NDAA FY2016 and Small Business – Part Three

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To complete what we started in Part One and Part Two, let’s take a final look at how FY2016 NDAA could affect small businesses.

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.

For more details about the FY2016 NDAA, see the full text or this summary.

Preventing Personal Conflicts of Interest for Acquisition Contractors

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© kieferpix – Fotolia.com

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.

Bid Protest Reform

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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?

Late Payments to Small Business Subcontractors Will Affect Prime’s CPARS

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© dizain – Fotolia.com

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.

Small Business Subcontracting Changes You Should Know About

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This is a reprint from the Federal Register: The Daily Journal of the United States Government for July 14, 2016.

DoD, GSA, and NASA are issuing a final rule amending the Federal Acquisition Regulation (FAR) to implement regulatory changes made by the Small Business Administration, which provide for a Governmentwide policy on small business subcontracting. The changes being implemented in this final rule include the following:

(1) Requiring prime contractors to make good faith efforts to utilize their proposed small business subcontractors during performance of a contract to the same degree the prime contractor relied on the small business in preparing and submitting its bid or proposal. To the extent a prime contractor is unable to make a good faith effort to utilize its small business subcontractors as described above, the prime contractor is required to explain, in writing, within 30 days of contract completion, to the contracting officer the reasons why it is unable to do so;

(2) Authorizing contracting officers to calculate subcontracting goals in terms of total contract dollars in addition to the required goals in terms of total subcontracted dollars;

(3) Providing contracting officers with the discretion to require a subcontracting plan in instances where a small business re-represents its size as an other than small business;

(4) Requiring subcontracting plans even for modifications under the subcontracting plan threshold if said modifications would cause the contract to exceed the plan threshold;

(5) Requiring prime contractors to assign North American Industry Classification System (NAICS) codes to subcontracts;

(6) Restricting prime contractors from prohibiting a subcontractor from discussing payment or utilization matters with the contracting officer;

(7) Requiring prime contractors to resubmit a corrected subcontracting report within 30 days of receiving the contracting officer’s notice of report rejection;

(8) Requiring prime contractors to provide the socioeconomic status of the subcontractor in the notification to unsuccessful offerors for subcontracts;

(9) Requiring prime contracts with subcontracting plans on task and delivery order contracts to report order level subcontracting information after November 2017;

(10) Funding agencies receiving small business subcontracting credit; and

(11) On indefinite-delivery, indefinite-quantity contracts, the contracting officer may establish subcontracting goals at the order level (but not a new subcontracting plan), 81 Fed. Reg. 45833. This final rule is effective November 1, 2016.

This information was reprinted from the Federal Register: The Daily Journal of the United States Government. We first learned of it in the PilieroMazza Weekly Report newsletter (click here to subscribe).

Note from Bill: Several of these changes could have a material impact on your circumstances as a small business in the Federal marketplace:

  • #1 creates a contract ratings impact for not using your “bid team.”
  • #3 will require even single award contracts being novated to large businesses to implement small business goals.
  • #6, while risky, allows you to bring a dispute to the KO, when the big Prime is delaying payments.
  • #10 is interesting; it establishes credit for “outside” funders. So if a contract is issued by Agency A, but Agency B uses it with their money, they now get credit for any set-aside used to award the contract. This could be huge in letting contracts be used by all.

Surviving a Change in Administration

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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 http://federalnewsradio.com/defense/2016/04/dod-tweaks-lpta-methods-save-money-help-industry/ 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.

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

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© Alex Tihonov – Fotolia.com

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 http://smallgovcon.com/gaobidprotests/rule_of_two_manufactured_products/ – 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.