In SBA News – Updates from an Expert

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Gosh, it seems like yesterday that the Mid-Tier Advocacy group held their Business Focused Breakfast around the legislative update with some regulatory issues thrown in (but it’s already almost time for the next one).

Our speaker on July 30th was Pam Mazza of Piliero Mazza – true experts in this legal and regulatory thicket we all have to plow through as GovCons…

We talked about the new Small Business Runway Extension Act, passed in December 2018. It turns out that the legislation had some flaws in it, so instead of new regulations flying for the 5-year average replacing the old 3-year average, they’re working on some adjustments.

It was somewhat over my head, to be sure, but it hinges on whether SBA was actually authorized, and Administrator vs. Administration. OK, I’m not kidding. However, it did pass bi-partisanly, so these changes should get made fairly quickly. Of course some places are implementing it, and I can hear the protests rumbling. My advice is to ask the question, do not assume.

Second was the SBA’s preliminary rule on inflationary adjustments to the size standards. By the way, a 10% rise from 27.5 million is going to 30 million, not to 30.25 million, because I guess bureaucrats like round numbers. These adjustments will take effect in August, but then you’ll have to be sure SAM Reps and Certs catches up, so things might take a while for these changes to actually change your size status. FYI, this is NOT the “re-evaluation” of Sector 54 and 236 still to come, someday…

There’s a bipartisan bill circulating to extend 8a sole sourcing to SDVOSB, HubZone, and WOSB/EDWOSB, and to raise the thresholds – these have not been adjusted in decades. The thicket of rule-of-2 rules and regulations for non-8a sole sourcing has got to be made easier, so we’ll see if this gains traction.

DoD issued a class deviation letter, allowing similarly situated entities on all DoD contracts.

DoD also issued a letter limiting LPTA contract evaluation types, but beware of “fake best value” where they have fewer factors and call it best value when price is really the issue.

Finally, SBA is looking at working some early termination graduation for 8a’s – more will be revealed.

And that’s the news report… These breakfasts are often a good place to hear and discuss the real issues, so if you can, attend them in your area wherever that may be. The next Mid-Tier Advocacy Business Focused Breakfast is on Tuesday, August 27th at the Tower Club in Vienna, VA, featuring SBA Associate Administrator Mr. Robb Wong. Learn more and get your tickets now.

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OMB Acquisition Reform Proposal 2 – Repeal Defense CAS

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The Office of Management and Budget (OMB) has proposed six ways to help streamline the acquisition process and improve the acquisition environment, intended to be included in the FY 2020 National Defense Authorization Act (NDAA).

The second proposal is to do away with the Defense Cost Accounting Standard Board (CASB). The issue here is that there is a Defense CASB, and there’s a federal one as well. The result is, unfortunately, is that the two different sets of cost accounting standards created can often be, well, different. So what this OMB initiative is going to try and do is eliminate the Defense CASB and consolidate everything into this one place under the federal board.

Of course, not everyone is going to be happy about this. There will be differences between the standards, and things from the Defense CASB that somebody’s been taking advantage of and doesn’t want to give up, or conversely, anything changed from the Federal CASB will have proponents and systems that cater to that function. We’ll have to figure out what those things are. Reconciling these two will be a nightmare, but it’s always better to have one rather than two things carrying out the same function.

And don’t forget that there are computer systems that handle acquisition and contract issues and cost accounting, and those will need to be adjusted.

What this demonstrates is that nothing in contracting and acquisition is ever as simple as “just do this.” So much of our regulated activity gets caught up in the very regulations being implemented; it’s never simple to change.

But, we’ll keep working on it…


Beyond the Size Standards – Business Focused Breakfast, Jul 30, 2019

Mid-Tier Advocacy, Inc. presents the next Business Focused Breakfast on July 30, 2019 from 7:00-9:00 a.m. at the Tower Club – Tysons Corner, 8000 Towers Crescent Drive, Suite 1700, Vienna, Va.

Topic: “Beyond the Size Standards” – SBA to Increase Size Standards with Inflationary Adjustment

Featured Guest Speaker: Ms. Pamela Mazza, Managing Partner, PilieroMazza PLLC.

Click here to learn more and register now!


How the CCPA Will Affect Federal Contractors

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This is a guest post by Jonathan T. Williams and David T. Shafer of PilieroMazza PLLC.

The California Consumer Privacy Act (“CCPA”) will go into effect on January 1, 2020. Similar to the European Union’s General Data Protection Regulation (“GDPR”), CCPA creates significant compliance challenges for government contractors and commercial businesses doing business in California, with several states following suit. Under CCPA, fines from the Attorney General for businesses that do not comply could be as high as $7,500 per violation, with CCPA also granting consumers the right to bring private action, exposing companies to actual and statutory damages.

Preparing for CCPA

To prepare for CCPA’s January 1, 2020 effective date, first determine if you fall within CCPA’s compliance criteria. Critically, the statutorily defined terms “consumer” and “personal information” are far broader than most statutes and regulations. The enlargement of these terms causes CCPA’s jurisdiction to be larger than it appears on the face of the statute. Below are certain high-level questions that can help a business determine if it meets certain threshold standards:

  • Do you, or any of your subsidiaries or affiliates, engage in business in California?
  • Do you do business with contacts or employees who reside in California?
  • Does your business have over $25 million in annual gross revenues?
  • Does your business buy, sell, or receive personal information?

If you fit certain initial criteria, we recommend identifying the type of personal information your business collects. As briefly mentioned above, CCPA broadly defines personal information as any information that directly or indirectly identifies, describes, or can be reasonably linked to a particular consumer.

Similar to GDPR, CCPA grants consumers significant rights to the use or their personal information, including general notice rights. It is here that companies can take proactive steps to prepare for CCPA’s implementation. More specifically, CCPA grants consumers the right to know what personal information a business collects, sells, or discloses about them. Additionally, several sections of CCPA require businesses to make affirmative disclosures to consumers by way of privacy policies and other notices.

In addition to the various privacy policies that are required under CCPA, other reasonable steps include conducting regular training programs for employees, crafting tailored intellectual property rights contracts, and instituting third-party commercial contracts to ensure that CCPA’s requirements are adhered to.

Looking to the future

CCPA was originally drafted as a ballot initiative before being transitioned into a statute in a relatively short timeframe. Because of this, CCPA has already been through a series of amendments, with many more amendments still before the California legislature.

More and more states are slated to follow California’s lead, including Hawaii, Maryland, Massachusetts, Mississippi, Nevada, North Dakota, New Mexico, New York, Rhode Island, and Washington. If these states decide to enact similar legislation, it will have a far-reaching effect on government contractors and commercial businesses that conduct business in those regions. In light of GDPR, CCPA, and these recent developments, the possibility of federal legislation being enacted is high. Businesses should prepare now to preempt the potential impact.

Attorneys in PilieroMazza’s Cybersecurity & Data Privacy Group are well-versed in this area of the law, and will continue to monitor CCPA developments, as well as the litany of other states that are in various stages of implementing additional privacy statutes and regulations. For more information concerning CCPA, click here to contact them directly.

This blog post originally appeared on the PilieroMazza blog at https://www.pilieromazza.com/impact-of-california-consumer-privacy-act-on-government-contractors-and-commercial-businesses and was reprinted with permission.


OMB Acquisition Reform Proposal 1 – Acquisition Test Programs

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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

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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.


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

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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.


SBA Changes to Size Determinations

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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

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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

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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.


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