Search the Community

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

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 first few common misconceptions surrounding the program (with the rest to follow in Part II). 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 #1 – “Any JV competing for contracts or pursuing sole-source contracts set aside for small businesses, 8(a)s, HUBZones, WOSB/EDWOSBs, or VOSB/SDVOSBs must have an SBA-approved MPA in place.” Correction #1 – “Any JV competing for contracts or pursuing sole-source contracts set aside for small businesses, 8(a)s, HUBZones, WOSB/EDWOSBs, or VOSB/SDVOSBs must have an SBA-approved MPA in place if either venturer is large for that contract’s size standard.” Indeed, an SBA-approved MPA is only required for two venturers to pursue a set-aside contract through a JV (competitively or through sole-sourcing) if one of those venturers is considered other-than-small for the size standard corresponding to the contract the JV seeks. In that case, once the venturers have an SBA-approved MPA in place, and have properly formed a JV entity/executed a compliant JV agreement, that MPP JV may then pursue any contract the protégé is eligible for, both in size and, if further set aside, in status too (i.e., for a WOSB set-aside contract with a $19 million size standard, the protégé must be a WOSB and must have average annual receipts under $19 million over the last five years). Just a few caveats here—the MPP JV (like all JVs) must: (i) be registered in SAM.gov prior to bidding the project; (ii) ensure the JV agreement is fully-executed prior to bidding the project; and (iii) either be project-specific or have a project-specific addendum (also executed prior to bidding). Also, but only for an 8(a) MPP JV or 8(a) JV pursuing an 8(a) sole-source, SBA will need to approve of the JV agreement and any addendums/amendments to it (in addition to any required-MPA) prior to the JV receiving the 8(a) sole-source award. Otherwise, two (or more) venturers are free to pursue any set-aside contract through a JV (competitive or sole-sourced) without an SBA-approved MPA, provided that: (i) those venturers both qualify as small for the size standard corresponding to the contract’s assigned NAICS code; and (ii) the managing venturer qualifies for any additional status the contract may be set aside for (i.e., for a WOSB set-aside contract with a $19 million size standard, the managing venturer must be a WOSB whose size does not exceed $19 million). Misconception #2 – “The rules prohibit SBA from finding affiliation between a mentor and protégé if they have an SBA-approved MPA in place.” Correction #2 – “The rules prohibit SBA from finding affiliation between a mentor and protégé based on the assistance provided under an SBA-approved MPA but may still find affiliation between such mentor and protégé for other reasons.” Again, the primary purpose underlying SBA’s MPP (and the assistance and JV options allowed thereunder) is the regulatory “shield” from affiliation it provides to a protégé and its SBA-approved mentor. Without an SBA-approved MPA in place: (i) one business providing multiple types of assistance to another could be found indicative of affiliation; and again, (ii) a large business could not JV with a small business for set-aside work of any kind, as they would be deemed affiliates and their sizes aggregated. So, while this “shield” is obviously quite powerful, it is crucial to keep in mind that it still has it limits. Specifically, SBA’s affiliation rules state the following: A firm that has an SBA-approved mentor-protégé agreement authorized under § 125.9 of this chapter is not affiliated with its mentor or protégé firm solely because the protégé firm receives assistance from the mentor under the agreement. Similarly, a protégé firm is not affiliated with its mentor solely because the protégé firm receives assistance from the mentor under a federal mentor-protégé program where an exception to affiliation is specifically authorized by statute or by SBA under the procedures set forth in § 121.903. Affiliation may be found in either case for other reasons as set forth in this section. Just a few things to note here: (i) my use (and SBA’s) of the repetitive precursor “SBA-approved,” as an MPA only provides this affiliation “shield” in the first place if SBA approves of it prior to the mentor providing assistance and, for an MPP JV, prior to bidding; (ii) my careful selection of the term “shield” for your visual representation of the MPP’s affiliation protections, rather than a broader-coverage term (like “blanket” or “immunity”), as the rule above clearly states that affiliation can always be found for “other reasons” than the mentor providing assistance “under the agreement”; and (iii) while most forms of assistance that are not anticipated by nor covered in the written, SBA-approved MPA will not receive protection from a finding of affiliation, it is generally accepted that a protégé and its SBA-approved mentor can JV in accordance with SBA’s rules whether the MPA spells that one out or not. * * * If these first couple MPP misconceptions sparked your interest, keep your eyes peeled for Part II, coming soon! Oh yea, and this is only the first “Common Misconceptions” article in what promises to be a fun and exciting new series for our SmallGovCon blog readers; so stay tuned for many more on a variety of other topics. 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 I) first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

I am incredible honored by the shout-out I received in this recent, powerful Washington Post article, by the talented Julian Mark. Mark also wrote the prior article including my statements about the 8(a) Program litigation and changes that took place last summer, which you can read about here. This second article covers the incredible story of 8(a) Program graduate, Curtis Joachim, and my work with him in drafting a successful social disadvantage narrative to remain in the program for his final year—a requirement (now) for all applicants and participants imposed by Federal District Court and implemented by SBA. I am so fortunate I had the opportunity to work with Curtis and so grateful for his strength and grace in sharing his inspiring story. The post He never saw himself as disadvantaged. Then the government had him write an essay. -Julian Mark (Washington Post) first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

The Veteran-Owned Small Business (VOSB) Program has long held a sort of unheralded position in SBA and federal contracting. Unlike its much more expansive counterpart, the Service-Disabled Veteran-Owned Small Business (SDVOSB) Program, the VOSB Program only allows for set asides for VOSBs for VA procurements (and even within VA SDVOSB companies are in a higher tier than VOSBs). In contrast, all agencies can set aside contracts for SDVOSBs. This has limited the desirability of admission to the program for many veteran owners, many of whom do not do work, that the VA needs. But things might be changing, as Congress has proposed a big step towards expanding what agencies can set-aside contracts for VOSBs. As noted above, at the present time, only the VA can set aside prime contracts for VOSBs. VOSB status can be helpful when it comes to subcontracting in some situations, but otherwise, the program is very limited in its scope. Considering that the VA is quite a small agency compared to some of the behemoths like the Department of Defense (DoD) and Department of Health and Human Services, the VOSB program often is overlooked by contractors, and, to a degree, one can’t blame them. However, on June 14, 2024, the House of Representatives approved language for the upcoming 2025 National Defense Authorization Act that would change things if it becomes law. This language, located at Section 861, would allow DoD to set aside contracts for VOSBs: “…a contracting officer may award contracts on the basis of competition restricted to small business concerns owned and controlled by veterans if the contracting officer has a reasonable expectation that two or more small business concerns owned and controlled by veterans will submit offers and that the award can be made at a fair and reasonable price that offers best value to the United States.” This new provision would also set up a VOSB contracting goal for DoD. On top of this, it also would allow DoD contracting officers to sole source contracts to VOSBs if the contracts are below certain dollar thresholds. All that would be required for such sole source awards is that the contracting officer determines the VOSB is a responsible source and that the award can be made at a fair reasonable price that offers best value to the United States. Steven Koprince (retired founder of SmallGovCon), made a great observation about this sole source rule over on his LinkedIn page: “To me, what’s most striking about the VOSB sole source authority under Section 861 is what’s missing: a ‘rule of two’ restriction. For example, FAR 19.1405, for SDVOSBs, provides that sole source awards are permitted only where ‘[t]he contracting officer does not have a reasonable expectation that offers would be received from two or more service-disabled veteran-owned small business concerns.’ Similar restrictions exist for HUBZone sole source contracts and women-owned small business sole source contracts. Section 861 would create a sole source authority much closer to that available under the 8(a) Program, which omits a “rule of two” requirement…” In other words, VOSB sole sourcing (for DoD) would be far easier for contracting officers to do than sole sourcing for SDVOSBs, woman-owned small businesses, and HUBZone businesses. As Steven notes, it would be more like the 8(a) program’s system. This is quite expansive authority, and it should give a major boost to the VOSB program, if it becomes law. Further, since an SDVOSB is necessarily also a VOSB, it basically helps SDVOSBs too. It is very important to clarify here that the above all only would apply to DoD contracts. Non-VA or DoD agencies still would not be able to set aside contracts for VOSBs, let alone sole source contracts to VOSBs. So, the VOSB program would still not be as expansive as its SDVOSB counterpart or the other socioeconomic programs. It’s also important to note that while the VA must give preference to VOSBs first (after SDVOSBs), there is no such requirement with the DoD. That all said, this should be very welcome news to VOSBs. For a long time, the VOSB program has essentially been neglected by the federal government, and while it is nice that the VA can set aside contracts for VOSBs, the program has been heavily overshadowed by the SDVOSB program and, considering again the VA’s size relative to the rest of the government, the effect is that the VOSB program has been limited to the point that many veteran owners have found the program unhelpful. We think this move makes sense considering the natural connection between the Department of Defense and our veterans, and should make the program far more advantageous for veteran owners to get into. That said, it is not yet a law. We will provide updates as the bill proceeds through Congress. 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 VOSB Program Possibly Expanding? Congress Takes Next Step Towards VOSB Expansion first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

If you have ever looked into socio-economic certifications through the SBA or “set-asides” as some call them, you undoubtedly have run into SBA’s certify portal. It certainly is a big part of the small business federal contracting landscape, with likely massive numbers of site visitors a day. However, it will soon be updated, causing a pause on new applications very soon. SBA has put out a webpage informing the public that SBA’s certification portal (certify.sba.gov) will be “upgrading how our customers apply for and manage their federal contracting certifications.” This of course is likely a good thing, as any efficiency in federal contracting is generally welcome by the federal government and contractors alike. However, there are some consequences to the upgrade process that contractors need to be aware of, including application pauses. The upgrade will “start” on August 1, 2024 and is anticipated to go to at least early September 2024. As part of this, SBA states: Initial certification applications will not be accepted during the upgrade period. New and prospective applicants for federal small business certification are encouraged to wait until the upgrade is complete before applying. Contractors needing to renew during the upgrade period will receive guidance from their certification program. Applications submitted before August 1 will continue to be processed during the upgrade period in the order received. The SBA also claims that the system will be able to take new applications in early September, hinting that the pause in receiving applications will be at least a month long, but leaving the door open for a longer pause. The SBA also assures that contractors already certified “will not be impacted by the pause in applications.” Importantly, SBA states that Contractors facing a proposal deadline that could be impacted by certification status before August 1, or that could be impacted by this application pause should contact: “certifications@sba.gov and provide the contract number, agency, and bid due date.” SBA states that more resources and guidance will be produced in the coming days, and to review a fact sheet discussing “what to expect.” This fact sheet provides much of the same information as the webpage, but does further clarify the following certifications are “impacted” by the upgrade: Women-Owned Small Business (WOSB) Economically Disadvantaged Women-Owned Small Business (EDWOSB) 8(a) Business Development Program Veteran Small Business Certification (VOSB) Service-Disabled Veteran-Owned Small Business (SDVOSB) Historically Underutilized Business Zones (HUBZone) Program The Fact Sheet also states that the most current guidance will be posted on certify.sba.gov, and individuals can contact the SBA at certifications@sba.gov or 202-205-6459. The biggest impact of this pause will likely be contractors who are close to applying or planning to apply for a certification through the portal; contractors that have a certification renewal due around or during the pause; and contractors facing certification issues and a proposal deadline around the time of the pause. To prepare for this pause, contractors will likely need to review their certification deadlines, proposal deadlines, and reassess their planned certification application timelines (if they were looking at applying in August 2024 to a SBA socio-economic program). Also, this likely will not be the last the SBA publishes guidance on this pause, so contractors should make sure to routinely check SBA’s websites for further updates and guidance. Luckily, the SBA has requested to be contacted for questions, and even stated that contractors should reach out in certain situations. So, contractors should not hesitate to reach out to the SBA for more information and assistance with understanding this impending certification portal pause. 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 Certify Portal Applications to be Paused first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

Hello readers and happy Friday! We hope you had a nice 4th of July and were able to spend some time with friends and family. This week’s round-up of federal government news, includes some cautionary tales on why defrauding the government is a very bad idea, the impact of the Boeing guilty plea on its federal contracts, and commentary on the Percipient.ai case and its effect on COFC jurisdiction. Have a great weekend! Former Defense Department Employee Pleads Guilty to Defrauding Government in Fake Invoices Scheme TAKE IT TO THE BANC: A General Plea For Increased Consistency And Clarification Contracting officers benefit from a bot in the seat to their right Pentagon to assess Boeing deal with DOJ before deciding on impact of guilty plea Boeing in Talks With US Defense Department on Impact of Guilty Plea, Source Says Contractors see new cyber reporting rules everywhere they look Brooklyn Resident and Canadian National Plead Guilty to Multi Million Dollar Export Control Scheme NDAA amendment to give more authority to DoD components to buy cyber products The post SmallGovCon Week in Review: July 8-12, 2024 first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

We at SmallGovCon wanted to take a moment to wish everyone a happy and safe Independence Day! It’s always a great time to celebrate our nation and be with family and friends. But it’s also a time to reflect on the sacrifices made by those who came before us and those who have served our country in myriad ways. The citizens of a nation must always strive to improve its governance and civil participation. And federal contractors are a key part of how the government operates. Happy 4th of July! The post Happy Independence Day from SmallGovCon! first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

The federal small business representation system relies in some part on self-certification and in some part on review by the Small Business Administration (SBA) and protests by competitors. The System for Award Management (SAM) is one key part of the federal procurement apparatus. Small businesses looking to take advantage of SBA’s socioeconomic programs must be registered in SAM, and crucially, must maintain up-to-date information in the system. Failure to do so can carry severe consequences, ranging from suspension and disbarment to civil and/or criminal penalties, including massive fines and even imprisonment. We’ve written before about some of the confusion contractors may have regarding self-reporting in SAM. A recent General Services Administration (GSA) Office of Inspector General (OIG) report is a reminder to federal contractors about the importance of being accurate in representing small business status. It details several investigations into small business misrepresentations, and reminds contractors of the severe penalties that can result from misrepresentation. In this post we’ll highlight the examples provided by GSA OIG to show just what is at stake when a small business fails to update (or knowingly misrepresents) their status, and offer some clarification of the Federal Acquisition Regulations to help you avoid similarly extreme penalties. The OIG report highlights a number of situations that federal contractors should take note of and look to avoid. While we at SmallGovCon often talk about the protest process as a way for competitors and agencies to enforce the small business system, agencies can also investigate potential misrepresentations by taking advantage of statutes like the False Claims Act. Here are a few examples to remind contractors to stay on the straight and narrow. Former Government Contractor Receives 15-Month Prison Sentence One would like to think it goes without saying that defrauding the government is not a wise strategy for long-term success (or staying out of prison). Part of the reason the penalties for misrepresentation are so high is to combat the temptation to abuse the trust inherent in the system. Some contractors seem to think the risk worthwhile however, and the results can be ugly. Jonathan Walker found this out the hard way when a GSA OIG investigation determined that he had fraudulently represented his company, Walker Investment Properties, as a service-disabled veteran owned small business (SDVOSB) in SAM. He proceeded to use that (mis)representation to secure two Department of Defense contracts valued at over $1.9 million. Walker had not been disabled from military service (in fact, he never served in the military at all) and obviously was therefore not qualified for contracts set aside for SDVOBs. He was indicted by a federal grand jury on charges of wire fraud and making false statements, and plead guilty to wire fraud on July 11, 2023. Three months later he was sentenced to 15 months in prison, 1-year supervised release, $72,000 in restitution, and a $10,000 fine. Note that this representation involved the old, self-reported system of SDVOSB certification. As we’ve discussed, the SDVOSB program no longer allows self-certification. Company Ordered to Pay $3.9 Million Following Small Business Status Misrepresentation This situation illustrates how a company that initially qualified for a certification risks massive consequences when it fails to update its SAM profile following big changes to the business. GSA OIG’s investigation resulted in Planned Systems International, Inc. (PSI) and its subsidiary, QuarterLine Consulting Services, LLC agreeing to pay $3.9 million. This payment resolved allegations that QuarterLine misrepresented its women-owned small business (WOSB) status to obtain a task order they were ineligible to receive on an indefinite delivery, indefinite quantity (IDIQ), multiple-award contract to provide physician, nursing, and ancillary services at military treatment facilities. At the time of the IDIQ award, QuarterLine was a WOSB and eligible to compete for set-aside task orders. However, QuarterLine was later acquired by PSI, which caused QuarterLine to forfeit its WOSB status. Had QuarterLine been diligent enough to adhere to FAR 4.1201 and its missive to keep SAM representation “current, accurate, and complete,” it may have avoided a several-million-dollar penalty. Instead, it failed to update its certifications in SAM as required. QuarterLine subsequently submitted a proposal for a task order which falsely represented that it was a WOSB and that its SAM representations were current, complete, and accurate. Ultimately, on January 26, 2024, PSI and QuarterLine agreed to pay $3.9 million dollars to resolve the allegations that they misrepresented their WOSB status. Company Agrees to Pay $1.75 Million to Settle Civil Fraud Allegations The Pavion Company (Pavion) agreed to pay $1.75 million to settle allegations of civil fraud, specifically that Pavion and its subsidiaries improperly obtained government contracts set aside for small businesses. Pavion ceased to qualify as a small business after its predecessor company was acquired in 2016 by the private equity firm Tower Arch Capital. After its acquisition, Pavion, including two of its subsequently acquired subsidiaries, falsely certified themselves as qualified small businesses in SAM. GSA OIG investigated this case alongside just about every three-letter federal agency you can think of, and the result was a cool $1.75 million penalty. The list of agencies involved in the investigation included DCIS, AFOSI, HHS OIG, Army CID, Naval Criminal Investigative Service (NCIS), DOJ OIG, Department of the Interior (DOI) OIG, Treasury Inspector General for Tax Administration, VA OIG, Department of Commerce (Commerce) OIG, DOE OIG, Coast Guard Investigative Service (CGIS), Department of Transportation OIG, Federal Housing Finance Agency, Department of State OIG, National Transportation Safety Board, Occupational Safety and Health Review Commission, and Department of Homeland Security OIG. As private equity moves into investments in federal contractors, it is important to stay mindful of the duty to stay current on small business certifications in SAM. FAR Requirements and When to Update Your SAM Profile As these recent examples hopefully indicate, the risk one takes in waiting to update a SAM profile following changes in business is not worth whatever ostensible benefit might be gained through that kind of misrepresentation. These are obviously extreme examples, in which the contractors in question allegedly made these misrepresentations knowingly, in hopes of getting away with violating federal regulations. Even if a misrepresentation is made through an honest mistake, however, the consequences can be dire should the government investigate. One common misconception contractors sometimes labor under is the belief that SAM registrations need only be updated on an annual basis. This yearly standard is the minimum acceptable, of a business that has not experienced any changes deemed noteworthy by SBA, but it will not shield a business that has grown, or changed ownership, or acquired a new subsidiary, or any number of changes that may affect the business’s certifications. FAR 4.1201 requires offerors and quoters to complete annual representations and certifications in SAM, but in addition it states: All registrants are required to review and update the representations and certifications submitted to SAM as necessary, but at least annually, to ensure they are kept current, accurate, and complete. The representations and certifications are effective until one year from date of submission or update to SAM. Obviously, the required information in a business’s SAM profile varies depending on the certifications claimed or applied for, but when in doubt, the best policy is to update your SAM registration any time a change in your business occurs. There are also requirements to update SBA for various socieconomic programs. If you aren’t sure about a recent change to your business and whether you should update your SAM registration (or other government databases) to reflect it, consult counsel, and err on the side of caution. No one wants to wind up in a GSA OIG semiannual report. 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 GSA Report: Be Truthful about Small Business Certifications first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

Join federal government contracts attorney Greg Weber along with SBA representative, Sophia Chou, as they discuss the tips and pitfalls of subcontracting and teaming on this webinar hosted by the South Dakota APEX Accelerators. Topics covered will include: Why Use a Teaming Agreement? Principles and Best Practices of Subcontracts & Teaming Agreements Understanding Small Business Categories Meet SBA Government Contracting’s CMRs Roles of a CMR How to Locate Subcontracting Opportunities through Subcontracting Plan Requirements Registration link here. The post Webinar! Finding Federal Subcontracting Opportunities/Subcontracts, July 9, 2024, 9:00am CDT first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

Please join John Holtz and me, for this informative webinar hosted by Texas El Paso APEX Accelerators. as we discuss joint venture agreements and teaming. For large and small contractors alike, teaming agreements and joint venture agreements can be essential to winning and successfully performing federal government contracts. In this presentation, we will explain how to develop, negotiate and administer agreements that are both compliant and effective. The presentations will cover both the key rules (such as flow-downs and ostensible subcontractor affiliation) and best practices for agreements that go beyond the bare minimum legal requirements. Register here. The post Webinar! Joint Venture and Teaming, July 9, 2024, 10:00-11:30am MDT first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

Good morning and happy Friday! After the heatwave and rain the tomatoes are starting to ripen here in the Midwest. It’s always fun to visit our local farmer’s market at this time of the year to take advantage of the abundant harvest. We hope you had a great week and have some fun things planned for the weekend. This week in federal government contracting news, be sure to look at articles related to an overview of governmentwide contracting, thoughts about government buying forecasts, and potential AI rules for federal agencies. US Judge Blocks Biden Wage Rule for Construction Projects A Snapshot of Government-Wide Contracting for FY 2023 (interactive dashboard) USDA Announces Enhanced Resources to Support Businesses Interested in Procurement Opportunities Air Force Seeks Proposals for $7B CFT Labor Augmentation Support Requirements Program Small Businesses Aren’t Getting Enough Defense Work. Here’s How to Help Them GovCon Index Took Positive Turn Last Week MIL-OSI Security: Midlothian Man Sentenced in One of Two Cases Involving Fraud, Bribery Reminder: Deadline for Contractors to Certify AAP Compliance is July 1, 2024 Sikorsky Support Services Inc. and Derco Aerospace Inc. Agree to Pay $70M to Settle False Claims Act Allegations of Improper Markups on Spare Parts for Navy Trainer Aircraft Department of Labor Begins Debt Collection Against Ohio Landscaping Company Barred From Federal Worker Program After Owner Allegedly Threatened Workers Senate Proposal Would Set Government AI Procurement Standards Contractors find some ‘buying forecasts’ better than others Biden-Harris Administration honors GSA with five Presidential Federal Sustainability Awards The post SmallGovCon Week in Review: June 24-28, 2024 first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

There are multiple overlaps in SBA’s socioeconomic rules for the 8(a) Program, Women-Owned Small Business Program (WOSB), and the Service-Disabled Veteran-Owned Small Business (SDVOSB) Program. One in particular has often caused some confusion for our clients: the full-time devotion requirement. This rule generally requires that the service-disabled veteran owner (or equivalent key owner in the other programs) work full time for the company with the SDVOSB status. But what does this mean in practice, especially for start-up companies where the owner may be working a second job. A recent SBA decision sheds some light on the full-time devotion rule. SBA considered this issue In & Out Valet Co., SBA No. VSBC-363-P, 2024 (June 12, 2024). That case arose from an SDVOSB protest filed by a competitor after Crown Based Services, LLC (Crown) won an award for valet services for a VA Medical Center. One protest argument concerned the full-time devotion requirement. The Full-Time Requirement SBA regulations bar a service-disabled veteran owner from engaging “in outside employment that prevent[[s] [him or her] from devoting the time and attention to the concern necessary to control its management and daily business operations.” 13 C.F.R. § 128.203(i). Normally, the service-disabled veteran “must devote full-time during the business’s normal hours of operations”. Id. Additionally, “[w]here a qualifying veteran claiming to control a business concern devotes fewer hours to the business than its normal hours of operation, SBA will assume that the qualifying veteran does not control the concern, unless the concern demonstrates that the qualifying veteran has ultimate managerial and supervisory control over both the long-term decision making and day-to-day management of the business.” Id. So, the rule sets up a default assumption–that a veteran owner who does not work full time for the SDVOSB during normal business hours does not control it. But it allows a company to demonstrate veteran control even in the absence . However, historically, it has been hard to overcome this assumption when dealing with the VA Center for Verification and Evaluation (the predecessor to the current CVE at SBA). Business Hours In this case, the veteran owner “confirmed that he operates Crown full time, during Crown’s normal business hours of 8:00am to 2:00pm, Monday to Friday. Although [the veteran owner] holds outside employment as an insurance agent from 2:00pm to 8:00pm Monday to Friday, this outside employment does not prevent Mr. Hill from working full time with Crown, during Crown’s normal business hours.” Based on this confirmation from Crown, OHA denied the protest and concluded that the veteran owner met the full-time devotion requirement. The key takeaway here is that, if a veteran owner (or other key individual for 8(a) or WOSB Program) works a second job, it must be very clear that there is no overlap between the working hours of the SDVOSB company and the second job. Here, OHA did not question the ability of someone to work 12-hour days. After all, that is doable. The key was that there were clear hours set aside for the SDVOSB company. Contrast this situation with a case we recently discussed. In the prior case, the SDVOSB failed to clearly describe the working hours at the SDVOSB versus the second job and was found noncompliant with the rule. If you have questions about the full time devotion requirement for the SDVOSB, 8(a), or WOSB programs, let us know. 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 Good Timing: SBA Decision on Full-Time Devotion Allows For Two Jobs if No Hours Overlap first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

We often see price realism in protests when the protester is making the claim that the awardee’s price, which was lower than the protester’s price, is low enough that the awardee would not be able to perform the work as solicited. Most often, GAO will determine that the agency’s price realism analysis was acceptable. However, in Criterion Corporation, B-422309 (Apr 16, 2024), the agency determined that the lowest priced offeror’s price was too low, and that the company could not possibly perform at the price offered. This led to the next lowest priced offeror receiving the award, and the lowest priced offeror protesting that decision, ultimately winning its argument. Price Realism Basics First things first, let’s start with a brief overview of what a price realism analysis includes. The purpose of a price realism analysis is to determine whether proposed prices: Are realistic for the work to be performed; Reflect a clear understanding of the requirements of the contract; and Are consistent with the offeror’s unique method of performance. FAR 15.404-1(d)(3). The purpose of a price realism analysis is to assess the risk pertaining to contract performance for the proposal being assessed. When GAO reviews an agency’s price realism analysis, GAO looks to whether the analysis performed by the agency was reasonable. Reasonable price realism analysis “must include consideration of the proposed technical approach.” Any price realism analysis that only compares prices will not pass GAO’s review. The depth of the analysis, however, is a matter reserved for the agency’s discretion. Analysis of Criterion Corporation’s Proposal As mentioned before, Criterion’s proposal was the lowest priced offer in response to the solicitation. The type of work solicited is not very important here. What is important is that the agency compared Criterion’s price with the average price of other offerors and the internal government estimate and determined that Criterion’s price was “unrealistically low.” This led to the price realism analysis. When doing the price realism analysis, the agency noted that Criterion proposed a slightly greater number of FTEs than the second-lowest priced offeror, which led the agency to conclude that “Criterion’s proposed unit prices for the fixed-price CLINs must be unrealistic because Criterion simply could not propose more FTEs at its much lower overall price.” The agency also compared Criterion’s proposed labor rates, noting that its slightly lower than average rates, when compared to the second-lowest offeror led to the conclusion that “Criterion’s proposed unit prices for the fixed-price CLINs must be unrealistic because they could not possibly be consistent with the proposed labor rates.” GAO’s Review of the Protest GAO reviewed the agency’s price realism analysis and determined that the agency did not conduct a reasonable price realism analysis. Though the agency looked at the number of FTEs, the agency didn’t look at the technical aspects of Criterion’s proposal. As mentioned above, the agency compared Criterion’s proposal with that of the second-lowest offeror and concluded that the fact that Criterion’s proposal provided for more FTEs with a lower price than the other offerors meant that the price was not realistic. There was no consideration given to the different labor categories and labor mix, meaning the types and experience levels of the proposed workers or the labor utilization strategies. GAO stated “without knowing how the labor mix and technical solutions compared there was no way for the agency to know if its conclusions about Criterion’s price were based on a true apples-to-apples comparison.” In the end, GAO found that the agency did not perform a proper price realism analysis, and recommended that the agency conduct a new price realism evaluation of Criterion’s proposal, which should include an evaluation of the price in relation to the technical solution. Questions about this post? Email us. Need legal assistance? Call us at 785-200-8919. Looking for the latest government contracting legal news? Sign up here for our free monthly newsletter, and follow us on LinkedIn, Twitter and Facebook. The post GAO Protest Sustain: Flawed Price Realism Analysis first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

When it comes to SBA’s many small business socioeconomic certification programs, the 8(a) Business Development Program is often considered SBA’s “golden child”–as its potential benefits are nearly endless. But it certainly wouldn’t be a “golden child” at all if just anyone could get into it. The 8(a) Program has some of the most extensive and strict requirements out there. In this post, we’ll dig into the basic components of one of those requirements: economic disadvantage. But don’t fret, this post is worth a read for our experienced 8(a)-ers and those just learning about the program. For the former, the information below can serve as a refresher on the basics of economic disadvantage–but also, a source for SBA’s most recent economic disadvantage thresholds (as of 2024, as these are updated periodically for inflation). For the latter, we suggest reviewing these basics of economic disadvantage along with our other Back to Basics blogs on the 8(a) Program (this one discussing the program, generally, and this one discussing all the rules for eligibility). What does it mean to be “economically disadvantaged” in the context of 8(a) generally? As you may already know, or may have read about in the other blogs linked above, SBA’s rules for basic 8(a) eligibility require the applicants to be unconditionally owned and controlled by one or more individuals who are both socially and economically disadvantaged. According to SBA, an economically disadvantaged individual is simply a socially disadvantaged individual “whose ability to compete in the free enterprise system has been impaired due to diminished capital and credit opportunities as compared to others in the same or similar line of business who are not socially disadvantaged.” Per SBA: In considering diminished capital and credit opportunities, SBA will examine factors relating to the personal financial condition of any individual claiming disadvantaged status, including income for the past three years (including bonuses and the value of company stock received in lieu of cash), personal net worth, and the fair market value of all assets, whether encumbered or not. An individual who exceeds any one of the thresholds set forth in this paragraph for personal income, net worth or total assets will generally be deemed to have access to credit and capital and not economically disadvantaged. Now, again, economic disadvantage is just one of several financial/economic based requirements for the 8(a) Program; but it is unique in that economic disadvantage looks at finances of the disadvantaged individual owner(s)/manager(s) who will be qualifying the applicant/participant company for the program (not the finances of the applicant/participant company itself). And this is important to keep in mind as we run through the three thresholds that make up this 8(a) requirement, as it gives rise to some common confusion our experience assisting with the 8(a) Program. What are SBA’s current economic disadvantage thresholds? SBA’s economic disadvantage regulation (found at 13 C.F.R. § 124.204) lays out the “cut-offs” or maximum thresholds for the three different areas of an individual’s finance that SBA will assess. And these are an all or nothing package-deal. SBA will reject an applicant (or graduate/terminate a current participant) if any of its individual owners/managers upon whom eligibility is based fall above any of these three thresholds while applying to or participating in the 8(a) Program. But SBA is not unreasonable when it comes to the constantly changing economy we live in; so, as we’ve written about previously, these thresholds are reevaluated periodically, with the most recent increase occurring in 2022 to account for inflation. First, the disadvantaged individual’s personal net worth must be less than $850,000. This “adjusted net worth” calculation, as we like to call it, excludes a few things, though, including: (1) the individual’s equity in the applicant/participant company; (2) their personal residence; and (3) any investments they hold in an IRA or other retirement account. Notably, one’s equity in their own company may depend on how specifically that company and its finances are valued. So, while this threshold (like the other two) looks at the individual’s finances, there is a crucial interplay with the company’s own finances to keep in mind, as some applicants/participants are able to find different valuations of the company and its assets from different sources. Second, the individual’s personal income must not exceed $400,000 per year when averaged over the three years preceding the application (or the time of the reevaluation, for current participants). In general, if one exceeds this threshold, SBA will presume the individual is not economically disadvantaged. But take note of SBA’s specific language here; this threshold is a bit different than the other two discussed in this post. This one applies a presumption, allowing a bit of wiggle room for special circumstances (while exceeding either of the other two thresholds results in automatic rejection/termination). This presumption may be rebutted if the individual can demonstrate to SBA that their income for a specific period of time considered in the calculation was not typical or unusual–and that it is unlikely to occur again in the future. It can also be rebutted if the individual can show losses commensurate and directly related to the earnings were suffered and should be deducted from the calculation. And it can be rebutted if the individual has an S corporation, LLC, or partnership and can provide documentary evidence showing such income was either reinvested in the company or used to pay the company’s taxes. Third, the fair market value of all assets held by the disadvantaged individual–this time, including their primary residence and equity in their company–must be at or below $6.5 million. Like the first threshold for adjusted net worth, however, this requirement still excludes investments in IRAs or other retirement accounts. But that is about it. As SBA’s rule regarding this threshold states, the “individual will generally not be considered economically disadvantaged if the fair market value of all his or her assets” exceeds this value. What will SBA look at to determine whether an individual is economically disadvantaged under these thresholds? SBA’s economic disadvantage rules require that “[e]ach individual claiming economic disadvantage must submit personal financial information.” This often includes the individual’s tax records, financial statements, and SBA’s own forms covering their finances and assets. The rules also note the following regarding the marital status of the individual being reviewed: When married, an individual claiming economic disadvantage must submit separate financial information for his or her spouse, unless the individual and the spouse are legally separated. SBA will consider a spouse’s financial situation in determining an individual’s access to credit and capital where the spouse has a role in the business (e.g., an officer, employee or director) or has lent money to, provided credit support to, or guaranteed a loan of the business. SBA does not take into consideration community property laws when determining economic disadvantage. Finally, if you are thinking, at this point, how easily one could simply “move money around” to meet these thresholds for economic disadvantage–SBA is one step ahead of you. The economic disadvantage rules also give SBA the authority to “look back” at any transfers within the last two years of the 8(a) application or reevaluation of the 8(a) participant, and with few exceptions, to include such in the calculations. SBA’s rules state: SBA will attribute to an individual claiming disadvantaged status any assets which that individual has transferred to an immediate family member, or to a trust a beneficiary of which is an immediate family member, for less than fair market value, within two years prior to a concern’s application for participation in the 8(a) BD program or within two years of a Participant’s annual program review, unless the individual claiming disadvantaged status can demonstrate that the transfer is to or on behalf of an immediate family member for that individual’s education, medical expenses, or some other form of essential support. The only other exception in the rules is for “any assets transferred by that individual to an immediate family member that are consistent with the customary recognition of special occasions, such as birthdays, graduations, anniversaries, and retirements.” But outside of these clearly stated exceptions, SBA tends to apply this rule quite strictly. * * * So, that is 8(a) economic disadvantage in a nutshell. But again, before you get too excited about your personal financial compliance here, don’t forget about all the other 8(a) requirements, including those looking at the company’s finances. One such rule is the “Potential for Success” rule (covered in this prior blog and this blog), requiring 8(a) applicants/participants to demonstrate “reasonable prospects for success in competing in the private sector.” In other words, SBA wants to be confident your business will make it before they hand you up to nine years of grade-A federal contracting opportunities. And finally, like all of the SBA’s socioeconomic programs, there are still specific size requirements for any company applying to or participating in the 8(a) Program (which you can read about here). But as we have repeatedly assured you all, the 8(a) Program almost always seems to be worth it. Questions about this post? Email us. Need legal assistance? Call us at 785-200-8919. Looking for the latest government contracting legal news? Sign up here for our free monthly newsletter, and follow us on LinkedIn, Twitter and Facebook. The post Back to Basics: 8(a) Program Economic Disadvantage first appeared on SmallGovCon - Government Contracts Law Blog.View the full article

Happy Friday and we hope you had an enjoyable Juneteenth. Yesterday was the first day of summer and our humidity was a balmy 96% on the first official day! Whew…so hot. I think that everyone here would agree that we hope that won’t be the norm. We hope you have a great weekend and find a nice cool place to read the articles we have included below. Enjoy! This week in federal government contracting news: agencies are cracking down on everything from cybersecurity to discrimination in the federal marketplace; GAO is pushing for faster and more private procurements; Artificial Intelligence continues to make its way into government acquisitions and may even aid in disabled veterans living independently; and GSA schedules and our U.S. Supply Chains continue to grow in strength and popularity. Read about these and other happenings in the procurement world below. GSA Touts Updated New Procurement Services to Agencies Presidential Innovation Fellows launches first cohort focused exclusively on Artificial Intelligence Consulting Companies to Pay $11.3M for Failing to Comply with Cybersecurity Requirements in Federally Funded Contract Biden Administration Establishes Council Tasked With Ensuring Resilience of US Supply Chains SBA announces $30M in funding for Women’s Business Centers GAO Says Pentagon Still Challenged With Slow Contracting Speed GSA contracting officers are driving schedule holders crazy VA looking at ‘smart home’ tech to keep aging, disabled vets living independently SBA pushes back timeline to implement GAO privacy recommendation Combatting Discrimination in Our Nation’s Largest Employer—the Federal Government The post SmallGovCon Week in Review: July 17-21, 2024 first appeared on SmallGovCon - Government Contracts Law Blog.View the full article