent post, we looked at the implications of BA OHA’s reasoning in In & Out Valet Co., SBA No. VSBC033-P, 2024 (June 12, 2024) on the full-time devotion requirement. Today we look at the impact of that case on another of SBA’s rules that has implications for both small businesses and for companies in the 8(a) Program, Women-Owned Small Business Program (WOSB), and the Service-Disabled Veteran-Owned Small Business Program (SDVOSB)–the ostensible subcontractor rule. The rule requires contractors not to rely too heavily on a subcontractor in the performance of a contract set aside under an SBA socioeconomic program. In practice, this standard may be confusing to a lot of hopeful contractors. What, after all, constitutes “undue reliance?” How reliant is too reliant? OHA’s reasoning in this recent decision helps clarify their application of the regulations, with results that may have far-reaching implications. The Ostensible Subcontractor Rule In a nutshell, this rule requires that a small business awarded a set-aside contract actually perform the primary and vital work on a contract and not be overly reliant on a non-similarly situated subcontractor. 13 C.F.R. § 121.103(h)(3). Read more about the rule here. The limitations on subcontracting rule contains limits on what percentage of work can be paid to a non-similar subcontractor. 13 C.F.R. § 125.6. Here is our blog post on that rule. As you might guess, the rules have some overlap. While subcontractors are an essential part of a prime contractor’s ability to perform a contract, SBA will not permit a small business prime contractor to be “unduly reliant” on a subcontractor that is not “similarly situated” (aka, another small business with the same program statues, defined in 13 C.F.R. § 125.1). SBA will allow a contractor to “use the experience and past performance of a subcontractor to enhance or strengthen its offer” but if that subcontractor performs “primary and vital requirements” of the contract, or the prime is “unusually reliant” on the subcontractor, SBA will treat the contractor and its ostensible subcontractor as affiliated joint venturers for size determination purposes, and the prime will be ineligible for the award. 13 C.F.R. §§ 121.103(h)(3), 128.401(g) (the ostensible subcontractor rule for SDVOSBs, and there is a similar rule for other types of set-asides other than 8(a)). A recent change to the rule stated that SBA will not find that the primary and vital requirements are being performed by the subcontractor, or that the prime contractor is unusually reliant on the subcontractor, if the prime contractor can “demonstrate that it, together with any subcontractors that qualify as small businesses, will meet the limitations on subcontracting” found in 13 C.F.R. § 125.6. SBA permits protestors to challenge a prime contractor’s reliance on a non-SDVOSB subcontractor under the ostensible subcontractor rule at 13 C.F.R. § 128.401(g). That rule says: In the case of a contract or order for services, specialty trade construction or supplies, SBA will find that a prime VOSB or SDVOSB contractor is performing the primary and vital requirements of the contract or order, and is not unduly reliant on one or more subcontractors that are not certified VOSBs or SDVOSBs, where the prime contractor can demonstrate that it, together with any subcontractors that are certified VOSBs or SDVOSBs, will meet the limitations on subcontracting provisions set forth in § 125.6 of this chapter. The question remains, how will OHA apply this update to the rule? This case has the answer. It’s All in the Proposal In this case, the protester alleged the veteran owner had violated the limitations on subcontracting requirements and, thus, violated the ostensible subcontractor rule. Specifically, because awardee had no employees and was a single member LLC, the protester argued that the awardee would have to “subcontract the majority of the services to be performed under the contract,” meaning they would fail the “no more than 50% of services to entities that are not similarly situated” requirement of 13 C.F.R. § 125.6(a)(1). OHA found this (seemingly reasonable) argument unpersuasive. They stated “[Awardee]’s proposal states that the subcontractor will only be responsible for providing 40% of the professional valet services. [Awardee] further confirmed in a Memorandum of Record to the CO that [Awardee] will fully comply with the Limitations on Subcontracting requirements at FAR 52.219-14 and will provide that at least 50% of the cost of contract performance incurred for personnel shall be expended for employees of [Awardee.]” OHA ended their inquiry into the matter there, essentially concluding that, because the prime contractor said it was going to follow the rules in its proposal, it was following the rules and compliant with the limitations on subcontracting requirements and did not violate the ostensible subcontractor rule. Seemingly aware that this standard of review appears highly deferential, OHA asserted that it does not “have jurisdiction to adjudicate matters dealing with the conduct of the procurement.” Determining what capabilities are necessary to perform a contract and whether the awardee has them are matters for the contracting officer to decide, not OHA. What this seems to mean moving forward is that, while the ostensible subcontractor rule remains on the books, SBA will be satisfied so long as a proposal contains a provision addressing the rule and pledges compliance (other than for general construction, where SBA may look more closely at the facts of the situation). While the contracting officer could determine for themselves that a business is “unusually reliant” on a subcontractor, the fact that an SDVOSB with allegedly no employees failed to trigger this finding indicates this is an unlikely outcome. So long as proposals are worded adequately, this often-confusing rule may be easily met by prospective bidders. Editor’s Note: Special thanks to our wonderful legal clerk Will Orlowski for putting together this blog post. Questions about this post? Email us. Need legal assistance? 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 Ostensibly OK: SBA Decision on Ostensible Subcontractor Rule Gives Contractors Some Clear Guidelines first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

Lately, we’ve seen a boom in protests being brought to the United States Court of Federal Claims (COFC) in lieu of protests brought at the Government Accountability Office (GAO). And it appears that the recent decision in Percipient.AI, Inc. v. United States, 2023-1970 (June 7, 2024) may have just set the course for even more. But the case here didn’t start with an offeror under a solicitation. Instead, it was brought by a commercial software company, Percipient.AI, Inc. (Percipient), who challenged the government’s acquisition of custom software at the Court of Federal Claims and then landed right in the lap of United States Court of Appeals for the Federal Circuit (Federal Circuit). 10 U.S.C. § 3453 establishes a preference commercial services. Specifically, it states: “The head of an agency shall ensure that procurement officials in that agency, to the maximum extent practicable … acquire commercial services, commercial products, or nondevelopmental items other than commercial products to meet the needs of the agency.” Here, the agency set out to procure custom software instead of commercial products as required per 10 U.C.S. § 3453. Accordingly, Percipient challenged the procurement. COFC didn’t agree with Percipient that it had standing under 28 U.S.C. § 1491(b)(1), so Percipient took its case to the Federal Circuit, which agreed with Percipient. A plaintiff must be an “interested party” per 28 U.S.C. § 1491(b)(1) to have standing at the Federal Circuit. An “interested party” can challenge: a solicitation by a federal agency; a proposed award or the award of a contract; or any alleged violation of statute or regulation in connection with a procurement or proposed procurement. COFC has held time and time again that a party is an “interested party” when the alleged harm-causing government action is a solicitation, an award, or a proposed award under prongs one or two of 28 U.S.C. § 1491(b)(1). However, a challenge under the third prong, when the challenged harm-causing action is not the solicitation, award, or proposed award of a contract, is far less common–and that is exactly what this decision discussed. Unfortunately, the Competition in Contracting Act (CICA), which is often referred to in this situation, does not address the third prong of 28 U.S.C. § 1491(b)(1). The plain language of 28 U.S.C. §1491(b)(1) does not resolve the interpretation issue either. This leads us to the big question, which has never been contemplated by the Federal Circuit: whether a prospective offeror may file an action raising procurement related illegalities under 10 U.C.S. § 3453 “where the asserted illegalities do not challenge the contract between the government and its contractor (either the award or proposed award of or a solicitation for such a contract.” The Federal Circuit determined that the third prong in 28 U.S.C. § 1491(b)(1) was meant to be interpreted more broadly based on its language covering “any alleged violation of statute or regulation in connection with a procurement or a proposed procurement.” Prongs one and two specifically discuss a “solicitation” and a “proposed award or the award of a contract.” Had the drafters’ intent been to give standing only the situations discussed in prongs one and two, there would have been no need for the third prong. After all, statutes and regulations are meant to be interpreted so as to give every word meaning. Thus, for this case involving only the third prong of § 1491(b)(1) and allegations of violations of 10 U.S.C. § 3453 that do not challenge the solicitation or contract, we hold that Percipient is an interested party because it offered a commercial product that had a substantial chance of being acquired to meet the needs of the agency had the violations not occurred. It was important in this case that the federal regulations required an agency to ensure that “offerors of commercial services, commercial products, and nondevelopmental items other than commercial products are provided an opportunity to compete in any procurement to fill such requirements” of the agency with respect to procurement of supplies or services “to the maximum extent practicable.” 10 U.S.C. § 3453(a)(1), (3). Therefore, the protester could raise an argument based on this provision even in the absence of a solicitation and would have no opportunity otherwise to challenge an agency’s violation of this requirement. Therefore, for this case and others that involve only the third prong of 28 U.S.C. § 1491(b)(1) without a challenge of a solicitation or contract, the Federal Circuit held that a protester can be an interested party. If a protest does involve a solicitation or contract, then the third prong of § 1491(b)(1) does not seem to apply. 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 Federal Circuit Decision: Slightly Opens Protest Door to Non-Offerors first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

Happy Friday! July sure is flying by! We’ve been very busy here at SmallGovCon with all that is happening in the federal government contracting world. We have included an extensive list of informative articles for this week in review. At the top of our week in review articles, SmallGovCon contributor Nicole Pottroff was quoted in a touching Washington Post story that we have included this week, concerning the SBA’s 8(a) Program social disadvantage narrative requirements. Enjoy your weekend! He never saw himself as disadvantaged. Then the government had him write an essay. General Services Administration and Department of Defense seek record-setting federal purchases of clean electricity Maybe the micro purchase threshold is a little too micro GOP lawmakers demand SBA postpone IT upgrades amid year-end contract spending surge Why a federal court sunk a raft of construction industry rules from the Labor Department Election uncertainty doesn’t slow an ambitious regulation agenda Immersive Program Arms DOD, Builds Acquisition Professionals’ Innovation Skills DoD preparing to recompete contract for Advana Understanding Native-entity enterprises’ subcontracting relationships Tribal Consultation for HUBZone Program Updates and Clarifications and Potential Reforms under Executive Order 14112 CIO-SP3 contracts extended through April 2025 amid issues with successor House Passes Bill Establishing Veteran-Owned Small Business Contract Preference Program Why the State Department wants to set up federally-funded research and development centers GSA announces new political appointees Russian International Money Launderer Sentenced to 36 Months in Prison for Illicitly Procuring Large Quantities of U.S.-Manufactured Dual-Use, Military Grade Microelectronics for Russian Entities The post SmallGovCon Week in Review: July 15-19, 2024 first appeared on SmallGovCon - Government Contracts Law Blog.View the full article