OMB Acquisition Reform Proposal 1 – Acquisition Test Programs

© Buffaloboy – Fotolia.com

The fundamental problem with acquisitions is that they take too long, by whatever standards people may be applying. The Office of Management and Budget (OMB), who oversees the performance of federal agencies, has proposed six ways to help streamline the acquisition process and improve the acquisition environment – changes they intend to be part of the FY 2020 National Defense Authorization Act (NDAA).

In a series of posts, we’ll look at each of these six proposals. First up, is to establish acquisition test programs.

You may remember our discussion about other attempts to streamline acquisitions through other transactional authorities and consortia. What the OMB is saying here is let’s set up some innovation in procurement and acquisition and allow individual agencies to test stuff out and cultivate the kind of innovation you might see in Silicone Valley and other high-tech areas.

Someone will still need to approve you to try out your idea, but then you can do so even if it’s not entirely in compliance with the FAR. The idea is to test stuff out, see whether it works, and then that would result in recommendations for future actual changes.

This all fits into the concept of agile development that so many are people are into right now. One example is the Air Force Kessel Run program (for all you Star Wars fans). It’s essentially a place where they’re doing software development in small bits – what they call agile scrums – and they can literally run from requirements to testing, fielding, etc. in months rather than years.

Establishing acquisition test programs is a really good idea. It will fit within what the 809 panel was doing, and it will also fit the government’s move toward innovation.


SBA to Change Measurement for Receipts-Based Size Calculation

© Andrey Popov – Fotolia.com

This is a guest post by Megan C. Connor of PilieroMazza, PLLC.

On June 24, 2019, the Small Business Administration (SBA) published its long-awaited proposed rule changing the period of measurement for a receipts-based size calculation from three years to five years. This change was prompted by the Small Business Runway Extension Act (the Runway Act), which became law on December 17, 2018.

SBA was slow to implement this change because SBA believes that the Runway Act amended a section of the Small Business Act that does not apply to SBA. “Nevertheless,” SBA says, “to promote consistency government-wide on small business size standards, SBA proposes to change its own size standards to provide for a 5-year averaging period for calculating annual average receipts for all receipts-based size standards.” Smaller and larger small businesses industry wide could be impacted in terms of gaining access to government contracts. PilieroMazza will be submitting comments to the proposed rules on behalf of our small business clients before the August 23, 2019, deadline.

The proposed rule changes the references to three fiscal years to five fiscal years in 13 C.F.R. §§ 121.104 and 121.903. The proposed rule does not, however, address how contractors should calculate their size in the period between December 17, 2018, and when SBA’s rule becomes final. Presumably, SBA’s position is that contractors must use a three-year calculation until SBA issues its final rule. But this position, of course, does not address the fact that the five-year calculation became federal law in December.

SBA also does not address a transition period, for firms that are small under a three-year calculation but other-than-small under a five-year calculation. The latest version of the House of Representatives’ National Defense Authorization Act for Fiscal Year 2020 (the NDAA) is requiring SBA to implement a transition plan that would allow firms to use a three-year calculation, if such calculation renders the firm a small business, for the period beginning on December 17, 2018, and ending on the date that is six months after the date on which SBA issues final rules implementing the Runway Act. (The House is also making clear in the NDAA that, from Congress’ perspective, the Runway Act became effective on December 17, 2018.)

The deadline for submitting comments is August 23, 2019. SBA specifically seeks feedback on whether SBA should calculate annual average receipts over five years for all industries subject to receipts-based size standards or on whether it should use a five-year annual receipts average for businesses in services industries only and continue using a three-year annual average for other businesses. SBA also invites input on how the use of annual average receipts over five years instead of three years would impact both smaller small businesses and more advanced, larger small businesses in terms of getting access to federal opportunities for small businesses.

Members of PilieroMazza’s Government Contracts and Small Business Programs & Advisory Services Groups will be preparing comments to this rulemaking. If you have feedback you want them to include in their comments, visit this page for further instructions: https://www.pilieromazza.com/blog-sba-issues-proposed-rule-changing-receipts-calculation-to-5-years-implementing-small-business-runway-extension-act. This post was reprinted with permission.


What are the Common Challenges Government Contractors Face with Proposal Writing?

© nexusby – Fotolia.com

This is a guest post by Reena Bhatia of ProposalHelper.

If you have any business with the Government, you are all too familiar with the proposal writing process. If you treat a proposal like a mini project, the rules are the same – plan, implement, monitor, control, and close-out. Why then do so many businesses (large and small) struggle through the proposal process? Why do so many companies suddenly forget what they do for a living and stress out their entire organization? The answer lies in the well-known trifecta – people, process, and tools.

The most common challenge businesses face – people. More precisely, a shortage of skilled people who (a) are not generating revenue for the company; (b) understand how to write to an RFx, and (c) are willing to work 18×7. Managing and writing a proposal takes a team, not one person. When I meet with potential clients, one of the common questions I get is, “why don’t we just hire one proposal manager instead of outsourcing?”

Companies can’t seem to figure out the right balance or the correct type of people to assign to a proposal. They either have one person doing everything or too many people who don’t know anything about proposal writing trying to battle their way through. Regardless of how small you think the proposal is, the skills required to work on it are diverse. Form and assign the right team and contrary to popular belief, we recommend you keep the proposal team small. Throwing bodies on a project doesn’t necessarily mean success.

The second challenge companies face is with their process. Building and submitting a proposal is not a mystery; it’s a process that can be learned, implemented, learned again, and continuously improved. Often we see companies who pick some industry-defined processes out of a textbook and force it as their own without really understanding resource limitations. Companies who are successful have a clear and flexible process that fits their organization.

Having a proposal process is great but remember if you assign the same writer to three different proposals at the same time, the process and therefore the proposal will fail. Your process should take into account resource availability and be flexible to utilize best what you need to succeed, not just what you have. Companies who succeed are not afraid to adjust their process to fit the magnitude of the RFx – adding or reducing resources and steps as necessary. Rigid processes add to the frustration levels and contribute to burn out. They most certainly don’t contribute to an increase in win ratios.   

Finally, we get to technology. There is no silver bullet here, but one thing we are sure about, email and Google docs are not the best tools to use when it comes to managing proposals. There are some excellent platforms in the marketplace today that cater to the Government contracting and proposal industry. Whether you invest in a platform, build your own (because you can!), or stubbornly decide to continue emailing files, we advise that you define how the tool will be used, communicate your expectations with your proposal team, and then stick to it and most importantly, keep it simple.

Often companies start with all good intentions to use SharePoint or some other complicated platform but quickly break the pattern and begin emailing files because of the difficulty in using the tool and lack of control. As we have observed at ProposalHelper, senior executives are the biggest violators of process and use of selected tools because they cannot remember another URL or password and are too busy to bother with it. This sets the tone and culture of the proposal team, and very quickly we see others doing the same. This creates a lot of unnecessary confusion and adds to an already stressful situation. When it comes to tools for proposals, ProposalHelper says to KISS (Keep it Simple Silly!).

Companies need to start treating proposals like their revenue generating projects – assign the right team, implement the proper process that is fit for that proposal, and ensure consistent use of tools at every level – from the senior executive on down to the proposal team.

Reena is the Founder & CEO of ProposalHelper. The company started in 2010 with one employee and today has over 42 employees. She brings over 24 years of experience in global sales and US federal proposal management. Her background also includes planning and designing technical and management solutions, drafting technical proposal responses, and pricing strategy. Reena graduated with a Masters in Public Policy from University of Maryland, College Park and is currently pursuing her PhD in Information Systems.


SBA (Finally!) Proposes Regulation Extinguishing WOSB Self-Certification

© Hurca! – Fotolia.com

This is a guest post by Haley Claxton of Koprince Law LLC.

In a move bringing to mind Etta James’ most popular refrain, SBA has proposed an amendment to its regulations which will require Woman-Owned Small Business program participants to be certified by the SBA or an SBA approved third-party certifier.

As we’ve talked about extensively on SmallGovCon (hereherehere, and here, to name a few), Congress and GAO have requested the SBA eliminate Woman-Owned Small Business program participant self-certification over and over again for the past few years. Most recently, GAO issued a report last month detailing ongoing issues with the SBA’s management of the WOSB program, due in part to SBA’s failure to eliminate WOSB self-certification in compliance with Congress’ 2015 National Defense Authorization Act. With these proposed amendments, SBA appears to have listened.

The proposed amendments are complex, so we’re focusing on the proposed initial certification processes for WOSBs in this post. Importantly, the proposed amendments outline two approved methods of WOSB certification: an entirely new Certification by SBA and a modified Certification by Third Party.

Certification by SBA

Certification by the SBA under the proposed amendments appears similar to the certification requirements of the 8(a) Business Development program, as well as Service-Disabled Veteran-Owned Small Business certification through the VA’s Center for Verification and Evaluation. Importantly, application is free! A woman-owned business may apply for SBA certification by accessing certify.sba.gov and submitting:

  • information requested by the SBA under the amended regulation (and as required to demonstrate compliance with 13 C.F.R. subpart B) similar to that currently listed in 13 CFR § 127.300;
  • if applicable, evidence demonstrating that it is a woman-owned business which is already a certified 8(a) participant, CVE-approved SDVOSB, or Disadvantaged Business Enterprise (authorized by the Department of Transportation); or
  • if applicable, evidence that it has been certified as a WOSB by an approved Third Party Certifier (as discussed below).

After applicants submit an application, the proposed amendment requires the SBA to notify applicants whether their application is complete enough for evaluation within 15 days, and if not, indicate any additional information or clarification it needs to proceed. The proposed amendment also requires SBA to make its final determination within 90 days “whenever practicable.”

Whether the SBA approves or denies an application, it must notify the applicant in writing. If it denies an application, it must provide specific reasons for denial as well. Denied applicants may file a request for reconsideration within 30 days of the SBA’s denial decision and provide additional information countering the reasons the SBA provided for denial. The SBA may either approve the application in light of additional information, or deny it again on the same grounds or new grounds. The decision on reconsideration is SBA’s final decision, meaning there is no further appeal through SBA.

Certification by Third Party

Due to ongoing WOSB third-party certification practices, the SBA’s proposed amendments would still allow the SBA to approve third-party certifiers, either for-profit or non-profit entities, to certify WOSBs. Unlike SBA Certification, third-party certifiers would be permitted to “charge a reasonable fee” for certification, but only if certifiers also notify applicants that the SBA will certify for free. SBA plans to list approved third-party certifiers on its website, as before.

Under the amendment, to become a third-party certifier an entity will be required to submit a proposal to the SBA, which “will periodically hold open solicitations.” If the SBA determines that an entity’s proposal meets its criteria, “the SBA will enter into an agreement and designate the entity as an approved third party certifier.” This agreement will contain the minimum certification standards for the third-party certifier, which, for the most part, mirror the standards for SBA certification. Much of the proposed process for becoming a third -part certifier is similar to the current system, but includes more detail and mechanisms allowing the SBA to make sure certifiers keep coloring inside the lines.

To ensure that third-party certifiers continue to comply with requirements set by the SBA, the SBA’s proposed amendment would require third-party certifiers to submit quarterly reports to the SBA and allow the SBA to periodically review certifier compliance. If the SBA determines that a third-party certifier isn’t keeping up their end of the bargain, SBA may revoke its approval of the certifier.  

Notably, unlike SBA’s various timelines for taking action on WOSB certification matters, the proposed amendment doesn’t include many regulations holding third-party certifiers to similar timelines (but that isn’t to say using a third-party certifier won’t be a speedier process than through SBA).

SBA is accepting public comments on the proposed amendment through July 15 of this year. After receiving public comments, SBA will hopefully move toward publishing a final rule quickly, at which time, WOSB self-certification will become a thing of the past.

This post originally appeared at SmallGovCon at http://smallgovcon.com/statutes-and-regulations/breaking-news-sba-finally-proposes-regulation-extinguishing-wosb-self-certification/ and was reprinted with permission.


Cost Pools in Federal Contracting

© joyfotoliakid – Fotolia.com

When you price a government contract, some of your costs are considered direct costs and others are considered indirect costs. The most basic direct cost is labor – specifically the cost of paying the employees who work directly on that contract. Those costs are billable to the government agency who hired your company.

You also have labor costs that aren’t billable to the government because those employees aren’t working directly on that contract. Some of these indirect costs include paying the salaries of your company president, your HR person, or your reception staff.

There are other indirect labor costs, known as fringe benefits, which are things like vacation pay and sick time. You are responsible for these costs as an employer but they are not directly billable to the government.

A cost pool is a calculation that combines these different but related types of indirect costs, and provides you with a percentage, e.g., 2X base salary, that you can include in your bid price to make sure those indirect costs are accounted for.

You would go through this same calculation for overhead costs, such as office space for billable versus non-billable employees, and direct versus indirect general and administrative costs.

I’m making this very simple (here’s a blog post that goes into more detail), but government cost accounting requires you to have these pools and rates established in order for your bid to have appropriate approval by a government cost analyst who might be evaluating the bid. Not to mention protecting yourself in case of an audit by the DCAA (Defense Contract Audit Agency – your processes could be also audited by the Defense Contract Management Agency).

As a small business in the federal contracting space, it’s important to understand cost accounting, cost analysis, indirect rates, cost pools, and all of these concepts in order to understand where you can cut costs and be more price competitive. You’ll still definitely want to consult legal and accounting experts, but educating yourself upfront will help save you time and money along the way.


SBA Changes to Size Determinations

© jozefmicic – Fotolia.com

There are often cases where a small business that’s been awarded a contract has grown bigger. This is especially common in the case of multi-year contracts, but can happen with any contract. At TAPE we’re currently awaiting award on contracts we proposed a year or as many as two years ago, and we’ve definitely grown since then.

It takes awhile for the government to evaluate proposals and in that time a company can grow and might no longer be considered small. That’s theoretically a problem if the contract was set-aside for a small business.

As Sam Finnerty explains in this post about changes to SBA’s small business regulations, SBA is proposing to amend 13 C.F.R. § 121.404(a) to make it clear that the size determination is made at the time of initial offer, OR the first formal response that includes price – this is not always the same time, the price discussion might happen later than the initial offer.

There are some other exceptions and special rules, but the important thing is that size is determined on the date of the proposal submission or the initial offer. This is a very important point because it provides more options and opportunities for substantial growth.

A small business, let’s say, could have a size standard of $15 million when they make an offer and a few years later could be $20 million or even $30 or $40 million. If it’s a five-year contract they could be a $100 million company by the end! With this change, none of that will affect the size standard that was applied at the moment of offer.

For all growing, successful companies, this is a wonderful thing and we want to applaud the SBA for doing this. This change creates a runway or a ramp for companies who’ve won contracts as a small business and meanwhile have grown into a large business.


Ostensible Subcontractor

© iracosma – Fotolia.com

In his post outlining SBA’s significant changes to its small business regulations, Sam Finnerty had this to say about a change to when you can protest an award that involves an ostensible contractor:

“SBA is proposing to amend its regulations to allow an unsuccessful offeror, SBA, or a contracting officer to protest a socioeconomic set-aside or sole source award to a prime contractor that is unduly reliant on a small, but not similarly situated subcontractor (i.e., ostensible subcontractor affiliation). By way of background, an ostensible subcontractor is a subcontractor that is not a similarly situated entity (e.g., not a small business, SDVOSB, HUBZone, or 8(a)) and performs primary and vital requirements of a contract or a subcontractor upon which the prime contractor is unusually reliant. In such cases, assuming that an exception to joint venture affiliation does not apply, SBA will treat the small business prime contractor and its ostensible subcontractor as joint venturers and, therefore, affiliates. And, if the “joint venture” is other than small, the prime contractor is ineligible for award due to this affiliation.

Notably, however, under SBA’s recently enacted joint venture regulations, a joint venture receives an exception from affiliation if both venturers are small under the applicable NAICS code. This means, for example, that if an SDVOSB contract is awarded to an SDVOSB company and that company subcontracts most or all of the actual performance to a business that is small for the applicable NAICS code, but not an SDVOSB (e.g., a generic small business, HUBZone, 8(a), or WOSB), there is currently no way to protest the awardee on the basis of ostensible subcontractor affiliation. Indeed, since both the prime and the subcontractor are small businesses, even if they are deemed a “joint venture,” they are exempt from a finding of affiliation.

To address this type of outcome, under the proposed rule, an interested party would now be able to protest the status of such an awardee, and SBA would evaluate the relationship between the prime and its subcontractor under the ostensible subcontractor rule. To that end, if SBA found that the subcontractor was an ostensible subcontractor, it would treat the arrangement between the contractors as a joint venture that is not subject to an exemption from affiliation.”

Bill’s comments: So in an ordinary circumstance, a set-aside vendor who bid on a job that’s been set aside can protest if the vendor who won will be subcontracting the work to another company that does not meet the set-aside requirements – in particular, a large subcontractor.

What’s been happening up until now, however, is that because of the joint venture rules about what’s called affiliation, members of a joint venture become immune to this form of protests if they have an ostensible subcontractor affiliation.

These new rules will essentially bring the subcontractor relationships underneath the much more stringent new rules and regulations applying to joint ventures. By doing so the SBA is allowing more opportunities for protest, and this will be a significant change.


Exciting Changes Afoot at SmallGovCon

© takasu – Fotolia.com

This a guest post by Shane McCall, attorney at Koprince Law LLC and editor of SmallGovCon.

As readers of this blog may know, we at SmallGovCon have been contributing to and reading Bill’s blog for a number of years. We wanted to inform you of some changes at our firm and our blog. Steven Koprince, the founder of Koprince Law LLC and SmallGovCon, has recently decided to move on from actively practicing law and he’ll also be stepping down as editor of our blog. For more information about the exciting things Steve has cooked up for his future plans (which will include working in the federal contracting sphere and slowing down a little), please read his post. We’ll definitely miss him, but he’ll continue to provide insight and guidance for the firm and SmallGovCon.

Rest assured, we will continue to be contributing important posts to Federalsmallbizsavvy.com on into the future. At SmallGovCon, we’ll continue to provide timely legal updates, easy-to-understand explanations, and lively commentary on the federal contracting realm. So, who’ll be taking over Steve’s duties as blog editor? Why, that would be me, Shane McCall. I’ve been practicing law since 2010, and I’ve really enjoyed the chance to flex my non-legal writing muscles some at SmallGovCon since joining Koprince Law. I’m looking forward to taking over the blog editing reins from Steve over the next month.

The other attorney-authors and I at SmallGovCon will continue to provide the latest and greatest in useful, easy-to-follow government contracting updates, with an emphasis on items important for small business contractors.

With that in mind, here are some things that we’ve commented on, but we’ll be watching closely and writing about more at SmallGovCon in 2019. Stay on the lookout for updates and commentary on these matters and many others.

  1. Small Business Runway Extension Act. Will Congress listen to the drumbeat of displeasure and amend the Act to remove the negative impact on those businesses that have had declining revenues by allowing businesses and SBA to run the numbers under both three-year and five-year look-back periods? Will the SBA listen to Congress and enforce the five-year lookback period for size-based receipts standards?
  2. Section 809 Panel’s Recommendations. We’ve written a lot and grumbled some about the Section 809 Panel’s advice, which, among many other things, ranges from eliminating most small business set-asides for DoD acquisitions to changing the “once 8(a), always 8(a)” rule. We also know that the Section 809’s panels advice has worked on some issues (read my update on changes to $1 coin regulations to maintain currency with the rules in this area). But it’s unclear how much sway the Panel will have over more substantial DOD procurement matters.
  3. Limitations on Subcontracting Updates. The limitations on subcontracting will undergo some major revisions in 2019, including a newly-effective DoD class deviation and the FAR Council’s long-awaited proposal for a comprehensive overhaul. These changes will clear up some of the confusion resulting from having different sets of rules for limitations on subcontracting found in the FAR and in the Small Business Administration’s regulations. But surely questions will remain.

We’ve enjoyed appearing as guest authors on Bill’s blog, and we’re glad to continue to do so. Please head over to SmallGovCon for updates on these hot-button issue for 2019, as well as many other topics.

Shane McCall is an attorney at Koprince Law LLC. He assists small businesses in navigating the federal government contracting world by advising on FAR and SBA issues. He regularly litigates bid protests, as well as size and status protests before the SBA. He assists with contract administration issues, including claims. Shane also drafts agreements including joint ventures, and subcontracts. Shane’s writing can be found at SmallGovCon, and he’s appeared in Contract Management magazine.


What’s in the 2019 NDAA for Small Business Contractors

© Colin & Linda McKie – Fotolia.com

The 2019 National Defense Authorization Act contains several provisions to help small business contractors, including extending the prompt payment requirement to small primes. While the changes are only proposed at this point, not passed, we wanted to highlight these ones to watch.

Small business strategy

The bill calls on DOD to establish a small business strategy to identify contracting opportunities for small firms. While there’s some interaction between small business programs, there really isn’t an integrated DOD-wide strategy that talks to all of the different support functions given to small businesses, manufacturers, and so forth.

This small business strategy would provide for a unified management structure within the department for functions related to small business programs, manufacturing and industrial base policy, and procurement technical assistance programs.

The strategy must clearly identify opportunities for small businesses to contract with DOD and ensure these firms have sufficient access to program managers, contracting officers and other relevant DOD personnel. The policy also must promote outreach to small contractors through procurement technical assistance programs.

The strategy is important to ensure small businesses continue to enjoy robust opportunities to contract with DOD, and that everyone is working towards the same set of goals.

Prompt payment

Section 852 of the NDAA requires DOD to establish a goal of paying small business primes within 15 days of receiving a proper invoice, if the contract doesn’t establish a specific payment date (this is a change from 30 days).

“They realize that prompt payment is important for small businesses to continue performance on a contract. This provision is meant to ensure that the government does its part to support these companies.” – Mitchell Bashur, attorney at Holland & Knight

This is definitely a major thing. One downside is in the rush to make payments in 15 days, there may be invoices approved that are not correct – something the government shouldn’t be approving or something you neglected to invoice for and the government didn’t notice. With less time for review, there is more chance the invoice will be rubber-stamped.

Five additional NDAA provisions that will help small business contractors:

  1. Increases participation in the Small Business Administration’s microloan program, where they give smaller amounts of money with less requirement for collateral
  2. Codifies and reauthorizes the Defense Research and Development Rapid Innovation Program to accelerate the fielding of technologies developed pursuant to phase II SBIR Program projects; extends the SBIR and STTR programs for three years until 2022 (it seems odd they don’t just put them into law, but this has to do with money and authority)
  3. Increases funding for procurement technical assistance programs – this is important because this will be very local; this is someone right in your backyard whose job it is to help you negotiate through all the rules and regulations and get contracts
  4. Requires SBIR-covered agencies to create commercialization assistance pilot programs, under which contractors may receive a subsequent Phase II SBIR Program awards – the point is to allow the research done in SBIR and STTR to be commercialized, in other words taken outside of the government sector and into commercial application
  5. Increases opportunities for employee-owned businesses through SBA loan programs such as ESOPs (employee stock ownership programs) – there are problems with how these companies qualify for SBA loan programs and they’re trying to address those issues

Many of these changes are positive, but there are some possible setbacks as well, such as the recommendations put forth by the NDAA-authorized Section 809 panel. They called for eliminating or significantly reducing small business set-asides in commercial contracts and substituting a five percent price preference. The problem is that small businesses can’t qualify for the work at the size that’s usually scoped.

Keep watching this space and we’ll share updates as they arrive.


Court of Federal Claims Decision Lends Support to VA’s SDVOSB Tiered Evaluation Scheme

© Tiko – Fotolia.com

This is a guest post by John Mattox of SmallGovCon.

In late 2017, we wrote that the VA was considering using tiered evaluations to simultaneously 1) comply with the VA’s statutory Rule of Two (and Kingdomware), and 2) address situations in which SDVOSBs and VOSBs might not offer “fair and reasonable” pricing.

Since then, the VA has instituted the tiered evaluation process for certain solicitations, using one of three approaches:

  1. Tiered Evaluation for SDVOSBs and VOSBs only: Offers made by SDVOSBs are first evaluated. If no SDVOSB submits an offer, or none would result in a award at a fair and reasonable price, then the VA evaluates offers made by VOSBs. If none are submitted, or none would result in a fair and reasonable price, the solicitation is cancelled and resolicited.
  2. Tiered Evaluation for SDVOSBs, VOSBs, and small business concerns: This approach first evaluates SDVOSB and VOSB offers as described above. But if no SDVOSB or VOSB submits an offer (on none are submitted at a fair and reasonable price), then the VA evaluates proposals from other small businesses, with 8(a) participants and then HUBZone small business concerns being given priority over other small business concerns as required by 38 U.S.C. 8127(i). If none are submitted by these types of entities, then the solicitation is cancelled and then resolicited as an unrestricted procurement.
  3. Tiered Evaluation for SDVOSBs, VOSBs, small business concerns, and large business concerns: This approach first evaluates SDVOSBs, VOSBs, and small businesses as described above. But if no SDVOSB, VOSB, or small business submits an offer (or none would result in a fair and reasonable price), then the VA evaluates offers from large business concerns. If none are submitted, then solicitation is cancelled and additional market research is conducted to inform a follow-on acquisition strategy.

The VA justifies these tiered evaluation approaches because they may prevent procurement delays. For example, if VA uses a tiered evaluation approach that includes SDVOSBs, VOSBs, small business concerns, and large business concerns, the VA doesn’t have to reissue another solicitation if no SDVOSB or VOSB submits a reasonable offer.

Of course, the practice remains controversial because the tiered evaluation approach isn’t a true set-aside for SDVOSBs. Some argue, for example, that the VA could simply rule out SDVOSB or VOSB offers as not fair and reasonable based on more advantageous pricing offered by non-SBVOSB/VOSB small business concerns (or perhaps even large business concerns) for the same solicitation.

In addition, whether the tiered approach complies with the Supreme Court’s decision in Kingdomware has been an open question–until now. Indeed, a recent case from the Court of Federal Claims supports VA’s use of a tiered evaluation scheme for procurements.

In Land Shark Shredding, No. 18-1568C (Fed. Cl. Mar. 21, 2019), the VA issued a solicitation for a firm, fixed-price FSS contract for on-site document shredding and pill bottle destruction for VA facilities in Florida. The solicitation noted that it was “a Service Disabled Veteran Owned Small Businesses (SDVOSB) set-aside with Small Business Set-aside using a tiered or cascading order of preference.” The tiers of preference were as follows: SDVOSBs, then VOSBs, then all other small businesses, then all other businesses. (In essence, it followed the third approach described above.)

Three offerors submitted proposals: Land Shark (an SDVOSB), a non-SDVOSB small business, and a large business. The SDVOSB’s price was $2.8 million, while the small business’s price was $474,000 (the large business’s price was somewhere in between the two). The small business’s price was closest to the VA’s independent government cost estimate of $490,000. Ultimately, the small business was awarded the contract.

In its protest, Land Shark raised several arguments. Here we’ll focus solely on protester’s two arguments relating to the VA’s tiered evaluation scheme.

First, Land Shark argued that the VA erred by comparing its price to other non-SDVOSB offerors. In Land Shark’s view, this process violated the holding in Kingdomware. In response, the VA argued that because the comparison of quotes was a methodology established by the solicitation, Land Shark should have raised the issue in a pre-award protest.

The Court did not decide whether the protest was untimely, but went right to the merits. In doing so, the Court found that the Kingdomware doesn’t address price comparisons or instruct the VA how it should determine that an SDVOSBs price is fair and reasonable. Specifically, the Court held:

The court agrees with the government that plaintiff has not cited any authority which supports its position. Kingdomware does not address price comparisons, in general, or the specific question of how the VA should determine that a SDVOSB’s prices are fair and reasonable. The Federal Acquisition Regulation (FAR) provision cited by plaintiff is a policy statement that does not regulate procedures for the price evaluation of proposals in procurements such as this one. In sum, plaintiff objects to the price comparison conducted by the VA here because it does not do enough, in plaintiff’s view, to secure government contracts for SDVOSBs. That is a policy argument, unmoored from statute or regulation. Without more, that policy argument is an insufficient ground for this court to invalidate a procurement decision of a federal agency.

Second, Land Shark attacked the use of tiered evaluation process head on. In part, it argued that the process violated the Rule of Two and Kingdomware.

But again, the Court was unconvinced and found that the VA did not violate the Rule of Two:

The VA in this procurement conducted a Rule of Two analysis, as required by Kingdomware, but the VA did not find that this procurement could be entirely set aside for veteran-owned businesses. . . . As defendant notes, the solicitation clearly indicated that, in addition to veteran-owned small businesses and SDVOSBs, small businesses and large businesses were welcome to apply. . . . The court sees no violation of Kingdomware in the agency’s Rule of Two analysis, its use of a cascading system of preferences placing SDVOSBs in the first tier, or in the selection of [the small business] as contract awardee.

While this decision certainly lends support to the VA’s use of a tiered evaluation procurements, it isn’t a wholesale endorsement. The analysis may have been different if Land Shark had, say, offered a fair and reasonable price (the Court found that its price was not fair and reasonable) or, perhaps, if Land Shark had leveled a better-advocated attack against the practice in the context of a pre-award protest (which would have concentrated purely on the legal validity of the tiered evaluation process without the distracting factual issue of fair and reasonable prices).

That said, the decision overall favors the VA. Another challenge–hopefully one that is better planned and executed–will likely arise later. But for now, the VA is unlikely to change course. So expect to see the VA’s continued use of the tiered evaluation scheme in, at least, the near future. If anything changes, we’ll be sure to let you know.

This post originally appeared at http://smallgovcon.com/service-disabled-veteran-owned-small-businesses/court-of-federal-claims-decision-lends-support-to-vas-sdvosb-tiered-evaluation-scheme/ and was reprinted with permission.


css.php