Agency Migration to Small Business Preference

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In a previous post, we looked at the Small Business Administration’s FY2015 Small Business Scorecard for how federal agencies did in meeting their goals to set aside a specific percentage of contracts and award them to small businesses.

So one of the things we can see is we’ve got five departments that achieved 40% or more: Agriculture has 50%, Interior 55%, Transportation 51%, State 44% and Commerce 43%. In addition there are several in the 30s.

Five years ago, none of that would have been the case – departments issuing 30-55% of their total acquisition for the year to small businesses was simply unheard of. Today there is a true migration towards more and more activity, including very robust contract sizes, being awarded to small businesses. This is clearly represented in the scorecard.

I think this trend will continue, and there are several things that growing and mid-sized small businesses need to understand to be ready. As it always comes back to on this blog, it’s all about relationships. Here are some specific relationships to think about:

  • Large business partners and bigger small business neighbors – When they are awarded some of these robust contracts, they are going to want to flip them to other small businesses. They’ll keep a share, of course, and though they can’t get more than a 49/51 split, this still gives them a piece of the revenue and can be a win-win-win for all sides (you as the small business, the bigger business, and the end customer).
  • Potential mentors and/or protégés – Another thing that we are tracking is the emerging regulations on extending mentor-protégé joint venture arrangements to all specially certified businesses as well as regular small business, where this was previously limited to 8(a) businesses.
  • Small business partners – It is important to build early and often good solid relationships with your competitors that are doing the same kind of work. In fact, if one of your partners already has previous relationship and experience with a customer, that will count towards your joint bid for new business with that customer.
  • Seemingly limited departments – Use the scorecard to focus on the departments that are clearly moving more and more work to small business. For example, Interior and Agriculture may have awarded small amounts compared to the giant amounts spent at DoD or Homeland Security, but when you look at the percentages these are no longer less desirable prospects. It is possible to design a robust portfolio and pipeline of opportunities from agencies you may have previously thought of as limited.

As you do your strategic planning, look at these entities and percentages and make some decisions – not just about who your prospects are but who your partners are. Consider whether you will build a true mentor-protégé partnership with bigger companies, and also whether you’re in a position to mentor another small business or mid-sized small business.

What the SBA FY2015 Small Business Scorecard Means for Your Business

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The team at Set-Aside Alert™ recently published their FY2015 Federal Agency Small Business Goals Summary Report, and gave us permission to reprint their findings:


Interesting data. Here’s what I noticed:

  • Department of Energy missed every goal, and was given an A.
  • HubZone seems hard to hit – only 6 of 16 hit that goal.
  • Surprisingly, several missed the goal for service-disabled veteran-owned businesses, which has been pretty consistent and over the mark. Education and Health and Human Services (HHS) missed it “by a mile.” If you’re a SDVO small business, you need to get out there and go after these folks!
  • Transportation got the only A+; they made every goal, and some by a decent amount over.
  • Only VA and HHS got B grades, which seems kind of surprising since they did well on most things. Obviously the VA did the best on SDVOSB – that just makes sense!
  • Finally, since Energy and Agency for International Development (AID) were the only ones to miss the overall small business goal of 23%, and yet the final total was only 25.75%, that tells you there’s some big missed opportunities at those agencies that we need to steer towards small businesses.

By the way, EVERY miss in this table is an opportunity to go in, talk to the small business officer, and make your case. They know they missed their goal, and would love to set it right in 2016. The buying season is coming, so give them a chance to select YOU.

Surviving a Change in Administration

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© frender –

Clearly there will be a change in administration after November 8, 2016. Even if the party does not change, many things still will. Let’s look at how that will impact you as a small business and federal contractor.

Knowing that some of the top people will change – cabinet-level secretaries and so forth – acquisition decision makers will become more tentative leading up to the event. They know that anything that does carry over into the next administration will potentially get a further review.

You could go through all the hoops for your program today – an RFP, proposals, approval, moving forward through the chain of command, etc. – and then all of a sudden it’s a new administration and the whole thing has to happen all over again. Especially if we’re looking at a new party.

New leaders will want to review all programs to make sure they’re in keeping with their politics, their situation, and the promises they made to voters.

So there are a couple of things you should do in self-defense. One is to expect that things are going to take longer, and there may be a substantial move to the right as the new admin, policies and practices take hold.

The second thing is that existing programs should be guarded zealously. Make sure that you’ve got the attention of your program’s government officials, and that they clearly understand why your program is in place and what it’s meant to do.

That’s because what almost always happens at the start of a new administration – particularly with a change of party – is that everything goes through zero-based justification. The onus is on you to defend why you are doing this, the policy and practice behind it, and show how you interact with the public and other allies (foreign affairs, military relationships, etc.).

Know that if a program is relatively more popular with one party than another and there’s a chance of change to a new party, it’s time to really begin contingency and risk planning because something may change dramatically.

We see these effects every eight years. Generally it starts right about now, in the buying season before the election, and then continues somewhat into the buying season after the election (2017).

Policies change when leadership changes. Will you be ready?

How DoD is Better Defining What Lowest Price Means in Contracts

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This is a guest post by Scott Maucione of Federal News Radio.

The Defense Department is implementing a major change to the way it awards contracts to companies.

An April 1 memo from Claire Grady, DoD’s director of defense procurement and acquisition policy lessens the onus on source selection officials to justify paying more for their requirements than just lowest cost technically acceptable (LPTA). It also adds some transparency to how the department prices its requirements.

The policy change is part of the Better Buying Power acquisition reforms, which stated the LPTA requirements sometimes ended up costing DoD more money in the long run. A 2013 Market Connections and Centurion Research Solutions study found 65 percent of contractors and 43 percent of government workers thought LPTA hurt long term value for short term savings. Some critics said DoD places too much emphasis on LPTA contracts.

DoD now will try to make clearer the worth of delivering a capability above “technically acceptable” or the minimum requirement when awarding contracts.

“What that would allow the source selector to do is then say, ‘Because the other offer came in that’s more expensive than the lowest price one, but it has this additional capability, I can put a price on that and quantify the value to the government of that additional capability,’” said Bryan Clark, senior fellow at the Center for Strategic and Budgetary Assessments in an interview with Federal News Radio. “This opens up a better way of doing best value selection that’s more defendable when it comes to protests.”

Over the past few years, LPTA has become more widely used, whether or not it was specifically called out in the contract requirements

That caused some problems for DoD. Industry has long complained that “technically acceptable” is not well defined. Some companies would lowball their bids to win contracts and then could not follow through on their promises. The government would then have to go through the contracting process again.

Also, as DoD bought some systems on the cheap, they would end up costing more money to sustain than if the government had invested more money into the original contract.

If the source selector wanted to go with a vendor that cost more during a LPTA competition, the contracting officer would then have to go through a process to justify spending the extra money.

Clark said that process was “very subjective.”

Now with the issuance of the memo, DoD will outline in its request for proposals how much it is willing to pay extra for something better than minimally required.

“You could say I need this thing to go this fast, but if it can go faster we would be willing to pay X number of dollars per additional mile per hour of speed,” Clark said.

The memo asks source selectors to prioritize the most important capabilities that DoD should pay extra for.

Roger Waldron, president of The Coalition for Government Procurement, said the change is beneficial for industry.

Waldron said the policy will provide a clearer statement to potential competitors as to how DoD values certain capabilities so it can get its pricing right and avoid the lowball scenarios.

Waldron said as a competitor it’s hard to get a sense of what the government values in certain items. When the government explains how much it is willing to pay for something it will help industry in how they price their contracts. Industry also can decide what risks it is willing to take investing in certain technologies.

DoD hinted it was looking into the methodology of its LPTA source selection back in late 2014.

The department made it clear that it was not embarking on a full review of LPTA.

“It’s just not something that we see as a problem. We’re not going to apologize for making price important, but we think there’s enough evidence to dispel the myth that we’re demanding that our people use LPTA techniques when they shouldn’t be. The data just doesn’t say we’re doing what some people say we’re doing,” Shay Assad, the director of defense pricing said last year.

This post originally appeared on Federal News Radio at and was reprinted with permission.

The Need for Acquisition Reform

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It’s no secret that many of the procurements in federal contracting take a really long time. Collectively, we’ve built some very big and complex processes around the rules and so forth, and now we’re reaping the result of having to get through all these gates. At the end the contractors and the Government are not clear if we’re left with anything better (although the gates make sure certain elements of fairness are covered), but what we are sure of is that the process took an extra year or more.

Here is just one example: At TAPE, we had started to respond to an RFP. We had asked a bunch of questions and been through several RFP Q&A responses and RFP iterations. One of our questions had to do with RDT&E (Research, Development, Test and Evaluation) activities. Like other respondents, we were trying to get more information in order to successfully respond to that portion of the RFP.

Now, any official change to an RFP that goes out – including answers to questions – are reviewed by the Government’s lawyers. In this case, the lawyers said that since RDT&E money comes from a different part of the budgeting process (different “colors of money”) than operations and maintenance, these activities should not be mixed into the same RFP or contract.

And just like that, we were done. Two days before it was due, the Government pulled (cancelled) the RFP and estimated a six-month to one-year delay before it would be re-opened, while they worked on a way to split up these functions in some fashion.

As you can imagine, everybody went a little bit crazy. We had done all this work, talked to the customer, got our capture information, etc. When we talked to the agency’s small business people, all they could say was that they’d needed to reframe the RFP. True, but why couldn’t they have caught that in one of the iterations? This wouldn’t have necessarily saved us and our cohorts from the ultimate disappointment, but would have certainly saved some of our efforts.

For it to take six months to pull out section of an RFP, rejig it, and put it back on the street, seems an absurd length of time. We’re not talking about a complicated weapons system here, but something in the services realm.

Shortening the acquisition timeline is one goal of reform, and other is to address the “ginormous” amount of overruns – when the acquisition takes more time and money than planned or available.

In any RFP, the government tries to give you detailed specs to build what they want, ranging from a mousetrap to a huge missile. They try to gather a huge number of details – performance measures, trail of spares, logistics, necessities to maintain it, etc.

In one case with procurement of defenses against the improvised explosive devices (IEDs) encountered in Iraq and Afghanistan, the war effort was over before the outcomes and results of the acquisition process were finished.

The more detailed the specs need to be, the longer the process will take. And when things take longer they cost more. This is how a $10 screwdriver ends up costing $1,000 – because you’ve given somebody 100 pages about the exact screwdriver you want. That’s what we need to fix.

This is an ongoing movement, and the pendulum is swinging both ways.

2017 NDAA Markup Makes Subcontract Plan Compliance Failure a Material Breach

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This is a guest post by Paul Murphy,which I spotted in the Mid-Tier Advocacy Group’s MTA Alert email. Sign up now for all the latest news on public policy and Capital Hill.

Congress is finally getting serious about the woefully inadequate subcontract reporting contained in the federal government’s Electronic Subcontracting Reporting System (ESRS).

Section 1821 of the just-passed Chairman’s Mark of H.R. 4909, the 2017 National Defense Authorization Act contains a potentially game-changing procurement reform innocently called, “Good Faith in Subcontracting.” It states: “. . . failure to provide contractual documentation showing compliance with a subcontracting plan is a material contract breach, just as existing law states that failing to comply with a subcontracting plan is a material breach.” In other words, any vendor found not to be compliant with their announced subcontracting plans could face breach of contract charges from their agency client. This is huuuge.

Breach of contract is one of the most serious charges federal prosecutors can bring against a vendor. If a vendor is found to have negotiated a contract in bad faith, or if they committed to subcontract plans they had no capability to fulfill, a material breach could lead to corrective action, fines or worse punishment.

Tens of thousands of vendors, hundreds of thousands of contracts and billions of dollars are potentially impacted by this one, simple sentence in HASC Chairman Rep. Mac Thornberry’s new bill. The markup, which just passed out of committee in the wee hours of April 28th, will likely come to the House floor within two weeks, followed by a trip over to the Senate before final reconciliation and approval. Clearly, the new subcontracting language has the Chairman’s support.

About the author: Paul Murphy is a senior data analyst at Bloomberg Government. BGOV’s Congress Tracker team aggressively monitors the progress of the NDAA and other major bills daily, in real time. BGOV’s data team ingests all the latest subcontract data as it is released and dynamically links it to the prime contract data. If you need to monitor the latest defense legislation or insure your company is compliant with subcontract reporting, contact BGOV at They can help.

When Asked For a Certificate of Competency

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A small business procurement is often a risky proposition for the government, especially if the function that has been performed by a large business with lots of back up. In that case, the government can be confident that their contractor can always pull in a subject matter expert at a moment’s notice.

If I’m building a missile, for example, I want to be assured that the contractor has access to a guidance expert and the funds to pay for their help. The risk is that a small company will only work with the people they’ve got, and don’t build the cost of any extra people into their bid.

In some number of cases during the procurement process, the government gets down to the person whose proposal seems the best, but these kinds of risks may stop them from wanting to go forward. One of the ways they can mitigate that risk is with a Certificate of Competency.

The agency’s program office will ask the Small Business Administration to conduct an investigation into the small business applicant – not their proposal, but their ability to perform. This includes a look at the financial and managerial competence of the people running the business, and how the business functions.

I once saw a statistic that almost 75% of companies asked for a COC do not get it. Whether that is still true or not, I strongly urge anyone in this situation to find someone who’s been through it and can advise you from real experience – there will be a lot of issues raised and you don’t want to stumble.

When a Former Government Official Goes to Work For a Contractor

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This is a guest post by David Moyer.

David Moyer is our Army Reserve Command subject matter expert, and the capture manager for our largest contract, the Army Training Models. He formerly was the Director of Resource Management for the Deputy Chief of Staff, G-3/5/7 US Army Reserve Command (USARC), where he was initially our USARC customer, and then a consultant for TAPE, advising the USARC.

We can all learn a lot from Dave’s experience, so I asked him to write about it here.

What are some of the organizational conflict of interest (OCI) issues that arise when a former government official comes to work for a company that they formerly supervised?

There are legal and moral issues associated with a former government official going to work for a contractor. The legal issue is one of whether or not the official influenced the hiring of the company or the awarding the contract in order to obtain employment.

Federal regulations and statute specifically preclude government employees from working for a contractor if a pecuniary relationship existed while the employee was still employed by the Federal Government. In this case, while I had TAPE employees working with me and in my directorate, I was not a signatory on the contract nor did I have a direct bearing on who won the contract.

If a federal employee anticipates working for a contractor after retirement a letter recusing that employee from all contract negotiations must be circulated within his or her organization.

As a funds certifying officer, I was more aware of the OCI issues than most. I was approached by the Graduate School USA to become an instructor prior to my retirement. I solicited Staff Judge Advocate guidance and was told to circulate a letter regarding my intention to become a contractor, which I did. When I was approached by TAPE three months after my retirement, neither a moral nor a legal impediment existed.

Federal employees do not supervise contractors, but task them to perform those tasks identified and specified in the Statement of Work. They are supervised by someone within the company awarded the contract.

What are your tips for how to handle these issues?

All government employees must know the regulations surrounding working for a government contractor. To ensure this occurs, employees are required to take annual classes on ethics provided by legal counsel. These classes address the issue in depth. Again, in my position I not only had to attend these classes by had to fill out an OGE 450 financial disclosure form on an annual basis. As I mentioned above I am also an adjunct professor for the Graduate School USA and one of the classes I regularly teach is Federal Appropriations Law. This course covers many of the issues associated with outside employment and future employment of government employees.

How can someone best prepare for being in this situation?

If an employee anticipates or even considers the possibility of working for a contractor upon retirement they should seek guidance from their department legal team. The requirement is well publicized and all legal departments deal with this type of inquiry on a regular basis.

What are some of the benefits your previous experience brings to your new position?

My case is somewhat unique in that I am for the most part assisting my previous organization. The turnover of government employees tends to be high in most organizations. Historical knowledge is rapidly lost even though the environment remains fairly constant.

In my case I was in the same directorate for almost 22 years and was the director for 18 of those years. Prior to that I had worked in resource management for over 11 years as an Army Officer. I either reviewed the work or assisted in the development of virtually all of the models used within the Army Training Model umbrellas in both the Active Army and then the Army Reserve.

In that 33-year span, I was part of every change and modification to the models and assisted in the development of the algorithms associated with the model designs. In my current capacity, I receive inquiries as to whether I remember how something was generated, what issue was it designed to address and what were the benefits or drawbacks of doing it another way. That knowledge is not easily replicated.

Can you give us an example of how you navigated or avoided a conflict?

I was well prepared for avoiding a conflict of interest due to the nature of my position. I was required by both regulation and statute to be an “honest broker” in all my dealings within my organization and with contractors. I was also keenly aware of what my relationship with all of my contractors was to be.

I always considered contractors an “asset” to be applied wherever and whenever prudent. I was able to incorporate their actions with the actions of my employees to obtain a synergy not previously possible. I considered them an integral member of my team and ensured they knew their role in achieving the goals and objectives my superiors had given me.

GAO: Rule of Two Not Satisfied Where Businesses Do Not Manufacture Products

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© Alex Tihonov –

This is a guest post by Matthew Schoonover of SmallGovCon.

Where an agency buys manufactured goods, the FAR’s Rule of Two is satisfied when two or more small business manufacturers of the end products exist. It is not enough, as GAO recently held, for two or more small business distributors of manufactured products to exist.

In Manus Medical, B-412331 (Jan. 21, 2016), GAO denied a protest claiming that the Department of Veterans Affairs erred by not setting aside the solicitation for service-disabled veteran-owned small businesses. The solicitation called for a contractor to “provide all labor, materials, transportation, equipment and supervision . . . to provide a Custom Sterile Procedure Pack program” for the VA’s Central Region medical facilities. “The packs,” the solicitation continued, “shall be available for distribution by the Medical Surgical Prime Vendor . . . or by direct purchase, at the discretion of the local facility.”

Manus—an SDVOSB—protested the VA’s decision to issue the solicitation on an unrestricted basis, claiming that at least two SDVOSBs expressed an interest in submitting offers under the solicitation. It did not assert, however, that either of these SDVOSBs actually manufactured the products sought; instead, it claimed that the SDVOSBs could perform the requirements based on “established distribution relationships with large manufacturers of the custom packs[.]”

At issue in this protest was the application of the small business nonmanufacturer rule, which applies to small business set-asides. GAO explained this rule, found in FAR 19.502-2(b) and (c), as follows:

An acquisition for the type of goods and services sought here, with an anticipated dollar value of more than $150,000, must be set aside for small business concerns if the agency determines there is a reasonable expectation that offers will be submitted by two or more small businesses that are offering products manufactured by small business concerns.

GAO then considered the “extensive market research” conducted by the VA. This research showed that though there were several small business distributors of custom sterile surgery packs, the products being distributed ultimately were manufactured by large businesses. Thus, the VA did not have a reasonable expectation that two or more small businesses (or SDVOSBs) offered products manufactured by small business concerns, so the Rule of Two did not apply.

GAO found this determination reasonable. In doing so, it rejected Manus’s claim that the VA was “obligated” to seek a waiver of the rule that requires products procured under a contract set-aside for small businesses to be manufactured by small businesses. According to GAO, the contracting officer has discretion to seek a waiver of this rule, but “this provision is discretionary,” and there was nothing improper about the VA’s decision not to see a nonmanufacturer rule waiver. Because the Rule of Two did not apply, and because the contracting officer was not obligated to seek a waiver, GAO held that the VA had not been required to issue the solicitation as a SDVOSB set-aside.

Applying the Rule of Two to small business procurements can be tricky. But as GAO held in Manus Medical, the Rule of Two’s application to contracts seeking manufactured items is satisfied only when two or more small business manufacturers of the end products exist and will submit offers.

This post was originally published at SmallGovCon at – sthash.fEIyIKnz.dpuf and was reprinted with permission.

NDAA FY2016 and Small Business – Part Two

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The new National Defense Authorization Act is full of small business actions and policy decisions.

I went through some of these in last week’s post, and we’ll continue today.

Section 862 – Amendments to data quality improvement plan

This section works on the increasing tendency to bundle (or consolidate) contracts. While bundling clearly makes it easier for the contracting folks, with much less to administer and less competitions to run, it tends to make requirements too big for small businesses and therefore shuts them out of priming work they could easily do.

The NDAA now requires specific identification and data analysis before justifying a consolidated/bundled approach. This is a very small business-friendly provision.

Section 863 – Notice of contract consolidation for acquisition strategies

Continuing on the same theme of bundling, this section requires a pre-publication, pre-solicitation, notice of bundling. And those bundling decisions will be protestable. This is good for small businesses, but will increase the potential for pre-award/pre-proposal protests.

Section 864 – Clarification of requirements related to small business contracts for services

This is one of those arcane provisions that makes everyone wonder how things got so dang convoluted. This provision is designed to limit instances where an agency (or court, in a protest action) applies “non-manufacturer” rules on certain small business service contracts. It really covers “incidental items” and makes them easier to include in service contracts for small businesses.

Section 865 – Certification requirements for Business Opportunity Specialists, commercial market representatives, and procurement center representatives

In general, the best offense a small business has a small business advocate who takes action before anyone even knows the opportunity is percolating. But the truth is, many of these folks (including procurement center and OSDBU people) lack the training to really stand up with knowledge and specifics. More training and familiarity with small business by these advocates is very desirable.