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  1. Under 13 C.F.R. § 124.506, if an 8(a) contract price would exceed a certain threshold ($7 million for manufacturing contracts, $4.5 million for others), in most cases, the agency must compete the set-aside. 13 C.F.R. § 124.506(a)(5) is a provision meant to close up what otherwise would be a loophole in the rules. It states that “[a] proposed 8(a) requirement with an estimated value exceeding the applicable competitive threshold amount may not be divided into several separate procurement actions for lesser amounts in order to use 8(a) sole source procedures to award to a single contractor.” But this rule does not apply in all circumstances. In particular, it does not apply to bridge contracts. In Anika Systems, Inc., B-422187 (Feb. 1, 2024), the SEC (the federal one, not the football one), had a two-step acquisition plan for data management services. It would sole source the first part to 8(a) participant Peregrine Advisors Benefit, Inc. (Peregrine) and compete the second part, worth $43 million, for 8(a) participants to bid on. The first part in 2022 went through without issue. But the second part of the acquisition was protested by unsuccessful offerors, resulting in the SEC taking corrective action. The problem was that now, the 2022 contract to Peregrine was about to expire with no successor to take on the data management services. As such, the SEC offered a bridge contract worth $4.2 million to Peregrine to continue the work while the second part of the acquisition was carried out. Anika Systems, Inc. (Anika), one of the competitors for the second part of the acquisition protested this bridge contract. Anika had some good points to make on this. Most notably, Anika argued that this bridge contract was basically inseparable from the 2022 contract as both contracts involve provision of the exact same services, and that, combined, the requirements had a value that exceeded the 8(a) sole source dollar limit. The SEC countered that the bridge contract wasn’t an attempt to split its requirement into smaller procurements so it could sole source the work to Peregrine. It argued that the bridge contract was a different requirement since it was issued in light of the protests and corrective action for the second part of the acquisition. The SEC also stated that 13 C.F.R. § 124.506(a)(5) is not meant to stop bridge contract as bridge contracts are a stop-gap measure to be used until an actual competition can take place. The SBA (invited to the party by GAO because the matter involved SBA regulations and GAO usually listens to SBA when interpreting SBA rules) filed a brief and agreed with the SEC’s interpretation, noting that the regulation was really meant to stop agencies from using indefinite-delivery, indefinite-quantity (IDIQ) contracts to get around the threshold. It “implemented this regulation to prevent an agency from dividing an IDIQ contract into separate smaller contract actions to make award to a single firm without competition.” Per SBA, it was not meant to stop agencies from using emergency measures like bridge contracts. GAO sided with SBA and the SEC. It noted that back in 2000, it in fact had addressed this question and agreed with the government’s view of the matter in Champion Bus. Servs., Inc., B-283927 (Jan. 24, 2000). GAO agreed that “the regulation does not apply to bridge contracts because bridge contracts do not pose any threat to the aims sought to be protected by a competitive procurement.” Going further, it noted its decision in New Tech. Mgmt., Inc., B-287714.2 (Dec. 4, 2001). There it “concluded that the regulation only applied to the award of concurrent contracts.” In other words, the regulation prohibits agencies from taking a single contract for, say, 10 services that would have a value above the threshold, and dividing it out into five separate contracts with covering two services each and each smaller contract being below the threshold. Anika also made an argument that the SEC failed to consider the effect the bridge contract would have on the equitable distribution of 8(a) contracts. Under 13 C.F.R. § 124.503(g), “[a] procuring activity contracting officer must submit a new offering letter to SBA where he or she intends to award a follow-on repetitive contract as an 8(a) award.” The SEC had not done this. However, GAO also rejected this argument. 13 C.F.R. § 124.3 notes: “The determination of whether a particular requirement or contract is a follow-on includes consideration of whether the scope has changed significantly, requiring meaningful different types of work or different capabilities; whether the magnitude or value of the requirement has changed by at least 25 percent for equivalent periods of performance; and whether the end user of the requirement has changed. As a general guide, if the procurement satisfies at least one of these three conditions, it may be considered a new requirement.” The bridge contract only had a base period of one month and was worth only $4.2 million compared to the $43 million original competitive acquisition. As such, it was a new requirement, not a follow-on requirement, so the new offering letter requirement did not apply. Thoughts GAO’s analysis seems very reasonable concerning bridge contracts, which really aren’t planned ahead of time. After all, how can you divide a requirement after the fact? But we think this protest raises some important questions. What happens when an agency decides that instead of competing a five-year contract to 8(a) companies, it will just sole source five one-year contracts at the sole source dollar threshold to an 8(a) company? Assuming they do this while complying with 13 C.F.R. § 124.503(g) and receiving SBA approval, there’s still an argument to be made that the agency is splitting up a five-year contract into five separate one-year contracts to stay under the threshold limit. 13 C.F.R. § 124.506(a)(5) doesn’t specify that it only applies for concurrent procurements, it says that “[a] proposed requirement may not be divided into several separate procurement actions for lesser amounts in order to use 8(a) sole source procedures to award a single contractor.” In fact, couldn’t this have maybe applied to the 2022 Peregrine contract itself? The agency basically split the procurement into two parts, one large and one small, and sole sourced the small part. It was too late for a GAO protest on the matter, but it is interesting to think about. It seems the implication is that the procedures in 13 C.F.R. § 124.503(g) on repetitive contracts will serve to prevent such a situation, and to SBA’s credit, we think that would do a good job of it. But it still opens a potential door, and we think it is something where some clarification in the regulation language itself could be helpful. Questions about this post? Email us. Needing 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 A Bridge (Not) Too Far: Prohibition on Dividing up Contracts to get Under 8(a) Sole Source Dollar Limit Doesn’t Apply to Bridge Contracts first appeared on SmallGovCon - Government Contracts Law Blog.View the full article
  2. If you feel like prices for just about everything are going up, you’re not alone. I recently got my annual property tax bill, and the first thing I did (after recovering from a brief fainting spell) was to start Googling to find out how much I could get for one of my kidneys on the black market. I get the feeling that my county tax assessor would consider anything less than a double digit increase to be an embarrassing professional failure. In federal government contracting, however, a contractor may not have the same leeway to raise its prices. In a recent bid protest decision, the GAO held that when an agency sought to procure services using the Federal Supply Schedule, the agency could not agree to pay a price higher than the price set forth in the offeror’s underlying FSS contract. The GAO’s decision in Kauffman & Associates, Inc., B-421917.2, B-421917.3 (2024) involved a request for quotations issued by the Centers for Medicare and Medicaid Services seeking in-person and virtual training services. CMS issued the RFQ to five GSA Schedule vendors under the procedures of FAR Subpart 8.4, which governs FSS acquisitions. Two of the five vendors submitted quotations. After evaluating the quotations, CMS announced that the order would be awarded to Octane Public Relations. The other vendor, Kauffman and Associates, Inc., then filed a bid protest with the GAO, challenging various aspects of CMS’s evaluation. Among its challenges, Kauffman argued that the agency “failed to evaluate discrepancies between the awardee’s proposed pricing and its FSS pricing.” Kauffman pointed out that Octane’s proposed price for the Events Coordinator labor category exceeded Octane’s price for the same category in its underlying FSS contract. The GAO explained: [W]hile discounts to FSS prices are permissible, a vendor may not propose prices higher than their FSS prices, as the higher prices have not been determined to be fair and reasonable by the General Services Administration (GSA) and are therefore not FSS prices. . . Accordingly, issuing an order based on non-FSS pricing under an FSS acquisition would be improper. In this case, the GAO wrote, “[w]e find the agency’s determination that the awardee’s pricing was fair and reasonable to be flawed.” Because Octane proposed a price that was higher than its FSS price, “it would not be proper to issue the order to that vendor.” The GAO sustained the protest. Contractors often negotiate FSS prices that are higher than they expect to actually charge, knowing that agencies may expect discounts. Per GAO, that tried-and-true strategy is viable. But as the Kauffman and Associates, Inc. case shows, a contractor’s FSS prices may effectively be a ceiling. When bidding on an FSS order, proposing a price higher than the underlying FSS contract price may make it improper for the agency to award the order. Oh, one more thing: if you know someone who is looking for a lightly-used kidney, could you let me know? Asking for a friend. This article was originally published by Steven Koprince on LinkedIn and is reprinted with permission. Steve is the founder of Koprince McCall Pottroff LLC but has retired from the practice of law to focus on other endeavors. His views do not necessarily represent those of the firm or its attorneys. To read more of Steve’s current government contracting writing, follow him on LinkedIn and subscribe to his LinkedIn newsletter. 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 Agency Could Not Accept Price Above Awardee’s FSS Price, GAO Says first appeared on SmallGovCon - Government Contracts Law Blog.View the full article
  3. Touted as a “game-changer” when it was first introduced in 2016, the U.S. Small Business Administration’s All Small Mentor-Protégé Program isn’t new anymore. Known now as simply the “SBA Mentor-Protégé Program, it is still extremely powerful for large and small contractors alike. In this webinar, Gregory Weber and I will explain the ins and out of the SBA Mentor-Protégé Program, covering the program’s eligibility requirements, its potent benefits (including the ability to form special Mentor-Protégé Joint Ventures), the application process, and common misconceptions and pitfalls. Target Audience: Small Businesses (SDVOSB, WOSB, HUBZone, 8(a), SDB) and large businesses interest in doing business with the federal government. Please join us and register here. And thanks to Earl King of the DC Department of Small and Local Business Development and Apex Accelerator for organizing this event. The post Free Webinar! The SBA Mentor-Protégé Program hosted by Washington DC APEX Accelerators, February 27, 10:30am -12:30 PM EST first appeared on SmallGovCon - Government Contracts Law Blog.View the full article
  4. Hello, blog readers. We want to say that our hearts are with the people of Kansas City. Our thoughts and prayers go out to the victims and families of those impacted during the the Super Bowl celebration in Kansas City. We also salute the first responders who acted so quickly. Our stories from federal contracting news this week included continued delays for CIO-SP4 and a new initiative on carbon-free electricity. GSA & DOD Seek Input on Upcoming Government Procurement of Carbon Pollution-Free Electricity Biden administration preps potential largest ever federal carbon-free electricity purchase How government contractors can harness artificial intelligence FACT SHEET: Biden-⁠Harris Administration Releases Annual Agency Equity Action Plans to Further Advance Racial Equity and Support for Underserved Communities Through the Federal Government How acquisition hinders national security VA sexual harassment investigation recommends firing, recouping bonuses from supervisors NITAAC seeking another 6-month extension for CIO-SP3 GE Aerospace Resolves Alleged Gender-based Hiring Discrimination, Pays $443K in Back Wages to Affected Job Applicants After Compliance Review Defense Federal Acquisition Regulation Supplement: DFARS Buy American Act Requirements (DFARS Case 2022-D019) General Services Administration Acquisition Regulation; Removing Small Disadvantaged Business Program Requirements To Align With the FAR The post SmallGovCon Week in Review: February 12-16, 2024 first appeared on SmallGovCon - Government Contracts Law Blog.View the full article
  5. If you’re interested in learning more about the federal government contracting business, our very own, Nicole Pottroff and John Holtz, will be co-hosting with Nick Bernardo at this live podcast event. Sign up now to join this free opportunity to speak with experts, who have actually helped people succeed in govcon and who will be happy to answer your questions. Please register here. For more information on this and other upcoming events visit my MyGovWatch.com. The post Event! MyGovWatch Live: The B2G Rountable hosted by Nick Bernardo, February 21, 2024, 12:00pm CST first appeared on SmallGovCon - Government Contracts Law Blog.View the full article
  6. An adverse inference is a penalty that the Small Business Administration (SBA) can enforce as part of a size protest. During a size protest determination, SBA will ask the protested company lots of questions. Sometimes, a protester will not answer those questions, either on purpose or due to oversight. Depending on the circumstances, SBA can apply an adverse inference if a protested company fails to respond to questions. If SBA applies an adverse inference, that means that the SBA Area Office will determine that the information that was not provided would prove that the company is not a small business. A recent decision reminds us about this penalty. If you are in a similar situation, reach out to a firm like ours to help think of a way to respond to SBA. In Size Appeal of: Sanford Fed., Inc. Appellant, SBA No. SIZ-6261, 2024 (Jan. 16, 2024), a contractor faced a size protest concerning a VA solicitation for boiler plant safety device testing under North American Industry Classification System (NAICS) code 238290, Other Building Equipment Contractors, and a size standard of $22 million. A protester filed a size protest against Sanford Federal, Inc. (Sanford) who was the proposed awardee. During the size protest, the SBA Area Office reached out to Sanford and asked them to provide financial information and a Form 355 (the SBA standard form for size determinations). Sanford failed to respond to multiple emails from SBA advising them of the size protest. As a result, the SBA found that Sanford did not qualify as small for the procurement, based on an adverse inference. SBA’s standard for adverse inference requires that three prongs be met: “(1) the requested information be relevant to an issue in the size determination;” “(2) there be a level of connection between the protested concern and the firm from which the information was requested;” “(3) the request for information be specific.” After the size determination was issued, Sanford appealed. Sanford argued that the protest did not make sense and was non-specific, basically arguing that the protest referred to contracts in 2023 that would not provide any money to Sanford until well after the period for review. As a side note, a receipts-based size standard looks back five years to calculate the average receipts for a company. 13 C.F.R. § 121.104(c)(1). The judge, at SBA’s Office of Hearings and Appeals (OHA), actually agreed that the protest did not appear to be on target and was nonspecific. However, that didn’t matter because Sanford did not respond to the size protest at all. OHA said that the Area Office properly applied the adverse inference rule, holding that Sanford, “could have requested that the Area Office dismiss the protest as nonspecific, or could have produced information showing that [Sanford] was small over the years 2018-2022.” But Sanford, “raised no such arguments to the Area Office, however, and its claim that the protest was nonspecific is therefore not properly before OHA on appeal.” Because Sanford “did not respond to the protest and did not produce a completed SBA Form 355 and other requested documents . . . [t]he Area Office therefore appropriately drew an adverse inference.” This is a sobering result for all small business federal contractors. If a federal contractor bids on a small business set-aside, it opens up that company to a potential size protest. Don’t respond to the size protest–and you could risk losing an award based on a protest that might not have any actual merit. Questions about this post? Email us. Needing 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 Adverse Inference, the Wrong Way to Lose a Size Protest first appeared on SmallGovCon - Government Contracts Law Blog.View the full article
  7. Happy Friday Readers. We hope you all have had a great week. We are enjoying some milder winter weather here in Kansas finally. We still have a bit to go before spring, but it feels like it is right around the corner. We will be following our KC chiefs as they look to defend their Super Bowl title! Enjoy the weekend and we also hope you will enjoy reading the articles below, regarding federal government contracting this week. Some highlights include more on the push to increase small business participation, and new legislation that will have an impact on contractors. Ex-CIA officer and WikiLeaks source sentenced to 40 years for largest breach in agency history Audit of the U.S. Ability One Commission’s Quality of Products in Support of Meeting Government Requirements PF 2024-17 Increasing Small Business Participation on Multiple-Award Contracts Senate Panel Advances Bills on Contracting, Cyber Competition, Other Matters FACT SHEET: The Biden-⁠Harris Administration Advances Equity and Opportunity for Black Americans and Communities Across the Country Data privacy is a full-time job at OPM. It’ll only get busier in the AI age Hit by OPM’s data breach? Bill offers feds free ID protection for life Contracting Orders legislation passes out of House Small Business Committee White House breaks the rules on rulemaking for contractors Chairman Williams: “Under the Microscope: Reviewing the SBA’s Small Business Size Standards” Space VCs urge startups to pursue government contracts but stay focused on commercial success The promise and peril of AI for federal contractors Study: Women-owned firms generate nearly 6,500 jobs Regulatory Agenda: Semiannual Regulatory Agenda General Services Administration celebrates $62.4 million award for improvements at Whittaker Courthouse in Kansas City as part of President Biden’s Investing in America agenda The post SmallGovCon Week in Review: February 5-9, 2024 first appeared on SmallGovCon - Government Contracts Law Blog.View the full article
  8. For our third entry in our “Why File” series, we will be covering one of the two big bid protest routes, a “pre-award” Government Accountability Office (GAO) bid protest. Most contractors are fairly familiar with GAO bid protests that occur after an agency makes their award decision (more on this in a later “Why File” post. But contractors may be less familiar with pre-award bid protests at GAO. We will cover some of the most common reasons pre-award protests are filed at GAO, based primarily on contracting regulations and bid protest cases. As always, please keep in mind, despite the commonalities discussed below, the question of whether to protest is highly fact-specific and demands careful consideration. What is a “pre-award” protest? First, it is important to establish just what a pre-award protest is. The name sort of gives away its meaning, but a pre-award protest is a bid protest filed at some point prior to the award decision. Note that the term pre-award protest is not found in the GAO rules or the FAR, but it is a helpful way to categorize certain types of protests. However, be careful, that does not mean the bid protest filing deadline at GAO is the award decision date. As discussed below, filing for such a protest could be due prior to a bid submission due date, within 10 days of a competitive range decision, or another date which occurs prior to the award decision. It is, as with all things federal contracting, quite fact specific (for more specifics on pre-award protests, check out our entry on them in our Back to Basics series). Pre-award protests can be filed at more tribunals than just GAO, such as the U.S. Court of Federal Claims, but as GAO is more common for contractors to utilize, we will focus here on GAO. That being said, many of the concepts for why a pre-award protest could be filed are universal. With that out of the way, lets discuss some of the reasons a contractor may file a pre-award protest. 1. The solicitation’s terms are unclear. The most common reason for filing a pre-award protest is that a solicitation’s terms are confusing or don’t make sense. Often contractors will look at a solicitation, interpret a term a certain way, but the agency meant it another way. This can be a fatal flaw to an otherwise superb proposal. To prevent such a thing from occurring, GAO actually provides contractors a way to protest solicitation terms, before finding themselves on the losing end of a proposal due to a misunderstanding. GAO in its regulations state that “protests based upon alleged improprieties in a solicitation which are apparent prior to bid opening or the time set for receipt of initial proposals shall be filed prior to bid opening or the time set for receipt of initial proposals.” So, if a contractor sees contradictory terms, or confusing terms within a solicitation, one way to force the agency to address it, is to file a pre-award protest. A great example of why such a protest is important is covered in a previous blog here on SmallGovCon. In One Community Auto, LLC, B-419311 (Comp. Gen. Dec. 16, 2020), a contractor–after award decision–raised a concern via post-award protest that the evaluation factors were ambiguous or indefinite. GAO agreed that “the language in the solicitation is internally inconsistent” but because the protest was filed post-award, it was dismissed as untimely. GAO noted that a “protest based upon alleged improprieties in a solicitation that are apparent prior to the closing time for receipt of initial proposals or quotations” must be filed prior to the closing time for proposals. It is very important for contractors to raise solicitation terms often and early, or they may face an unfortunate award decision, with no recourse. When facing solicitation term confusion, there are generally two categories these issues fall into: Overly Restrictive Terms or Terms that Do Not Match Industry Norms: One category of solicitation terms that will get commonly protested are terms that overly restrict competition, or that are so off base that they don’t match industry norms. A good example of this type of protest at GAO is a recent protest of the CIO-SP4 procurement which we blogged about here. In that protest, the solicitation called for submitting experience, but the amount of experience one could submit varied depending on if they were in a mentor protege relationship or not. This basically overly restricted certain offerors, while giving great leeway to others. Similarly, there can be protests that argue the terms are too restrictive as they don’t meet the subject industry’s norms. This can be a tough protest to win though, as GAO uses a standard of if the agency’s terms were reasonable (we have a blog on this type of case here). Ambiguous or Inconsistent Terms: This other category of solicitation terms protests is much more apparent on its face. Often contractors will see terms that contradict other portions of the solicitation (making it impossible to satisfy either term), or that just plain don’t make sense. A great example of this, are the terms from the One Community Auto case discussed earlier. While the case was dismissed as untimely, GAO did state the terms were inconsistent (and presumably would have been a successful pre-award protest). One Community Auto highlighted terms that sometimes felt more appropriate to a lowest-price technically acceptable while others were more fitting of a best-value tradeoff (both separate and distinct evaluation methodologies). This type of solicitation concern and confusion is one that would be raised in a pre-award protest as it presents ambiguities, or inconsistencies. (PLEASE NOTE: In rare cases, ambiguous solicitation terms can also be protested after award, but this is rarely successful, as the ambiguity of the term must not be apparent at all until after award. GAO often calls this a latent ambiguity) 2. The Agency will not communicate on Solicitation questions. This reason for filing is sort of an extension or outgrowth of reason #1. However, it is a little different than protesting strictly on solicitation terms. Often solicitations will have the ability for Q&As with the agency. Or offerors will reach out to the agency with questions on their own, as there is no restriction on contacting the agency with questions on a solicitation. Sometimes, these Q&As or communications can contain great information for contractors, or resolve solicitation term issues that would have necessitated a pre-award protest. Unfortunately, this is not always the case. Occasionally agencies are not very communicative or responsive to questions. Their responses may be rather lacking, only lend to more confusion, or the agency may not respond at all. This lack of communication leads to more ambiguities with solicitation terms, contradictions with solicitation terms, and confusion among contractors. Contractors may find that the best way to get the response they are looking for, or any formal response to concerns at all, is to file a pre-award protest. The agency then has to directly respond, through the bid protest, to those concerns. Such a protest could also spur a corrective action by the agency in which they correct the terms in the solicitation or finally respond in some fashion to the basis of the communications they previously ignored. 3. To stay contract award or decision. While this is not a technically a basis to file a pre-award protest, it is an added bonus for contractors who feel there are issues in the solicitation and need more time to prepare, want to continue performing the previous contract for a while longer, or are excluded from the competitive range and hope for another shot at the award. When a pre-award protest is filed with GAO, the FAR states “a contract may not be awarded unless authorized.” While it is not a guaranteed stay of award, it will at least cause an agency to pause its award decision. That being said, a stay of award decision is the most likely outcome, as unless the agency completes multiple steps outlined in the regulation to overcome the stay, it cannot award the contract until the protest is complete. Often, contractors may see solicitation terms or communication issues present in a solicitation, but not think it rises to the level of protesting. However, if that same contractor is the incumbent performing a bridge contract, or is a contractor that needs more time to work on the proposal, they may see this potential stay as a good reason to take a shot at a pre-award protest. Of course, if a contractor finds itself excluded from the competitive range, it may hope that the protest of that decision will result in it getting another chance at award, which is only helped by a stay of award decision. Speaking of which… 4. Contractor is excluded from competitive range. A common way to structure a solicitation is to allow the agency to set a competitive range of offers, thus whittling down the amount of offerors progressively until the final award decision is made. When a contractor doesn’t make that cut, it is called being excluded from the competitive range. A competitive range is typically set to eliminate certain offerors, then have discussions with the remaining offerors. The unlucky offerors who find themselves on the outside looking in sometimes will simply think that they have no way to debate the competitive range decision until after award or that it is not an award decision that can be protested. That is incorrect. GAO states that protests other than those based on solicitation terms “shall be filed not later than 10 days after the basis of protest is known or should have been known (whichever is earlier).” If there is a required debriefing (which does sometimes occur with competitive ranges), then the protest “shall not be filed before the debriefing date offered to the protester, but shall be filed not later than 10 days after the date on which the debriefing is held.” There is no designation that such a protest must be “after award” or something along those lines. As exclusions from competitive range occur prior to a final award decision, they stand as a great reason to file a “pre-award” protest. The protest of course will feel similar to a post-award decision, discussing evaluations, etc. but it will still be a pre-award protest. Bonus: Debriefing complexities about pre-award protests. With all this in mind, it is important to note something that could actually prevent you from protesting a pre-award matter. Our blog on this provides more information, but it is important to keep in mind that if offerors postpone a pre-award debrief until after award decisions are made, then they lose the right to protest based on any information that could have been discovered in the pre-award debriefing. If a contractor finds itself excluded from competitive range, and is offered a debrief, then choosing to postpone that debrief until after award will prevent any possible protest from happening based on viable grounds discovered as part of that delayed debriefing that could have come out in the earlier debriefing. Though the reasons for protest represent a wide array of situations, they all contain one common thread—they all are filed prior to an award decision. GAO, through its case law and regulations, has carved out a way for contractors to address things prior to any award decision. These pre-award protests can be filed to help rectify the wrong of an exclusion from competitive range, or be used to help clean up a less than stellar solicitation. As with all protests, it is very fact specific as to why and when a contractor should file a protest. If you find yourself facing a confusing solicitation, excluded from the competitive range, or not getting clear communication back from an agency, don’t hesitate to reach out to a federal government contracts attorney to discuss your possible pre-award protest options. Questions about this post? Email us. Needing 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 Why File: A GAO Pre-Award Protest first appeared on SmallGovCon - Government Contracts Law Blog.View the full article
  9. Solicitations for brand name or equal products are commonly used by contracting officers to ensure that the products procured via the contract meet minimum requirements. However, as one agency found, the salient characteristics required to meet the minimum requirements must be explicitly stated in the solicitation. And, evaluating the product on any characteristics that are not included in the solicitation, even if incorporated by reference to the name brand item, can lead to an improper exclusion of offerors from competition. In American Material Handling, Inc., the International Boundary and Water Commission excluded the protester, American Material Handling, from award because the product offered by the protester, a Volvo tractor, did not contain salient characteristics that the name brand product, a Caterpillar tractor, had. So, what was the problem? Why was the protest sustained by GAO but not the agency if the Volvo tractor did not contain the salient characteristics of Caterpillar tractor? Well, the answer to that lies in the solicitation. The RFQ was for the award of a contract to the offeror that offered the “lowest-price technically acceptable quotation considering price and technical acceptability.” The RFQ included language stating that the tractor “must meet the salient features or specifications of the Caterpillar 980 or exceed the specifications attached.” The specifications were listed in a two-page specification sheet. As the agency argued, the salient characteristics were specified in the solicitation, so what exactly was the problem here? It turns out that while the RFQ did contain the two pages of specifications, the six salient characteristics that the protester was excluded from competition on account of, were not included. Rather, GAO found that the contracting officer added salient characteristics after the quotations. The agency claimed that the reference to the Caterpillar 980 meant that any tractor offered must meet or exceed all characteristics of that brand name product, not just those listed in the specifications contained in the RFQ. However, as GAO held, a brand name or equal product does not have to meet every specification of the brand name product to be deemed acceptable when those characteristics are not stated in the solicitation. Therefore, the agency improperly determined that the protester’s Volvo tractor was unacceptable because it actually met all of the salient characteristics that were listed in the RFQ. As FAR 11.104(b) requires, solicitations must include “a general description of those salient physical, functional, or performance characteristics of the brand name item that an ‘equal’ item must meet to be acceptable for award.” By evaluating proposals on characteristics not listed in the solicitation, the agency did not evaluate the offers solely on the terms in the solicitation. Which, as any federal contracting attorney would know, is prime real estate for a protest to be sustained. Questions about this post? Email us Need legal assistance, call 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: Brand Name or Equal RFQ Must Explicitly State All Salient Characteristics first appeared on SmallGovCon - Government Contracts Law Blog.View the full article
  10. Happy February! Our Kansas City Chiefs have once again managed to make it back into the Super Bowl and we couldn’t be happier about it! Whether you’re a Chiefs fan, a 49ers fan or a Swiftie, it’s sure to be a good one! Start gathering those favorite snack recipes and get out the lucky sports gear, folks! This week in federal government contracting news had some important updates, including a new GSA schedule catalog platform, a report on savings in software purchases, and a revamped SBA training program from small businesses. The SBA Revamps the Federal Contracting Program for Small, Disadvantaged Businesses Procurement Innovation Lab to tackle ‘big A’ acquisition at DHS New FAS Catalog Platform is a “game-changer” for vendors using GSA Advantage Former Federal Employees Sentenced for Conspiracy to Steal Proprietary U.S. Government Software and Databases Agencies are losing out on software savings, GAO finds Government Contractors Agree to Pay $3.9 Million to Resolve Claims of Misrepresenting Women-Owned Small Business Status For contractors, a lot to ponder five months into the fiscal year Department of Labor Announces Seminars for Prospective Federal Contractors on Prevailing Wage Requirements Business Leaders Applaud SBA’s Improved Empower to Grow (E2G) Program Federal government contracting is an opportunity for minority business owners Increasing Small Business Participation on Multiple-Award Contracts The Evolving Landscape of Government Contracting: Why Networking Matters Whistleblower Receives $900,000 for Alleging Army Contracting Fraud Information Collection; Small Business Size Rerepresentation Four Additional Defendants Plead Guilty to Bid Rigging in Michigan Asphalt Industry Project Manager Pleads Guilty to Kickback Scheme to Defraud a U.S. Army Facility The post SmallGovCon Week in Review: Jan. 28-Feb. 2, 2024 first appeared on SmallGovCon - Government Contracts Law Blog.View the full article
  11. The second entry in our new “Why File” series covers some of the main reasons unsuccessful offerors file veteran-owned small business (VOSB) and service-disabled veteran owned small businesses (SDVOSB) status protests. Don’t worry if VOSB and SDVOSB are new acronyms to you–or you just need a refresher–we’ve got a Back to Basics blog for that. If you’re a seasoned vet (pun intended), you already know SBA now handles the Veteran Small Business (VSB) Certification Program (VetCert) (which covers VOSBs and SDVOSBs) administration and status protests. So, the following (non-exhaustive) list of some of the most common reasons VSB status is protested is based primarily on SBA regulations and cases. But please keep in mind, despite the commonalities discussed below, the question of whether to protest is highly fact-specific and demands careful consideration. 1. The qualifying veteran or service-disabled veteran (SDV) owner (Qualifying Veteran) does not appear to be meaningfully involved with the company’s operations. This one might seem obvious. But contractors sometimes assume that because a VSB went through SBA’s certification process (or previously, through VA Center for Verification and Evaluation), they must be compliant–even where the Qualifying Veteran is MIA. But that’s not necessarily true. Despite the illegality and major potential (and even criminal) consequences, some VSBs represent (and even certify to) Qualifying Veteran-ownership and -control, while the Qualifying Veteran actually has little to no involvement in the VSB’s operations. And regardless of whether such misrepresentation rises to the level of an indictment or statutory violation, (as you might’ve guessed) it is certainly not compliant with SBA’s VSB eligibility requirements. The VSB control rules say, “[t]o be an eligible [VOSB or] SDVOSB, the management and daily business operations of the concern must be controlled by one or more [veterans or] service-disabled veterans[,]” and control here “means that one or more qualifying veterans controls both the long-term decision-making and the day-to-day operations of the Applicant or Participant.” Note my emphasis on the “and” here. The facade of eligibility is often based on the assumption or claim that the Qualifying Veteran is never around the office or worksites because they are too busy making all the big decisions behind some velvet curtain. But as you can see, SBA’s rules speak directly to this. SBA requires the Qualifying Veteran to control the company both at the big picture management/long-term decision-making level and at the day-to-day operations level. In fact, there used to be a VSB control rule that essentially required a Qualifying Veteran to live near (within a reasonable commute of) the company office and worksites. SBA’s most recent final rule on VSB eligibility (among other things) did away with the infamous “reasonable commute rule.” But that does not absolve Qualifying Veterans of their required multi-level management and control of company operations and decisions. In fact, there is a specific provision in SBA’s current rules that states: A qualifying veteran generally must devote full-time during the business’s normal hours of operations, 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 concern. Where 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. So, if the Qualifying Veteran is persistently absent from the office and worksites, a status protest would likely lead to SBA raising and investigating the issue of VSB control. But even if the Qualifying Veteran is around sometimes, just not during normal business hours, a status protest would still likely lead to such SBA compliance review (at a minimum). Even though this rule only says that SBA will assume there are control violations in such case, it is no easy feat to convince SBA of Qualifying Veteran control where the Qualifying Veteran is rarely physically present. Now, we may have seen some leeway provided by the COVID-19 pandemic–leading to assertions that the Qualifying Veteran virtually controls all operations. But SBA has historically been pretty tough on that one (even during the height of the pandemic). So, now that most in-office business has resumed, a company would likely need to show SBA documentation of direct support for such long-distance management. And I am not saying it is impossible to run a VSB company from afar. SBA’s VSB control rules are not intended to target instances where such virtual/long-distance control is truly present. Rather, the rules are intended to weed out situations where a Qualifying Veteran is publicly positioned as the “face” of the company, while non-qualifying people or entities (Non-Qualifying Veterans) are really pulling all the strings. Such is often referred to as a “Rent-a-Vet” scheme. The VSB protest process plays a crucial role in detecting such schemes, helping to maintain integrity and fairness in the VSB Program. In fact, our next reason why to protest a VSB status relies on many of these same rules and policies–as well as others. 2. The Qualifying Veteran has a “side hustle.” Even if you focus solely on the rules already discussed above, you can still likely see why a Qualifying Veteran’s “side hustle” or secondary employment could give rise to VSB control concerns. But SBA’s regulations take it one step further. The same rule requiring “full-time management” (covered above) also specifically prohibits the Qualifying Veteran holding the highest officer position in the company from engaging in any outside employment that would “prevent [them] from devoting the time and attention to the concern necessary to control its management and daily business operations.” Generally, SBA’s determination whether any such employment “prevents” the required full-time management and control is intensely fact-specific. Sure, some secondary employment obligations can truly and completely be handled outside of normal working hours. Some are not too demanding or time consuming. And some in no way interfere with a Qualifying Veteran’s required control of their VSB company. In fact, there have been a decent number of SBA decisions finding VSB eligibility despite outside employment–but common to many of those decisions is the fact that the Qualifying Veteran can show their outside employment obligations can be met: (a) with less-than-full-time hours; and (b) at any hour of the day or night and/or during weekends. So, naturally, SBA has been less likely to allow it where the outside employment company; (a) operates during the same or similar business hours as the VSB company; and/or (b) requires more involvement than a veteran/SDV (that manages their VSB full-time) can reasonably dedicate. As you can see, SBA’s decisions on Qualifying Veteran outside employment are incredibly fact-specific. Obviously, discovering that a Qualifying Veteran appears to be “splitting time” between two or more companies could lead to a reasonable and strong status protest. But a status protest may still be warranted (and even, have a good chance of success) where there are less obvious concerns with SBA’s outside employment rule. An SBA compliance investigation initiated by a status protest has the potential to reveal facts not typically considered public information–nor willingly provided to a VSB’s competitors–that may be relevant to the VSB’s: (1) noncompliance with SBA’s outside employment limitations; and/or (2) noncompliance with other applicable control, ownership, or general eligibility rules. That’s why we selected outside employment as one of our reasons to file a VSB status protest. Our next reason, too, goes to SBA’s control requirements. 3. A Non-Qualifying Veteran’s history and involvement with a Qualifying Veteran or their VSB company raises control concerns. Now, we kept this reason to file a VSB status protest quite broad for a reason; it covers a lot of different provisions and limitations from SBA’s VSB eligibility regulations. SBA’s VSB control regulations don’t just detail strict rules and standards a Qualifying Veteran must follow to show the required control. They don’t just discuss the level of involvement and dedication a Qualifying Veteran must demonstrate. Sure, they do all of those things (as we detailed above). But they, again, go one step further. SBA’s regulations also place strict limitations on any Non-Qualifying Veterans that have a history with or are involved with the Qualifying Veteran and/or the VSB. Notably, SBA’s rules don’t exclude Non-Qualifying Veterans completely. In fact, SBA’s rules expressly state that a “non-qualifying-veteran may be involved in the management of the concern, and may be a stockholder, partner, limited liability member, officer, and/or director of the concern.” But SBA does have a wide variety of provisions in its control regulations that it enforces to keep any involved Non-Qualifying Veterans “in check,” if you will. These various provisions prohibit all Non-Qualifying Veterans from exerting control over a VSB or its business operations. They restrict the financial support a Non-Qualifying Veteran may provide to a VSB and prohibit any financial dependence or influence. And they create certain presumptions or assumptions a VSB must overcome where there is: prior employment history between the Non-Qualifying Veteran and the Qualifying Veteran; or where a Non-Qualifying Veteran receives too much compensation from a VSB. SBA’s VSB control rules say that a Non-Qualifying Veteran must not: (i) Exercise actual control or have the power to control the concern; (ii) Have business relationships that cause such dependence that the qualifying veteran cannot exercise independent business judgment without great economic risk; (iii) Control the Applicant or Participant through loan arrangements (which does not include providing a loan guaranty on commercially reasonable terms); [or] (iv) Provide critical financial or bonding support or a critical license to the Applicant or Participant, which directly or indirectly allows the non-qualifying-veteran significantly to influence business decisions of the qualifying veteran. These first four regulatory limitations are pretty self-explanatory–all aiming to prevent any control over a VSB by a Non-Qualifying Veteran and even any power to control a VSB based on financial dependence or influence. SBA’s VSB control regulations go on to say that a Non-Qualifying Veteran may not: (i) Be a former employer, or a principal of a former employer, of any qualifying veteran, unless the concern demonstrates that the relationship between the former employer or principal and the qualifying veteran does not give the former employer actual control or the potential to control the Applicant or Participant and such relationship is in the best interests of the concern; or (ii) Receive compensation from the concern in any form as a director, officer, or employee, that exceeds the compensation to be received by the qualifying veteran who holds the highest officer position (usually Chief Executive Officer or President), unless the concern demonstrates that the compensation to be received by the non-qualifying veteran is commercially reasonable or that the qualifying veteran has elected to take lower compensation to benefit the concern. Notably, the last two provisions don’t just give SBA the right to “raise an eyebrow” where the facts apply. They also set forth the method by which a compliant and eligible VSB can demonstrate to SBA that the required control and pure intentions are still there–specifically, where a Non-Qualifying Veteran (1) used to employ a Qualifying Veteran ready to venture out on their own, or (2) makes more money at the VSB than the Qualifying Veteran because it will truly benefit the company. The provisions of SBA’s regulations discussed in this third reason–limiting certain aspects of Non-Qualifying Veteran involvement, rather than requiring certain aspects of Qualifying Veteran involvement–serve the same underlying policies as the control rules discussed in the first two reasons. So, this fourth and final reason to file is no exception. 4. The VSB has a franchise-type or affiliate agreement with another entity or individual. We will keep this last reason to file a VSB status protest brief–especially since you can read all about it here. In a nutshell, consistent with all of the control rules and limitations we discussed above, anytime you discover that a VSB has a franchise-type or affiliate agreement with another person or entity, it could also be worth a status protest. At a minimum, SBA needs to closely review any such agreements to ensure there are not provisions limiting the Qualifying Veteran control–or allowing any Non-Qualifying Veteran control. So, the very existence of such an agreement could lead to a successful SDV status protest: (1) if SBA has not already had the chance to review it; or (2) if an SBA deep-dive into the agreement demonstrates that another entity or individual has control over (or the power to control) certain aspects of the SDV’s operations (e.g., marketing, websites, sales, or other day-to-day operations or long-term decisions). * * * Though the four reasons to file an SDV protest discussed above cover a wide variety of facts–they all rely on the same underlying goals and policies. Essentially, SBA only wants to certify VSBs and allocate VSB-designated contracting dollars where there is meaningful SDV involvement and sufficient SDV authority. SBA only aims to restrict the involvement of other entities and individuals to prevent anyone from exercising too much authority over a Qualifying Veteran or its VSB. This, again, is vital in preventing the infamous “Rent-a-Vet” schemes you see in the news. And so is the VSB status protests process. Questions about this post? Email us. Needing 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 Why File: A VOSB or SDVOSB Status Protest first appeared on SmallGovCon - Government Contracts Law Blog.View the full article
  12. The White House has issued a memorandum that calls for specific procedures for Increasing Small Business Participation on Multiple-Award Contracts. To that end, OMB has recommended steps such as increasing small business order set-asides and maximizing small business set-asides across multiple types of contracts. Perhaps most importantly, OMB has directed federal agencies to apply the small business Rule of Two for all orders, which should has the potential of leading to an increase in small business set-asides. Below, we dive into these new recommendations. The memorandum, issued through the Office of Management and Budget (OMB), refers to a number of other policy documents. One of those is Executive Order 14091, Further Advancing Racial Equity and Support for Underserved Communities Through the Federal Government. That executive order established a government-wide goal of awarding at least 15 percent of federal contract spending to small disadvantaged businesses in FY 2025. The White House, SBA, and the Federal Acquisition Regulatory Council (the FAR Council), had worked together to come up with solutions to “promote a diverse federal supplier base.” These actions will be the subject of future regulations in the FAR and SBA rules. Here are some of these key actions that the memo encourages. For Multiple Award Contracts (MACS) Work with agency small business specialists early. “Agencies should carefully consider total or partial small business set-asides when planning new multiple-award contracts.” Agencies should review set-aside decisions with the the agency small business specialist and the SBA’s Procurement Center Representatives (PCR). While agencies always consider small business set-asides, this recommendation says that agencies must engage both the SBA and the small business specialist at the agency, to ensure small business advocates are part of the set-aside decision. The agency small business specialist should review the decision to not use a small business set-aside. Use On-Ramps. “Consider on-ramps when developing the acquisition strategy.” This would allow small businesses to be added to MACs on a continuing basis, so that they are not foreclosed from entry just because they did not make the initial cut. Limit Off-Ramps. Agencies should not remove companies from small business MACs “because of a change to its size status, except where size status changes as a result of a merger or acquisition of the business.” Agencies should not actively look to remove small businesses from awards based on off-ramping, unless there is an acquisition of a business. We have seen some solicitations that have pretty strict off-ramping procedures. The OMB memo instructs agencies not to have such strict procedures for small businesses. For Orders under MACS We’ve written extensively on when agencies must set aside orders under MACS. For instance, in one COFC decision, the court held that “[t]he Rule of Two unambiguously applies to ‘any’ ‘acquisition,’ FAR 19.502-2, without any loophole for MAIDIQ task orders.” The court noted, “where the FAR intends to make the Rule of Two entirely inapplicable to the selection of a particular procurement vehicle, the FAR knows how to do so,” and it cited FAR subpart 8.4, which expressly exempts FAR Part 8 FSS procurements from the Rule of Two requirements. The indefinite delivery contract regulations in FAR subpart 16.5, however, do no such thing. However, GAO has disagreed with the COFC on whether the small business Rule of Two apply to orders under a multiple award contract and said it is discretionary on the part of the agency. GAO noted that it had in the past construed the small business Rule of Two as applicable to any task order delivery order solicitation, but that in 2010 Congress amended the Small Business Act to require rules allowing federal agencies to “set aside orders placed against multiple award contracts for small business concerns” “at their discretion.” Both the FAR and SBA rules echoed the language allowing agencies to have discretion in setting aside orders for small business. In various decisions, GAO had consistently ruled that “set-aside determinations under multiple-award contracts are discretionary, not mandatory.” In keeping with that tradition, GAO reiterated that agencies do not have to use small business set-asides for orders solicited against multiple award contracts. Perhaps in part to overcome this split in authority, here are the key actions that the memo recommends: “Apply the rule of two to contract orders, with limited exception.” With limited exceptions for things like urgency, “agencies should set aside orders over the micro-purchase threshold (MPT) for small business contract holders when the contracting officer determines there is a reasonable expectation of obtaining offers from two or more small business contract holders under the multiple-award contract that are competitive in terms of market prices, quality, and delivery.” This memo, then, encourages agencies to use small business set-asides for orders, regardless of the split between the COFC and GAO. This should have a positive effect on setting more acquisitions aside for small business. “Maximize orders to small businesses under the simplified acquisition threshold (SAT) to the maximum extent practicable.” Agencies should review data on what percentage of orders are not set aside and take action on those small-dollar orders. Make BICs work for small business. “Best-in-class (BIC) contract vehicles are enterprise multiple-award contracts that meet a rigorous set of criteria, including demonstrated use of category and performance management strategies and small business best practices.” Many of them have been used for awards to SDBs and SDVOSBs. Agencies should prioritize small business and use order set-asides in connection with BICs. This memo shows that the OMB is committed to increasing small business participation. It predicts that new SBA and FAR rules will be coming soon to put these ideas into practice. For now, OMB is relying on voluntary agency effort to carry out these steps. Let’s hope that many agencies follow them, but that new regulations come out soon. Stay tuned to SmallGovCon to see how this develops. Questions about this post? Email us or give us a call at 785-200-8919. Looking for the latest government contracting legal news? Sign up here for our free monthly newsletter, and follow us on LinkedIn, Twitter and Facebook. The post OMB Issues Command to Increase Small Business Participation on MACs first appeared on SmallGovCon - Government Contracts Law Blog.View the full article
  13. Happy Friday! We hope you had a productive week. We are slowly exiting the deep freeze that we have been enduring the past few weeks, here in the midwest. We’ve had snow, ice, rain and sub degree temperatures! Not fun! We are looking forward to seeing the sun again and warmer days. Hope you are doing well and looking forward to a nice weekend. This week in federal government contracting news saw some interesting stories, including a push to streamline contracting and GSA not following procurement rules. Contracting Vehicles: Understanding GSA Schedules, IDIQs, and Beyond Bipartisan bill strives for ‘more nimble and meaningful’ federal contracting Federal ‘neurodiversity’ initiatives slowly getting off the ground GSA hosts roundtable with business leaders on advancing equity in federal contracting Can a data environment actually improve federal procurement? Study: Growing Indian middle class on Nebraska reservation defies odds GSA Purchased Chinese-Manufactured Videoconference Cameras and Justified It Using Misleading Market Research DoD’s new memo puts stricter requirements on cloud providers Protests restart over CIO-SP4 It’s time to rethink GovCon pricing to align with post-pandemic reality Technology Modernization Fund announces targeted investments to improve customer service and security United States Files False Claims Act Complaint Against Department of Energy Prime Contractor Alleging Millions of Dollars in Fraudulent Overcharging The post SmallGovCon Week in Review: January 22-26, 2024 first appeared on SmallGovCon - Government Contracts Law Blog.View the full article
  14. In 2019, the Department of Defense (DoD) announced the development of the Cybersecurity Maturity Model Certification (CMMC) Program, which was then implemented in 2020 as an interim rule. We blogged about that way back in 2020. This program was designed to give a certification to contractors based on the depth and effectiveness of their cybersecurity systems to help ensure that contractors implement required security measures. As DoD put it, “[t]he CMMC model consists of maturity processes and cybersecurity best practices from multiple cybersecurity standards, frameworks, and other references, as well as inputs from the broader community.” In late December 2023, the DoD issued proposed changes to the CMMC program for “CMMC 2.0,” a plan that DoD began work on back in 2021. In this post, we will take a general look at these proposed changes. FCI and CUI It might be helpful for context to give an idea of what the CMMC Program protects. After all, many might wonder what there is to protect if the information is unclassified. The CMMC Program aims at protecting two kinds of information: Federal Contract Information (FCI) and Controlled Unclassified Information (CUI). FAR 52.204-21 defines FCI as “information, not intended for public release, that is provided by or generated for the Government under a contract to develop or deliver a product or service to the Government, but not including information provided by the Government to the public (such as on public Web sites) or simple transactional information, such as necessary to process payments.” Essentially, it’s information that comes from a contract that isn’t marked for public release. CUI, per 32 C.F.R. § 2002.4, “is information the Government creates or possesses, or that an entity creates or possesses for or on behalf of the Government, that a law, regulation, or Government-wide policy requires or permits an agency to handle using safeguarding or dissemination controls.” Essentially, CUI is information that, while unclassified, agencies must or are permitted to safeguard or otherwise control the dissemination of. The National Archives provides a good rundown of the difference between FCI and CUI. The CMMC Program, then, basically is aimed at ensuring the information that falls in between “classified” and “meant for public release” is properly protected. This program became all the more crucial with the rise of electronic data creation, collection, and processing. “Classified information” generally has to do more with information that must be protected for national security reasons. Just because information is unclassified, that does not mean it is meant to be disseminated to the public. Personal data and financial information all might well be unclassified, yet still improper to disseminate publicly. This is what the CMMC Program seeks to protect. Current CMMC Under the current CMMC program, federal contracts have five levels of security requirements. For CMMC Level 1, contractors and applicable subcontractors must follow FAR 52.204-21, which has 15 security requirements for the transfer of FCI outside the government. For CMMC Level 2, contractors and applicable subcontractors must follow DFARS 252.204-7012, which has 65 of 110 security requirements for the transfer of CUI outside the government by its reference to the National Institute of Standards and Technology (NIST) Special Publication (SP) 800-171, “Protecting Controlled Unclassified Information in Nonfederal Systems and Organizations,” along with 7 CMMC practices and 2 CMMC processes. CMMC Level 3 consists of all 110 security requirements from NIST SP 800-171, 20 CMMC practices, and 3 CMMC processes. CMMC Level 4 consists of all 110 security requirements from NIST SP 800-171, 46 CMMC practices, and 4 CMMC processes. Finally, CMMC Level 5 consists of all 110 security requirements from NIST SP 800-171, 61 CMMC practices, and 5 CMMC processes. CMMC 2.0 If implemented, CMMC 2.0 would add 32 C.F.R. Part 170 to the CFR if implemented. It would create a number of new requirements for assessment and affirmation that requirements are being met for CMMC Levels 1 and 2. For CMMC Level 1, contractors and applicable subcontractors would need to verify they are meeting the security requirements through self-assessment and affirm the same annually. For CMMC Level 2, program contracts will either include a self-assessment requirement or a certification assessment requirement at what appears to be the discretion of the contracting officer, the latter of which would involve assessment of contractors and applicable subcontractors by a third-party on whether they are meeting the CMMC Level 2 security requirements. In either case for CMMC Level 2, the contractor and applicable subcontractors would need to affirm continuing compliance after each assessment. However, the biggest change with CMMC 2.0 is that it appears it would simplify the leveling system and make CMMC Level 3 the highest level. Per the proposed rule, it would eliminate Levels 2 and 4, and rename the remaining three CMMC Levels as follows: Level 1 will remain the same as CMMC 1.0 Level 1 (15 security requirements for the transfer of FCI outside the government); Level 2 will be similar to CMMC 1.0 Level 3 (110 security requirements from NIST SP 800-171); and Level 3 will be similar to CMMC 1.0 Level 5 (110 security requirements from NIST SP 800-171. But, furthermore for CMMC Level 3, contractors and applicable subcontractors would also be required to implement 24 selected security requirements (outlined in what will be 32 C.F.R. § 170.14) from NIST SP 800-172, “Enhanced Security Requirements for Protecting Controlled Unclassified Information: A Supplement to NIST Special Publication 800-171.” Under CMMC Level 3, contractors and applicable subcontractors would need to verify through a DoD-conducted assessment that they are meeting the Level 3 requirements. They would then get a certification that is valid up to three years. Naturally, the contractor and applicable subcontractors would also be required to affirm compliance after the assessment and then annually thereafter until the next assessment. It is worth noting that this CMMC Program applies to defense contracts, and that the implementation will be a phased rollout. Specifically, the proposed rule states: “The DoD is implementing a phased implementation for the CMMC Program and intends to introduce CMMC requirements in solicitations over a three-year period to provide appropriate ramp-up time. The Department anticipates it will take two years for companies with existing contracts to become CMMC certified.” As such, it would seem it should not apply to existing contracts but will apply over time to more and more new solicitations until all such DoD solicitations incorporate this program. Summary CMMC 2.0 expands upon the CMMC Program in multiple ways, such as simplifying the security requirement level structure, assessment requirements, and affirmation requirements. No doubt there will be further tweaks to the program in the years to come even if CMMC 2.0 is implemented, but contractors should be aware of the potential for this new program. As of this posting, comments are still welcome on the CMMC 2.0 proposed rule and will be until February 26, 2024. It seems safe to assume that CMMC 2.0 will be implemented in some form or another, so familiarization now may help prevent headaches down the road. 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 CMMC 2.0 and You: A Look at the Department of Defense’s Proposed New Cybersecurity Rules first appeared on SmallGovCon - Government Contracts Law Blog.View the full article
  15. It’s been one year since the U.S. Small business Administration (SBA) took over the federal government’s veteran-owned small business contracting program from the Department of Veterans Affairs (VA), and a lot has happened in that amount of time. Here, we discuss how SBA has handled the Veteran Small Business Certification Program in the first year and some of SBA’s achievments. And in other big SDVOSB news, the federal government will be providing more contracts for veteran-owned entities under the National Defense Authorization Act’s increased contracting goals. VetCert is One Year Old In a welcome change to the much longer process of years past, SBA has streamlined the process that service-disabled veteran owned small businesses (SDVOSBs) and veteran owned small businesses (VOSBs) must endure to either become certified for the first time, or to continue its certification. In 2023, VetCert approved over 10,400 applications from SDVOSBs and VOSBs, while averaging only 15 days for the applications to be processed. Wow! Perhaps the CVE can give some pointers to the WOSB certification program, which has endured some very long wait times based on what we’ve heard from folks. You can read the full press release here, but some of the high points include: Streamlining of ownership and control requirements to make them similar to those of the 8(a) Program and Woman-Owned Small Business Program; Monthly (or more) VetCert webinars for interested applicants discussing the application process (register here); Updated frequently asked questions library; and Centralized reporting, via the Veterans Case Management System (VCMS), for changes in ownership, company structure, veteran status, and recertification. “To date, 42,525 VetCert customer service responses have been completed by the VetCert Verification Support personnel.” From what we’ve heard and experienced, the VetCert program has been very efficient, especially compared to other SBA programs. Kudos to SBA for that! Joint Venture Certification While the transition from the VA to the SBA has been a relatively smooth one, it still had some questions that needed to be answered. At the top of the list: What does a joint venture need to do to be an eligible offeror? Is there a certification or registration requirement for the joint venture, separate from the registration requirement of the SDVOSB or VOSB venturer? We’ve seen some language in solicitations that seems to state that joint ventures must be certified or registered. But is that the case? And if so, where, or how? Well, the answer to that is two-fold. First, SDVOSBs and VOSBs do not have to go through the certification process under the regulatory language, and SBA judges have confirmed this. Freedom Technology Partners, LLC, SBA No. VSBC-321-P, 2023 (Dec 4, 2023). Instead, their eligibility is based on the SDVOSB or VOSB status of their managing venturer per 13 C.F.R. § 128.402. But, just because the joint venture does not need to be certified, it does appear that SBA is requiring joint venture offerors to be “designated” as an SDVOSB or VOSB joint venture. Late in 2023, SBA published, within its FAQ library, guidance which states, “Joint Ventures do not get certified as SDVOSBs or VOSBs by SBA. Instead, they must be ‘designated’ as eligible for sole-source or set-aside awards under the Veteran Small Business Certification Program by the Managing Venturer.” This is done by the managing venturer, who “must log into VCMS and ‘claim’ the Joint Venture.” Visit the FAQs to view a step-by-step walkthrough of this process. SDVOSB Contracting Goals Increase Finally, the 2024 National Defense Authorization Act will bring with it a bump in the SDVOSB contracting goals. The government-wide goal for contracting with SDVOSBs will go from three percent, which it has been at since 2000, to five percent. It will be interesting to see if SBA or other agencies change their policies based on this new goal. But based on prior years’ small business scorecards, agencies don’t have too far to go to hit the new goal. In fact, 2022 came in with 4.57%, less than a half of a percentage short of the soon-to-be 5% goal. This is great news for veterans to ensure they continue receiving a large number of federal contracting dollars. 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 SDVOSB Updates: SBA VetCert Achievements, JV Certification, and NDAA Contracting Goal first appeared on SmallGovCon - Government Contracts Law Blog.View the full article
  16. Happy Friday! Brrr, another very cold day here in the Midwest. We are looking for relief next week as the forecast is set for warmer temperatures after this deep freeze. I think I speak for everyone when I say that we are ready! We hope that you are staying warm in your neck of the woods. This week in federal government contracting saw some important stories, including the one-year anniversary of the SBA takeover of the SDVOSB program and the new defense industrial strategy. Small Business Size Standards: Notification of Two Virtual Public Forums on the2023 Revised Size Standards Methodology White Paper The Committee on Small Business (the Committee) is investigating National Aeronautics and Space Administration’s (NASA) procurement decisions related to the Solutions for Enterprise-Wide Procurement Government-Wide Acquisition Contracts (SEWP VI GWAC)solicitation. Another possible challenge for DoD’s $19B moving contract: No movers Forbes: Unprecedented Number of Entrepreneurs Opened Small Businesses in Past Three Years Sens. Cruz, Peters Introduce SHARE IT Act to Require Government Agencies to Share Code Governor Murphy Signs Legislation to Support Disabled Veteran-Owned Businesses SBA Celebrates One-Year Success of VetCert Program 3 Major Contract Opportunities Shaping the Defense R&D Ecosystem Will the new defense industrial strategy actually produce results? Private capital for defense needs, DoD’s requirements system will be most challenging areas to address in the coming years Report: Federal Government Awarded Record $765B in FY 2023 Contracts Contractors can be forgiven if they’re grumpy this month GSA’s Polaris contract pulled back into protest vortex Veterans get lip service when it comes to small business loans The post SmallGovCon Week in Review: January 15-19, 2024 first appeared on SmallGovCon - Government Contracts Law Blog.View the full article
  17. Everyone has New Year traditions. Some do resolutions, some take vacations, some simply buy a fun new calendar. Here at SmallGovCon we like reading the different federal contracting annual reports. These annual reports function as almost yearbooks or like a friend’s yearly holiday card that discusses all the highlights of the past year. These annual reports are a great resource for contractors to catch up on what a specific agency or tribunal has been up to, and plan for the year ahead. In this quick review of the CBCA and ASBCA’s annual reports, we will cover some of those takeaways. Who knows, maybe in reading this post, you can find something that gives you your own federal contracting new year’s resolution. The Civilian Board of Contract Appeals (CBCA) functions as a tribunal at which contractors and civilian agencies can “resolve contract disputes between government contractors and agencies under the Contract Disputes Act.” As such, when reading about the CBCA you will typically hear about contract claims, and different contract administration and performance issues. While it doesn’t seem to get as much traction on publications about federal contracting as say the GAO or Court of Federal Claims, it is still a tribunal which many contractors may someday need to go to in order to resolve issues. Similarly, the Armed Services Board of Contract Appeals (“ASBCA”) is a tribunal that generally hears contract disputes between Department of Defense agencies and contractors . As the CBCA annual report has more information this year than ASBCA, we will start with some nuggets of info from that. CBCA Annual Report CBCA’s 2023 annual report covers a good amount of ground. You will find some significant case summaries, information on new staff (including a new Judge), acknowledgment of staff achievements, and fiscal year statistics. Of most interest to federal contractors will likely be the cases and statistics, although it is good to put faces to names that you may encounter as well as recognize the great work CBCA’s employees may be completing. CBCA Cases of Note: In its annual report, CBCA lists summaries of nine cases that it deems “Decisions of Note.” All are worth a quick read (each is about half a page). The cases noted by CBCA in the annual report provide some great examples and pitfalls for contractors to consider prior to filing with CBCA. Some good takeaways are below: Alan E. Fricke Memorials, Inc. v. Department of Veterans Affairs, CBCA 7352, et al. (Jan. 12, 2023) VA issued cure notices for performance of a contract for inscription services at a VA cemetery. The contractor did not respond directly to the cure notices, but eventually completed all backlogged work on the contract. VA, however, terminated the contract for default. Upon review, CBCA converted the termination for default to a termination for convenience. CBCA found that the cure language didn’t properly put the contractor on notice that the CO sought a plan for how the contractor would “receive and process orders in the future and that, by the date of the cure notices, [contractor] had no delinquent orders to support a default termination.” With this case, CBCA seems to be issuing an alert to agencies that cure notices must be clear, and that contractors should strive to catch up on any work that may be subject to them. If it’s not clear, a contractor may be able to challenge a default termination. Contractors should also read any cure notices closely, and correct any problems. Cobra Acquisitions, LLC v. Department of Homeland Security, CBCA 7724 (Sept. 21, 2023) The contractor here had a contract with the Puerto Rico Electric Power Authority (“PERPA”) to provide power restoration services. This contract stemmed from the Federal Emergency Management Agency (“FEMA”) entering into a “cooperative agreement with Puerto Rico” to allow FEMA to provide disaster assistance. PERPA failed to pay the contractor “more than $174 million” that the contractor claimed was due. The contractor submitted a claim to FEMA for this. The CBCA however states that under the Contract Disputes Act (“CDA”), its jurisdiction is limited to contracts with an executive agency, and FEMA (the executive agency here) was not a party to the contract between PERPA and the contractor. CBCA continued, clarifying that a “suretyship arrangement is not a contract for the procurement of good or services” and would not be seen as a procurement contract under CDA. The CBCA “lacks jurisdiction to entertain third-party beneficiary contract claims.” CBCA’s jurisdiction is limited to direct contracts with executive agencies; and even if an executive agency may have been the cause behind an action, if the contract itself is not with that agency, then CBCA cannot hear the claim. Contractors need to be sure to nail down who their contract and claim is with, before diving into the CBCA process. SBA Archway Helena, LLC v. General Services Administration, CBCA 5997, et al. (Mar. 6, 2023) In a design/build lease with GSA, the contractor alleged that GSA was “at fault for 234 days of delay in issuing a notice to proceed (NTP) after the contract was awarded.” This caused occupancy and the start of rent payments to be pushed back. CBCA found that the costs at issue (pre-occupancy costs) would not have occurred under the lease without the agency’s delay. That being said, the CBCA did not agree that GSA was liable for the entirety of the delay, adjusting the percentage of costs accordingly. This confirms that an agency’s delay in starting a contract could lead to a viable claim for contractors, but that CBCA will not take a contractor’s length of delay in such claim at face value. CBCA will make its own determination on how much a contractor can recoup in any such claim. CBCA Statistics: CBCA notes that there were 409 new cases filed at CBCA in 2023, but this includes cases that are not claim appeals, such as FEMA cases, of which there were quite a few. There were 246 claim appeals docketed in the past year. For the 47 claim appeal cases that went to a decision on the merits, the Board granted the appeal 10 times (contractor fully wins), granted in part the appeal 11 times (contractor won some of its grounds), and denied the appeal 26 times. The report mentions CBCA dismissed 138 CDA cases (125 were voluntarily dismissed, often meaning a settlement was reached). The CBCA also produced a graph of which agencies had the most appeals filed. It would appear that the agency with by far the most appeals filed was the Department of State, followed by the VA, and then the GSA. Taking the statistics into account, a great many CBCA appeals end in settlement. And of those not ending in settlement or dismissal, close to half of appeals (about 45%) at least result in some victory for the contractor. ASBCA Annual Report The ASBCA’s annual report focuses on the statistics for ASBCA during 2023. The ASBCA docketed 342 cases in 2023, representing a decrease of 58 cases from 2022. This also marks a 5-year low for the amount of cases docketed at ASBCA. Among the DoD agencies that had cases docketed, the one with the most was the Corps of Engineers at 105, with the Army, Navy and Air Force with 40 to a little over 50 cases each. The ASBCA resolved (or as they say “disposed”) 375 cases in 2023, 22 less than 2022. Of those, 88 were sustained, 44 were denied, and 243 were dismissed. The 88 sustains are lower than 2022, but still represent a higher amount of sustains than in 2019, 2020, and 2021. Of those not dismissed, that represents quite a high sustain rate of 67%–but we have few details on what a sustain resulted in for the contractor. Very few ASBCA cases are appealed up to the U.S. Court of Appeals for the Federal Circuit, as there were 14 appeals filed based on 13 ASBCA decisions in 2023. ASBCA also highlighted that 83 cases were voluntarily diverted to Alternative Dispute Resolution. In comparison to CBCA, the ASBCA rules in favor of the contractor more often on the merits. But it does look like ASBCA’s usage was less common than the CBCA this past year, which is interesting because DoD spends many more contract dollars than civilan agencies. Whether that was due to less contracting issues in DoD contracts, or due to some form of wariness in using ASBCA, is unclear. While ASBCA and CBCA may not be the most talked about federal contracting tribunals, they are still widely used. As you can see, there is some helpful information in these annual reports. Given the percentage of sustains and settlements reached for claim appeals, it is crucial to fully assess your options with a federal contracting attorney to see if you have a viable case before going to the CBCA or ASBCA. 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 Government Claim Appeals Nuggets from the ASBCA and CBCA 2023 Annual Reports first appeared on SmallGovCon - Government Contracts Law Blog.View the full article
  18. Happy Friday! Boy, were we hit with a major snowstorm this week with very cold temperatures sweeping in from the north! We dug out just in time for a cold blast to arrive today and our Kansas City Chiefs have a playoff game at home this weekend, with the high expected to be a balmy 6 degrees! Brrr. I’ll be watching from my climate-controlled living room. Go Chiefs! This week in federal government contracting news saw some White House initiatives for better contracting, as well as updates on cybersecurity and AI in the federal space. Welcome to a Very Busy New Year in Federal Contracting! White House Reveals Better Contracting Initiative Procedures for reporting on veteran-owned small businesses need improvement, according to GAO GSA finds federal tech accessibility challenges driven by lack of staff, resources Federal Real Property: Improved Data and Access Needed for Employees with Disabilities Using Secure Facilities SBA Marks One-Year Anniversary of Veteran Small Business Certification Program What a cybersecurity company thinks of the new DoD cybersecurity rule How Contractors Can Secure a Spot on NASA’s SEWP VI Contract Pentagon’s Military AI Effort Project Maven Could Begin Contracting in 2024 Trade Group Criticizes Regulatory Change to Federal Acquisitions Rules Bidders for this massive professional services vehicle have to provide finer details on their rates, a move one protestor is opposing in court and is detailed in this denial by the Government Accountability Office. SAP to Pay Over $220M to Resolve Foreign Bribery Investigations Improving government capacity is key for AI deployment, experts tell Congress Proposed FAR Amendment Addresses Procurement & Nonprocurement Procedures on Debarment, Suspension The post SmallGovCon Week in Review: January 8-12, 2024 first appeared on SmallGovCon - Government Contracts Law Blog.View the full article
  19. Touted as a “game-changer” when it was first introduced in 2016, the U.S. Small Business Administration’s All Small Mentor-Protégé Program isn’t new anymore. Known now as simply the “SBA Mentor-Protégé Program,” it is still extremely useful for large and small contractors alike. View Preview Please join me and Gregory Weber as we explain the ins and outs of the SBA Mentor-Protégé Program, covering the program’s eligibility requirements, its potential benefits (including the ability to form special mentor-protégé joint ventures), the application process, and common misconceptions and pitfalls. Additionally, we will provide an introduction to the even older DoD Mentor-Protégé Program, which set the stage for the SBA’s program, and compare the two programs. Register here. The post Free Event! SBA & DoD Mentor Protégé Webinar hosted by MST Contract Opportunities Center APEX Accelerator, El Paso: January 23, 2024, 10:00-11:30am MST first appeared on SmallGovCon - Government Contracts Law Blog.View the full article
  20. Happy New Year to our SmallGovCon readers! While we have already posted some updates from 2024, it’s a good time to reflect on the important posts from 2023. This post revisits those blog posts from 2023 that were the most popular. Below, we summarize the blogs written in 2023 that were the most popular as well as the perennial favorites from years past that were the most viewed in 2023. It’s a good chance to look back on the important articles from 2023, and those topics of continuing interest to federal contractors. Here are the top 10 blog posts that were posted in 2023. As usual, our readers were interested in changes to SBA’s rules, including changes to the 8(a) Program and the social disadvantage requirement, as well as our Back to Basics series focusing on issues such as teaming agreements, debriefings, and SAM registration. Top Posts Published in 2023 1Back to Basics: Teaming Agreements. Obviously, readers are very interested in why they should use a teaming agreement for federal contracts. Thankfully, this post goes into all the reasons.2Initial Challenge to 8(a) Presumption of Social Disadvantage for Certain Minority Groups Succeeds: What This Means for Now. Back on July 24, we wrote our first post about the Ultima decision that forced a revamp of how SBA reviews social disadvantage for the 8(a) Program. 3SBA Puts “Temporary Pause” on New 8(a) Program Application Submissions. After the Ultima decision, SBA had to pause new 8(a) Program applications. 8(a) Program applications resumed after a short break. One of our latest posts reminds readers what SBA is looking for in the new streamlined social disadvantage narrative format.4SBA Final Rule Relaxes Change of 8(a) Program Ownership, Allows Limited Populated Joint Ventures. This post summarized many changes that SBA made to 8(a) ownership rules, as well as joint ventures. This was a lengthy rule change from SBA that included lots of small changes to many SBA rules.5Back to Basics: Debriefings. This post can tell you all the basics about debriefings, a crucial part of the complicated world of bidding on government contracts. 6Back to Basics: Registering in SAM.gov. Before you can bid on a federal contract, you have to be registered in SAM. But what does that entail?7SBA Revisions to the “Two-Year Rule” for Joint Ventures: a Reminder to Read the Entire Rule. This post explored the still-confusing language of SBA’s “Two-Year Rule” for joint ventures.8SBA New Rule: Guidelines for Compliance with Limitations on Subcontracting in 13 C.F.R. 125.6. SBA updates its limitations on subcontracting rule to require that compliance with the limitations be looked at on an order-by-order basis for multi-agency set aside contracts and added additional consequences for violations of the limitations on subcontracting. 9Senate-Passed 2024 NDAA set to Raise DoD Set-Aside Sole-Source Contract Threshold Limits. Unfortunately, this increase did not make it into the final text of the NDAA. 10Back to Basics: Calculating Small Business Size. A helpful article that reminded our readers of the key aspects of calculating small business size for federal contracts. Top Posts Viewed in 2023 from All Time 1“In Scope” vs. “Out of Scope” Modifications: GAO Explains The Difference. This is the famous inflatable craft decision from 2017. In it, GAO explained with some detail on how far an agency can modify a contract before it becomes, essentially, a new contract that can be protested at GAO.2Goodbye PTAC, Hello APEX Accelerators. While we are still trying to get used to the name change, APEX Accelerators carry on the PTAC legacy of providing free procurement assistance to small businesses that work with all levels of the government, whether federal, state, or local. 3FedBizOpps is Almost Gone. There must be a lot of folks nostalgic for FedBizOpps and not so happy with sam.gov, based on the popularity of our post saying goodbye to FBO.4Back to Basics: Limitations on Subcontracting. A post from 2022 that is becoming very popular. With the renewed focus on limitations on subcontracting, it’s always good to know how to stay compliant. 5DOD: Sole-Source Contracts up to $100 Million Don’t Need Justification. This post explored the sole-source limits for entity-owned 8(a) companies, a continuing source of interest for 8(a) companies and their partners.6FAR Final Rule: Increased Micro-Purchase and Simplified Acquisition Thresholds. The FAR was updated to increase the micro-purchase threshold and the simplified acquisition threshold, effective August 31, 2020. Based on recent inflation trends, it might be time for Congress to look at updating these numbers. Perhaps in next year’s NDAA.7Don’t Ignore NAICS Code Changes: New Rule a Reminder to Contractors. This post reminded contractors that the U.S. Office of Management and Budget routinely revises the North American Industry Classification Systems (NAICS), which the SBA in turn incorporates as the new applicable NAICS codes for small business size purposes. 85 Things You Should Know: HUBZone Program (The Basics). This post explores a crucial program for small businesses: the Historically Underutilized Business Zone—or HUBZone. 9SAM Registration: What The Heck Is An “Immediate Owner?”. The SAM definition of “immediate owner” still creates questions for a lot of federal contractors. 10Back to Basics: Teaming Agreements. This post from 2023 made it into the top 10 from all time. I’m sure there will be much to talk about in 2024. Make sure to keep up to date on SmallGovCon for all the updates. 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 Year in Review: Top SmallGovCon Posts of 2023 first appeared on SmallGovCon - Government Contracts Law Blog.View the full article
  21. Back in 2020, we discussed an SBA Office of Hearings and Appeals (OHA) decision stating that the managing venturer must control every aspect of the joint venture. This position, which we questioned in that article, has changed since that time, and we explored the changes to the regulatory language in question not long thereafter. But this regulatory language was still vague. Since that time, there has been much case law development. The Court of Federal Claims (COFC) held in 2022, “[a] minority owner’s control over “extraordinary” actions, such as actions intended to protect the investment of minority shareholders, will not result in a finding of negative control” and applied this idea to a populated joint venture. Swift & Staley, Inc. v. United States, No. 21-1279, 2022 WL 1231428 (Fed. Cl. Mar. 31, 2022), aff’d, No. 2022-1601, 2022 WL 17576348 (Fed. Cir. Dec. 12, 2022). It now appears, fairly established at this point, that non-managing venturers can have a say in what can best be described as “extraordinary actions.” These are the sorts of decisions that can completely change the trajectory of the joint venture. But contractors must still be very careful in giving the non-managing venturer a say in the joint venture’s decisions. As one firm learned the hard way in a recent COFC case, a joint venture with too many actions controllable by the non-managing venturer may end up ineligible for set-asides. Here, we explore this decision. The Case In 2023, the COFC heard an appeal of the SBA’s determination that LS3, LLC, (LS3), a mentor-protégé joint venture comprised of LUKAYVA—the protégé and SDVOSB—and its mentor, Systems Application & Technologies, Inc. (SA-TECH), was not an eligible SDVOSB joint venture. LS3, LLC v. United States, No. 23-1392, 2023 WL 8638647 (Fed. Cl. Dec. 14, 2023). LS3 was awarded a contract for engineering support services for the Navy, and a competitor filed a combined size and status protest with the SBA, alleging that LS3 both was not small under the regulations and further lacked eligibility for SDVOSB contracts. SBA OHA found that LS3 was not eligible for SDVOSB eligibility, and then dismissed the size protests as moot since LS3 was already found ineligible. The appeal to the COFC thus specifically concerned the allegation that LS3 lacked SDVOSB eligibility. OHA based its decision on four simple considerations: (1) LS3’s operating agreement established a management committee; (2) the Management Committee held decisional power over LS3’s actions; (3) management committee actions required a majority vote of the members of the committee; and (4) SA-TECH and LUKAYVA had equal representation on the committee, providing SA-TECH with the ability to block any management committee actions. The COFC stated that the question on appeal then was whether “OHA’s action was arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law and, if so, whether the error is prejudicial.” LS3 essentially argued that OHA was wrong because it found that LUKAYVA did not have unequivocal control over LS3. However, this overstated OHA’s position. COFC observed that “OHA took issue with the type of negative control SA-TECH could assert via the Management Committee and the breadth of activities it could control.” As the SDVOSB member of the joint venture, “LUKAYVA needs to be in the driver’s seat when it comes to day-to-day management and administration of the business operations.” While LS3 argued that OHA was saying SA-TECH could have zero negative control, the COFC observed this was not the case. “OHA’s decision is specific to SA-TECH’s ability to assert negative control in the day-to-day management and administration of the contractual performance by virtue of its fifty percent representation on the Management Committee. That is, OHA’s decision is limited to who can control the breadth of LS3’s day-to-day management and administration of contract performance.” This was the problem with LS3’s agreement. It didn’t just let SA-TECH have a deciding say in those “extraordinary actions.” It gave SA-TECH and LUKAYVA 50% of the vote each. And because a majority of the vote was required for any action, essentially, SA-TECH could block any vote of LUKAYVA, be it on an extraordinary action OR a day-to-day matter. As a result, the operating agreement created a situation that went well past any extraordinary action exception to the requirement that the managing venturer control the joint venture. SA-TECH had essentially complete power to block all decisions by LUKAYVA. As such, contractors need to keep in mind that, while this extraordinary action exception is useful, it is not unlimited. You must be very careful to ensure non-managing venturers for socioeconomic joint ventures and mentor-protégé joint ventures only have say on extraordinary actions. But that raises the question: What is and is not extraordinary? Extraordinary Actions v. Day-To-Day Actions 13 C.F.R. 125.8(b)(2)(ii)(A) states: “The managing venturer is responsible for controlling the day-to-day management and administration of the contractual performance of the joint venture, but other partners to the joint venture may participate in all corporate governance activities and decisions of the joint venture as is commercially customary. The joint venture agreement may not give to a non-managing venturer negative control over activities of the joint venture, unless those provisions would otherwise be commercially customary for a joint venture agreement for a government contract outside of SBA’s programs.” What is meant, however, by “commercially customary” regarding extraordinary actions? There is no hard rule it appears. The case law is what must be looked at. There appear to be some generally agreed ideas. “Adding new members and dissolving the concern has been found to be an extraordinary action.” Strategic All. Sols. LLC, SBA No. VET-277, 2022 (Sept. 22, 2022). The same SBA decision held “[s]elling or otherwise disposing of the firm’s assets, admitting new members, amending the JVOA in any manner that materially alters the rights of existing members, or filing for bankruptcy all constitute extraordinary actions that may require the minority shareholder’s input, but do not create negative control.” Id. The same decision also helpfully points out some examples of day-to-day actions. “Conversely, OHA has characterized a number of actions as essential to the daily operation of the company, and therefore granting a minority owner the power to block such actions does in fact constitute negative control. A minority member who has control over the budget, has the power to hire and fire officers, and sets employee compensation, has control over the daily operations of a concern.” Id. This helps give at least some sense of what is and is not an extraordinary action. This post also discusses a recent joint venture agreement that provided do much daily control to the non-managing venturer. However, keep in mind with all this that this area of law is still rapidly developing, and some of this may change. One thing that can be safely said: Take drafting your joint venture agreement and joint venture operating agreement very seriously. Little mistakes can cause serious consequences. The language you choose is crucial. We always recommend at least having an attorney look over your joint venture agreement before you prepare to bid on that first contract. 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 Extraordinary Actions v. Day-to-Day Decisions for Joint Ventures: A Cautionary Tale first appeared on SmallGovCon - Government Contracts Law Blog.View the full article
  22. Happy new year! We hope you enjoyed the holiday and are looking forward to what 2024 brings. It’s been a pretty mild winter so far, but we expect old man winter will be showing up any day now. Until then, everyone has been taking advantage of getting out and about without any major travel problems. We are all grateful for that. This week in federal government contracting news saw more insights on the new CMMC regime as well as important trends for 2024. Investigations into DoD struck a chord in 2023 Cyber risks to defense industrial supply chains are ‘substantially worse’ than other concerns Navigating the Challenges and Opportunities in Government Contracting: A Guide for C-level Executives Nondisplacement of Qualified Workers Under Service Contracts GSA Technology Transformation Services Names Eric Mill Its Executive Director of Cloud Strategy PF 2024-11 Acquisition Guide, Chapter 7.1, Acquisition Planning and Acquisition Letter 2010-05 Contract Periods of Performance Exceeding 5 Years Five things to remember about CMMC Battle renews over $356M Veterans Affairs records contract If, Then: 2024 serves up many questions and potentials Fugitive Leonard Francis Back in San Diego; Appears in Federal Court The post SmallGovCon Week in Review: January 1-5, 2024 first appeared on SmallGovCon - Government Contracts Law Blog.View the full article
  23. We at SmallGovCon are excited to announce this first in a new line of blogs we call Why File. Our firm handles a wide variety of federal procurement and contract litigation matters–from SBA size and status protests to contract claims and appeals, and everything in between. One of the most common and important questions we get in that regard is, should I file? Of course, we can only directly answer that question for our current clients after reviewing the relevant facts giving rise to the potential filing. But through our new Why File series, we will cover some of the most common facts and circumstances that lead contractors to initiate litigation. So, without further adieu, here is the first blog in the series, covering some of the most common reasons contractors file size protests. Size protests are a vital and effective tool for promoting small business goals and competition in the federal procurement and award process. If the concept is newer to you–or you just need a refresher–check out this Back to Basics blog on the subjects of size protests and appeals. And if you want a deeper dive into how to file size protests and appeals, check out our handbook. When it comes to the question whether you should file a size protest, we can only provide a direct and specific answer to our clients after a review of the award and awardee at issue. But there are still some common red flags that have historically led contractors to file size protests–and that have even led SBA to agree and sustain in many cases. 1. The awardee has publicly available information that, under SBA’s size regulations, indicates it may be other-than-small for the contract’s assigned size standard. This first reason to file a size protest goes to the most basic of SBA’s size regulations, those explaining how to calculate a firm’s size. In SBA’s words, “[t]o be eligible for government contracts reserved for small businesses, your business must meet size requirements set by SBA[,]” which “define the maximum size that a business — and its affiliates — can be to qualify as a small business for a particular contract.” As SBA’s size regulations explain: SBA’s size standards define whether a business entity is small and, thus, eligible for Government programs and preferences reserved for “small business” concerns. Size standards have been established for types of economic activity, or industry, generally under the North American Industry Classification System (NAICS). The size standard for a particular contract is the one that corresponds with the NAICS code assigned to the contract, which you can find here. Once you know the applicable size standard for the contract, you can use SBA’s size regulations to calculate the firm’s size. For purposes of this blog, we will briefly summarize and discuss SBA’s size calculation standards (but we won’t go into too much detail here; so, check out this Back to Basics blog for more information on calculating a firm’s size for purposes of federal government contacting). At a basic level, SBA’s size standards are either based on number of employees or annual receipts. To determine number of employees, SBA’s size regulations say: SBA counts all individuals employed on a full-time, part-time, or other basis. This includes employees obtained from a temporary employee agency, professional employee organization or leasing concern. SBA will consider the totality of the circumstances, including criteria used by the IRS for Federal income tax purposes, in determining whether individuals are employees of a concern. Volunteers (i.e., individuals who receive no compensation, including no in-kind compensation, for work performed) are not considered employees. They clarify that the firm’s “average number of employees” is used, based on the “numbers of employees for each of the pay periods for the preceding completed 24 calendar months[,]” and SBA counts part-time and temporary employees the same as full-time employees. To determine average annual receipts, SBA’s size regulations explain: Receipts means all revenue in whatever form received or accrued from whatever source, including from the sales of products or services, interest, dividends, rents, royalties, fees, or commissions, reduced by returns and allowances. Generally, receipts are considered “total income” (or in the case of a sole proprietorship “gross income”) plus “cost of goods sold” as these terms are defined and reported on Internal Revenue Service (IRS) tax return forms[.] The rule lists a few limited exceptions for what counts as annual receipts and notes that those are “the only exclusions from receipts” SBA will allow. So, “[a]ll other items, such as subcontractor costs, reimbursements for purchases a contractor makes at a customer’s request, investment income, and employee-based costs such as payroll taxes, may not be excluded from receipts.” The rule explains, in determining size, “[t]he Federal income tax return and any amendments filed with the IRS on or before the date of self-certification must be used to determine the size status of a concern[.]” And where the firm hasn’t filed a federal income tax return for the fiscal year being measured, SBA calculates the firm’s annual receipts “using any other available information, such as the concern’s regular books of account, audited financial statements, or information contained in an affidavit by a person with personal knowledge of the facts.” Based on both size regulations, it is easy to see why an unsuccessful offeror may want to protest an award upon finding public information indicating the awardee’s number of employees or annual receipts exceed the contract’s size standard–or information directly contradicting the awardee’s SAM profile or other representations or certifications of small business size. This could be information on the number of employees listed on a company website, SAM profile, or LinkedIn profile. Or it could be publicly available award and government spending information acquired from SBA’s Dynamic Small Business Search (or DSBS) website, the USA Spending.Gov website, or another reputable federal government contracting website. Since a size protest cannot be based on speculation alone, protesters often collect and use screenshots or print outs of this kind of information to allege that an awardee is too large for the award–and thus, ineligible. And where valid and reputable, such support could even lead to a sustained size protest on that basis. Review of the regulatory language in SBA’s size rules also gives rise to our second reason to file a size protest, affiliation. 2. The awardee has a relationship with another entity or individual that gives rise to concerns about what or who has power to control. Both rules for calculating size (employee and annual receipts based) note that a firm’s size must include in its calculations the employees or annual receipts of any acknowledged “affiliates” as well. SBA’s employee-based size regulations explain: If a concern has acquired an affiliate or been acquired as an affiliate during the applicable period of measurement or before the date on which it self-certified as small, the employees counted in determining size status include the employees of the acquired or acquiring concern. Furthermore, this aggregation applies for the entire period of measurement, not just the period after the affiliation arose. SBA’s receipt-based size regulations similarly explain: The average annual receipts size of a business concern with affiliates is calculated by adding the average annual receipts of the business concern with the average annual receipts of each affiliate . . . [and] [t]his aggregation applies for the entire period of measurement, not just the period after the affiliation arose. SBA’s affiliation rules, also found here (at section 121.103), state: In determining the concern’s size, SBA counts the receipts, employees, or other measure of size of the concern whose size is at issue and all of its domestic and foreign affiliates, regardless of whether the affiliates are organized for profit. Now, what constitutes an “affiliate” is not a simple question–nor does it have a simple answer, as affiliation can be found for many different reasons. Since we won’t get too deep into affiliation here, check out these two Back to Basics blogs covering affiliation generally, as well as the specific types of affiliation. But for purposes of this blog, we will briefly summarize why affiliation matters for purposes of size calculations. SBA defines an affiliate as follows: Concerns and entities are affiliates of each other when one controls or has the power to control the other, or a third party or parties controls or has the power to control both. It does not matter whether control is exercised, so long as the power to control exists. As you can see, control is key. If SBA finds that one firm has the power to control another firm, the two firms are affiliates. Such control can be obvious, affirmative control (i.e. the right to make decisions on the company’s operations), or it can be negative control (i.e., “instances where a minority shareholder has the ability, under the concern’s charter, by-laws, or shareholder’s agreement, to prevent a quorum or otherwise block action by the board of directors or shareholders.”). Such control can be exercised indirectly through a third-party–or even, unexercised. SBA will look at many factors, including the firms’ “ownership, management, previous relationships with or ties . . . and contractual relationships, in determining whether affiliation exists.” The rule even contains a fallback SBA can rely on to find affiliation where the firms are not considered affiliates under one specific affiliation basis (i.e., common ownership or management, economic dependence, familial affiliation). It says, “[i]n determining whether affiliation exists, SBA will consider the totality of the circumstances, and may find affiliation even though no single factor is sufficient to constitute affiliation.” So, this second reason to file a size protest could actually be broken into 10 or so reasons, if we wanted to. For example, just to name a few, many size protests are filed because the unsuccessful offeror finds out or determines: The awardee works closely with another firm run by an immediate family member (potential familial affiliation); The awardee gets a substantial portion (70% or more) of its revenue from another firm–or provides a substantial portion of another firm’s revenue comes from the awardee (potential economic dependence); The majority owner of the awardee also holds majority ownership in another firm or firms–even if the ownership is less than 50%, but large compared to the other owners (potential common ownership affiliation); Individuals who manager the awardee also manage another firm or firms (potential common management affiliation); and The awardee simply has so many ties to another firm that it cannot be ignored (potential totality of the circumstances affiliation). Again, this list is far from exhaustive. The only thing that matters across the board is that the size of the awardee, when the employees or annual receipts of all of its affiliates are added on, would no longer be small under the contract’s size standard. So, if you file a size protest that meets the jurisdictional prerequisites (i.e., relies on nonspeculative information or findings), the awardee will get a chance to show that affiliation doesn’t exist (typically, by providing information/documentation to SBA regarding its organization, owners and managers, financials, existing agreements, etc., and by showing that the affiliation factors and/or required control are not present)–or that the affiliation has been severed. Notably, SBA’s rules do clearly allow companies to “sever their affiliation” by removing the ties giving rise to such affiliation or–where affiliation is familial–by showing a “clear fracture” of the relationship. In such case, the former affiliate’s employees or receipts would no longer be aggregated. If the awardee cannot show that affiliation doesn’t apply or has been severed–and the addition of their affiliate’s size does make them too large for the contract at hand–SBA will find them ineligible and will likely require the contracting agency to rescind or terminate the award. If a size protest leads to a finding of general affiliation, such could affect the awardee’s size standard for other contracts moving forward (unless and until affiliation is severed)–and could even affect any certifications the awardee may hold (i.e., 8(a), WOSB, SDVOSB, etc.). Affiliation, as well as SBA’s basic size regulations, also gives rise to the third reason to file a size protest that we will discuss. 3. The awardee has recently initiated M&A proceedings with the potential to affect its size calculations. Affiliation can also be found where a firm has stock options, convertible securities, and agreements to merge with another firm. SBA will essentially treat such agreements as though they’ve already been put into effect under its “present effect” rule. But even where a firm is acquired by another firm or acquires another firm, and affiliation itself isn’t really the issue, the firm’s size could still be affected in a way that makes it ineligible for award. Indeed, SBA’s employee-based size regulations explain: If a concern has acquired an affiliate or been acquired as an affiliate during the applicable period of measurement or before the date on which it self-certified as small, the employees counted in determining size status include the employees of the acquired or acquiring concern. Furthermore, this aggregation applies for the entire period of measurement, not just the period after the affiliation arose . . . [and] if a concern has sold a segregable division to another business concern during the applicable period of measurement or before the date on which it self-certified as small, the employees used in determining size status will continue to include the employees of the division that was sold. And SBA’s receipt-based size regulations similarly explain: If a concern has acquired an affiliate or been acquired as an affiliate during the applicable period of measurement or before the date on which it self-certified as small, the annual receipts used in determining size status includes the receipts of the acquired or acquiring concern. This aggregation applies for the entire period of measurement, not just the period after the affiliation arose. However, if a concern has acquired a segregable division of another business concern during the applicable period of measurement or before the date on which it self-certified as small, the annual receipts used in determining size status do not include the receipts of the acquired division prior to the acquisition . . . The annual receipts of a former affiliate are not included if affiliation ceased before the date used for determining size. This exclusion of annual receipts of such former affiliate applies during the entire period of measurement, rather than only for the period after which affiliation ceased. However, if a concern has sold a segregable division to another business concern during the applicable period of measurement or before the date on which it self-certified as small, the annual receipts used in determining size status will continue to include the receipts of the division that was sold. Based on the size regulations, affiliation rules, and present effect rule, even an awardee’s written intent to engage in a business acquisition that affects its size–and thus, its eligibility for a small business set-aside contract–could give rise to a size protest, and even an SBA sustain of such protest. So, often, unsuccessful offerors will file a size protest upon getting word that the awardee plans to acquire another company or be acquired in the future. Finally, our last reason to file isn’t based on regulations at all–but rather on a gut feeling. 4. Something doesn’t feel right and you want SBA to ensure the awardee is eligible for the award. Indeed, many a size protest has been filed because the unsuccessful offeror simply has a bad feeling that the awardee is hiding something about its size, organization, or eligibility. And again, so long as the size protest isn’t solely based on speculation, that is ok. While we may not encourage protests based solely on a gut feeling, we are not naive to the fact that gut feelings serve as the basis for many size protests. Now, there are SBA protective orders for size appeals that safeguard the proprietary information of the protested concern (where requested and granted by SBA). But many unsuccessful offerors will have their trusted government contracts attorneys file the size protest and eventual appeal to get access to information on the awardee’s size and eligibility. The protester can rely on its counsel, along with SBA, to check if the awardee is eligible for the award. * * * These are just a few (of many) reasons why unsuccessful offerors file size protests. And a size protest–filed for any reason–is an important part of the government contracting world and process. Size protests, and their resulting size determinations, serve the crucial policies of transparency and fairness and further the nation’s small business contracting goals. Questions about this post? Need help filing or responding to a size protest of your own? Or need additional government contracting legal assistance? Email us. Looking for the latest government contracting legal news? Sign up for our free monthly newsletter, and follow us on LinkedIn, Twitter and Facebook. The post Why File: A Size Protest first appeared on SmallGovCon - Government Contracts Law Blog.View the full article
  24. Happy Friday! It’s time to say goodbye to 2023 and usher in the new year. Here at SmallGovCon, we would like to thank all of our blog readers for a wonderful year. We will continue to work hard to provide helpful federal contracting news and updates in 2024 and we truly appreciate your continued support and feedback. Happy new year! Enjoy a final few federal contracting updates to round out the year, including the new CMMC rules and new SDVOSB goals. Strengthening Digital Accessibility and the Management of Section 508 of the Rehabilitation Act Class Deviation—Implementation of the United States Trade Representative Trade Agreements Thresholds Civilian Agency Acquisition Council (CAAC) Consultation to Issue a Class Deviation from the Federal Acquisition Regulation (FAR) Regarding New Trade Agreements Thresholds Risk Management: Identifying and Mitigating Risks in Federal Contracts Cybersecurity Maturity Model Certification Program Proposed Rule Published Proposed rule would allow DOD program managers to request waivers for CMMC requirements DOD Seeks Comments on Proposed CMMC Program Rule to Protect Sensitive Unclassified Information Congress Increases the Government-Wide Goal for Awards to Service-Disabled Veteran-Owned Small Businesses From 3% to 5% in a Victory for NVSBC, Veterans and American Small Businesses GSA’s Federal Acquisition Service achieves $100 billion status Addressing cyber shortages and going after zero trust: Pentagon’s efforts to modernize its forces Army Futures Command to focus more on rapid acquisition, with an eye toward potential pitfalls The post SmallGovCon Week in Review: December 25-29, 2023 first appeared on SmallGovCon - Government Contracts Law Blog.View the full article
  25. Happy Holidays, Blog Readers! Please make sure to thank all those that work tirelessly during the holidays to make things merry and bright and I’m not just referring to Santa. We truly appreciate you! We hope you have a very joyful holiday season surrounded by family and friends. And now in federal government contracting news this week, a big update about labor in federal construction projects. Fact Sheet: Biden-⁠Harris Administration Announces Action to Support Economic and Efficient Construction Projects While Creating Good-Paying and Union Jobs FACT SHEET: President Biden to Highlight How His Investing in America Agenda Has Led to a Black Small Business Boom Why the General Services Administration has a busy year coming up OMB Releases Guidance on Use of Project Labor Agreements in Federal Construction Projects Owner of Kansas Company Pleads Guilty to Crimes Related to Scheme to Illegally Export U.S. Avionics Equipment to Russia and Russian End Users Executives Charged with Bid Rigging, Territorial Allocation and Defrauding the U.S. Forest Service After a Wiretap Investigation Use of Project Labor Agreements on Federal Construction Projects ‘Fat Leonard,’ fugitive in Navy bribery case, facing extradition to US Iowa’s Ernst touts defense bill boost for small businesses seeking federal contracts Sterling Shepard Gets Into Holiday Spirit, Shows Support for Women-Owned Small Businesses SBA’s Handling of Identity Theft in the COVID-19 Economic Injury Disaster Loan Program Small Business Administration: Procedures for Reporting on Veteran-Owned Businesses Need Improvement Legislative Branch: Options for Enhancing Congressional Oversight of Rulemaking and Establishing an Office of Legal Counsel The post SmallGovCon Week inReview: December 18-22, 2023 first appeared on SmallGovCon - Government Contracts Law Blog.View the full article
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