As I write this post, we have a new administration that will be sworn in shortly. As you read this post, this has already happened. There is a lot more to come in terms of making sure all the cabinet positions get appointed and that people fill the government activities all the way down the line. This is obviously a big deal, since they have 4,000 positions to fill, and got 86,000 online applications and 4,000 referrals.
So in the meantime, I thought I would offer a few words for all of us to think about what we’re doing here. This new administration has established some specific priorities, and we can expect there will be as slight shift in priority from the civil sector over to homeland security and defense.
There may be some serious chaos as they get themselves sorted, get people in place, and get everything built. As with any major change, it’s bound to be unsettling and difficult. Probably the worst effect will be that the usual slippage in awards and RFP release that we ordinarily see in the federal procurement process will be exacerbated by the actual transition.
I’m convinced that overall this change can be very good for all of us in federal contracting. Although defense contractors and homeland security may do slightly better in the long run, there’s going to be a lot of activity across the board, and an uptick in that attention.
Interestingly enough, I had certainly hoped that the latest NDAA had done away with LPTA pricing (watch for future posts about what NDAA 2017 means for small business), but recent presidential direct intervention in cost overrun decisions on weapons systems tells me that we may see some LPTA activity erupt as everybody sorts out what this administration is looking for.
Hang in there, this is a natural course of events. There’s nothing unusual or worse about this group of folks from the last group of folks. And we’ll be doing this together. And I will keep blogging and tell you everything I can about what I know. And hopefully we’ll all prosper together.
As GSA Interact reported on their blog, several new FAR rules will impact small business.
According to the Federal Register, “DoD, GSA, and NASA have adopted as final, with a minor edit, an interim rule amending the Federal Acquisition Regulation (FAR) to implement regulatory changes made by the Small Business Administration (SBA) that provide for authority to award sole source contracts to economically disadvantaged women-owned small business concerns and to women-owned small business concerns eligible under the Women-Owned Small Business (WOSB) Program.”
The Federal Register also notes that the rule puts the WOSB Program “on a level playing field with other SBA Government contracting programs with sole source authority and provided an additional, needed tool for agencies to meet the statutorily mandated goal of 5 percent of the total value of all prime contract and subcontract awards for WOSBs.”
Of all the SBA contracting programs, the 8(a) set-aside rules were always the best for sole sourcing. Fundamentally, if a KO (contracting officer) was willing (at the program office’s behest) to accept/write a Justification and Approval (J&A), the sole source went through. As well, many times this same authority was extended to 8(a) companies on multiple-award vehicles, so that the covered programs could use the vehicle to do sole sourcing as well.
This new regulation and FAR/DFAR change creates a similar dynamic for EDWOSBs – which is huge, because there are many EDWOSB companies ready for this, and because the 8(a) sole sourcing has come under pressure, particularly after some of the issues that arose in large sole sourcing for Alaskan Native Companies (ANCs) and some less than ethical/legal behavior by companies trying to take advantage of the program. In fact, the 8(a) program seems to have largely been replaced with “small disadvantaged” status, much to the chagrin of many of my friends who have 8(a) status.
This is definitely a major change, considering the 328 EDWOSBs and 974 WOSBs who could have received sole source awards between April 1, 2011 (the implementation date of the WOSB Program) and September 1, 2015.
When federal agencies bundle or consolidate requirements, it can exclude small businesses from qualifying for the work. A new FAR rule effective October 31, 2016 (one of many that will impact small businesses) will address this.
According to the Federal Register, consolidation or consolidated requirement means “a solicitation for a single contract, a multiple-award contract, a task order, or a delivery order to satisfy:
i. Two or more requirements of the Federal agency for supplies or services that have been provided to or performed for the Federal agency under two or more separate contracts, each of which was lower in cost than the total cost of the contract for which offers are solicited; or
ii. Requirements of the Federal agency for construction projects to be performed at two or more discrete sites.”
Bundling, they explain, is “a subset of consolidation that combines two or more requirements for supplies or services, previously provided or performed under separate smaller contracts, into a solicitation for a single contract, a multiple-award contract, or a task or delivery order that is likely to be unsuitable for award to a small business concern (even if it is suitable for award to a small business with a Small Business Teaming Arrangement) due to:
i. The diversity, size, or specialized nature of the elements of the performance specified;
ii. The aggregate dollar value of the anticipated award;
iii. The geographical dispersion of the contract performance sites; or
iv. Any combination of the factors described in paragraphs (i), (ii), and (iii) of this definition.”
The summary notes that, “There are currently approximately 307,846 small business registrants that can potentially benefit from the implementation of this rule. This rule does not impose any new reporting, recordkeeping or other compliance requirements.”
OK, that’s a lot of technical and legal mumbo-jumbo. The essence here is a few different things. First, in their definition of small business teaming arrangements, this provision recognizes the Mentor-Protégé JV, Contractor Teaming Arrangements (CTAs), and normal JV provisions for use in a contract bundling provision. This is important because often JVs and CTAs are considered “higher risk” in large contract actions, and this provision both defines the various potential arrangements and encourages them.
And secondly, this provides more detail and restrictions to the contract bundling and consolidation routine that so many agencies go through, and which serve as an anti-small business process because of the size of the resulting requirement. This provision explicitly recognizes the small business team types as being valid and therefore limits some of the anti-small business prejudice that becomes prevalent.
As small businesses, we’d like as little consolidation and bundling as we can get. Since this rule better defines how the government can do this, and limits who can do it and how, there will be less of it, and that’s a good thing.
Any company that is just trying to stay in business and “keep on, keeping on,” will not be profitable in the long run. When you really think about it, you know contracts will end and you will have to move on – what is your plan to replace those contracts?
The process for this is to have a pipeline of potential income. Think of your pipeline like a funnel. At the outer edge up at the top it’s very wide, because at first glance there are always many possibilities. That’s why the first and most important step is qualification, that is to ask:
- Does this customer have money?
- Does this customer have a problem that we can solve?
- Does the customer know that our company can solve their problem?
If you can answer those questions with yes, then you try and capture the work, which is to say shape it so that you are more qualified than other potential competitors (your OSDBU office may be able to help). Thereby (through this capture) you learn the things you need to do to bid successfully.
You always want your pipeline to be full at every level, so there is a mix of some opportunities you’re qualifying, some stuff you’re capturing, and some proposals you’ve already written and sent, that may or may not come to pass in various time frames. Flexibility is essential, as new things come along that may bump aside a well-qualified, or even well-captured opportunity.
So your pipeline will be filled not with oil or gas, but with a continuum of opportunities. Some might not become proposals for a year or even more from now, some things you might start writing in the next three or six months, some things you’re writing now, and then things you’re waiting for awards on.
The most important question is how to fill the top of the funnel. Of course we’ve talked many times about how relationships with the people you already know are the heart of your capture process. Even if a customer doesn’t have more work, they have friends in other agencies and contacts in other places they work for.
But your own contacts can only get you so far; sometimes you also need outside help. Along with proposal consultants, you can also hire people just to do the research and uncover new potential customers for you. There are always opportunities that you’re not going to hear about that these people will uncover.
Now if you’re only pursuing opportunities from these data sources, you’re probably not mining your own customers enough. You really need to determine if such a service would be worthwhile for you to have, and if the benefits outweigh the costs.
Having a full pipeline means when one contract ends, you don’t have to worry where the next job is coming from. The capture process for that one, and many others, is well under way.
Department of Veterans Affairs is required by law to award contracts to service-disabled veteran-owned small businesses when there is a reasonable expectation that two or more such concerns will bid for the contract. This has become known as the “Rule of Two” or “Veterans First.”
Yet there were many large-scale contracts that the VA department didn’t open up to this rule because they were traditionally things that they would not have set aside or acquired on a small business scale.
As Steven Koprince explains at SmallGovCon.com, “Despite the absence of a statutory exception for GSA Schedule orders, the VA has long taken the position that it may order off the GSA Schedule without first applying the VA Act’s Rule of Two.”
This effectively changes the rules of engagement for the VA so that they’re going to have to do a sources sought to determine whether there is a reasonable expectation that SDVOSBs can meet the requirements of the contract, and that there are qualified businesses who can do the job.
Interestingly enough, some things that are in IDIQ contracts may be exempt from this requirement – large IDIQs with both large businesses and SDVOSBs, or other small business types, may allow the VA to procure directly with the large businesses of a task order competitive basis.
But there are still going to be a lot more service-disabled sources sought directed at procurements for small businesses. It may very well be that the outcome will be the same, but we don’t know. What we do know is that SDVOSBs will have access to more work.
Let’s say there is a piece of work that traditionally would have been done full and open (not set-aside for specially certified businesses), or would have been done by an 8(a) or another small business type. Now, for that same piece of business the VA will have to determine whether two or more SDVOSBs will be qualified and will bid. There’s no guarantee, but at least it’s more likely the work could go a service-disabled vet.
Section 866 – Modifications to requirements for qualified HUBZone small business concerns located in a base closure area
This section provides an equivalency between HUBZone firms and Native Hawaiian firms, which helps the NHSBs to expand into HUBZone contracting. To date, meeting HUBZone goals is the most difficult set-aside category.
This section also does some definitional changes that make BRAC (Base Re-alignment and Closure) areas more easily designated as HUBZones, this is a good thing, as base closure areas from BRAC decisions are always particularly hard-hit.
Section 867 – Joint venturing and teaming
So this section is a big deal, and as the details emerge, we’ll address this. First, the specifics are that joint venture team members’ past performance will count when pursuing certain large contracts. And it expands the use of JVs to expand the number of areas where SBs are acceptable.
If implemented as described, this is a big change. Currently, only certain JVs inherit the past performance from their members. If this is implemented as written, we’ll be able to use JVs a lot better in the future.
Section 868 – Continued modification to scorecard program for small business contracting goals
The scorecard program is, quite frankly, somewhere between a joke and unfathomable. Agencies with major deficiencies still receive A’s, and small differences seem to generate larger effects.
Could this be because the grades affect government officials’ bonuses? We certainly don’t want those to be affected (sorry, tongue-firmly-in-cheek).
Section 869 – Establishment of an Office of Hearings and Appeals in the Small Business Administration (SBA); petitions for reconsideration of size standards
This is a technical detail, which separates a way to have size standard appeals to prevent these from going to courts instead. It also allows this office to review the size determinations. There have been a lot of complaints over the years that SBA keeps sizes smaller than really appropriate.
Section 870 – Additional duties of the Director of Small and Disadvantaged Business Utilization
If an OSDBU is a strong advocate, this helps by empowering them to help an SB work on SB set-aside status for an opportunity.
Section 871 – Including subcontracting goals in agency responsibilities
It is always a good thing to have all small business goals in the evaluation criteria for success by agency executives. This provision adds goals to agency-level responsibilities.
Section 872 – Reporting related to failure of contractors to meet goals under negotiated comprehensive small business subcontracting plans
This is essentially “tattling” on the big integrators – and requiring actual accountability. Accountability is always a good thing, but be wary because you’re complaining about your prime contractor. But when aggrieved, this may be a strong avenue.
Section 873 – Pilot program for streamlining awards for innovative technology projects
Pilots for awarding contracts to non-contractors might be good, but this can lead to abuse. As small businesses we’re always wary of “special deals.”
Section 874 – Surety bond requirements and amount of guarantee
A surety bond is a promise given to one party to pay a certain amount if the second party fails to meet the terms of a contract. Surety bonds are mostly used in construction.
At its core, the purpose of an OCI (organizational conflict of interest) clause is to prevent somebody from having an unfair competitive advantage by knowing information about an upcoming procurement or what is required to win or lose, or some other secretive information about what’s going on in that particular contract.
The dilemma is how to define organizational conflict of interest in a way that doesn’t prohibit the incumbent from bidding on the contract. Because the incumbent does know details about the customer and the contract, and already has people operational in the agency.
So when there is an incumbent in place, the RFP has to written in such a way that the evaluation requirements don’t give the incumbent an unfair advantage. In addition, we don’t want a situation where a contractor is helping to define the requirements, and therefore has advanced knowledge.
Acquisitions/support work is one of three contractor services that are most likely to get into OCI issues. Clearly, if you’re working as an acquisitions support consultant supporting a contracting office, you shouldn’t be able to bid on anything that you helped to work on, because you know the stuff that didn’t go into the RFP.
Organizational conflicts of interest are discussed in FAR Part 209.5, and there’s now a new subpart 3.11 that specifically addresses contractors in acquisition functions. It’s important to be improving these definitions because frankly lots of people have been tripped up on OCI clauses and OCI issues, particularly in these last eight years.
Ultimately we must prohibit the person who’s creating an RFP (helping the government create one) from bidding on that RFP, so they don’t have an unfair advantage over you or me.
There have been many recent changes to the regulations around bid protests, including one outlined by Sandra Erwin in a recent guest post about Pentagon contractors.
The Government Accountability Office (GAO), where most bid protests are filed, released a proposed rule on April 25, 2016 that hopes to clarify the protest process.
There are a couple of important things to understand about where these regulations are going. There’s a proposed $350 filing fee. Right now there’s no filing fee other than admin costs of lawyers creating a document.
This is not a prohibitive amount, but is enough to make people think twice before filing. People have been complaining for years about folks who file frivolous protests in order to hold onto a contract. In fact, one company got the government’s attention with their repeated protests and were prohibited from protesting again for a specific period of time.
The GAO is also proposing to extend the ability to protest below the current task order multiple-award contract threshold of $10 million. Clearly, the lower they go, the more protests they will encounter. This is a good thing in one sense because of the recognition that more opportunities are being competed on multiple-award task order contracts. The bad news is that there are more likely to be protests.
There are a lot other rules and regulations to understand about the bid protest process, but let’s end this post at the starting place: deciding whether or not to protest in the first place.
The fundamental issue around protests is a belief that the government, has “done you wrong,” in their evaluation. However, you have to understand that these evaluations are always subjective and if you are eliminated in the evaluation process, it’s because the technical evaluators or contracting officers wanted somebody else, pure and simple.
You have to be very careful about using protests. Not only does it cost you money in legal fees, and the time and energy involved, but you could be pissing off a future customer. Just because you lost this contract, doesn’t mean you won’t be bidding on the next one from the same agency customer. Should you ask for a debrief instead, and focus on the next opportunity?
On January 20, 2016, the FAR Council published a proposed rule calling for changes to the Federal Acquisition Regulation (FAR), regarding payments to small business subcontractors. It has concurrence and is going to be added to the Code of Federation Regulations at section 19.701.
Originally put into the Small Business Jobs Act of 2010, this rule provides specific definitions for reduced payment and untimely payment so that there’s no questions or confusion, for example in the case of prorated payments.
This statute requires a prime to self-report, that is to say to tell on themselves, if they make a late payment to small business subcontractors.
(Note that this doesn’t apply if you’re a small businesses with a large business as a subcontractor. You can be late paying them and not have to self-report. This makes sense because typically large businesses have whole accounting departments tracking money coming in and going out.)
The prime self-reports to the CO and that information gets reported in a system called FAPIIS. What’s important is that a history of delayed payments in FAPIIS will be a criteria for your CPARS rating when a CPARS is generated at the end of each contract year.
For a small business, not getting paid can be a very big deal, so these efforts are definitely a step in the right direction.
The Fair Labor Standards Act (FLSA) is a federal statute that defines, among other things, the difference between an exempt employee (one who is paid a salary and is therefore exempt from overtime pay) and an hourly employee (someone who may be paid on an hourly, weekly, or even yearly basis, but is not exempt and is therefore subject to overtime pay).
The current threshold is $455 per week, meaning that if you’re paid that amount or less you’re automatically assumed to be hourly. If you’re paid more than $100,000 per year, you’re automatically assumed to be exempt. In between, there are duties (referred to as professional standards) that will define an employee as exempt.
So that’s the current law. Under the new law, they’re going to raise that salary to $913 per week, and the automatic compensation level to $134,000 per year. What this means is that a lot more people are going to become subject to hourly rules, no longer exempt. When that happens, as a small business owner you will have to convert those people from exempt status to hourly status, from being paid a salary and not being eligible for overtime pay, to being eligible for overtime pay and being paid hourly.
In government contracting, it’s common practice for people to put in a lot of extra hours, many of them spent on non-billable work (sometimes called “company time”) rather than directly serving customers, after the 40-hour week is “done.” This might be time spent doing things like interviewing candidates for other jobs in the project or elsewhere in the company, preparing status reports, or attending company meetings. A major example of this is doing proposal work.
Let’s say you have an employee who works 40 hours a week of billable time and 10 hours a week of “company time.” Under these new rules that employee will now have to be paid for all of those 50 hours (and 10 of them at overtime rates).
Of course you’d be smart to consult with the compensation experts and lawyers whose job it is to work on this stuff. I will only say that it’s important for you to understand these issues because these changes are definitely going to be a challenge.