This is a guest post by Jason Miller of Federal News Radio.
It’s been a year since the Office of Federal Procurement Policy released and accepted comments on its draft circular around category management.
With little-to-no activity on the draft circular over the past year, it seems OFPP is taking a less permanent route to further institutionalize this approach to buying.
Federal News Radio has learned OFPP sent a draft memo out for comment across the agencies earlier this summer, focusing on demand management and “best-in-class contracts.”
Several sources confirmed agencies submitted comments and OFPP is reviewing them.
Government sources familiar with the draft memo say OFPP wants agencies to set goals for using “best-in-class contracts,” and implement demand management by analyzing procurement data and making decisions on who to buy from and how to buy from those vendors.
One source said the draft memo would require agencies to negotiate with OFPP a percentage of work that would have to go through some of the currently 29 governmentwide, multiple-award contracts that have been designated “best-in-class.” These include several General Services Administration contracts, such as OASIS for professional services and Alliant for IT services, as well as the governmentwide acquisition contracts run by NASA and the National Institutes of Health.
“Each agency’s goal would be different because it would be based on what you buy and what you think you should be buying,” said the source, who requested anonymity in order to speak about the pre-decisional memo. “OFPP will look at what you bought in the past and determine what percentage should be bought through these contracts. You will then negotiate with OFPP, much the same way we do with small business goals.”
Multiple government sources say they have real concerns about the memo and have expressed them to OFPP.
Another government source familiar with the memo said they are not a fan of the “best-in-class” designation because it’s based too much on labor rates or categories, and not based on whether the vendor can do the work the agency needs.
“To be ‘best-in-class,’ you have to demonstrate that the vendor is best in class,” the source said. “I understand using it for some things, like delivery services, but for anything mission-related or more complicated, I’m not sure you can just look at the basic information and decide a contract is ‘best-in-class.’”
Lesley Field, the acting OFPP administrator — who, by the way, has been acting for more than a year— said at the Professional Services Council’s Vision Forecast Conference on Nov. 2 that agencies use rigorous criteria to determine “best-in-class.”
“We developed the requirements with a lot of government agencies in mind. It’s not just one agency, but there were customers at the table helping with the requirements,” Field said. “We want to take advantage of volume pricing. We want to have benchmarks for what industry is driving toward. We want to make sure is there data-driven demand and we have to validate our savings methodologies.”
But the criteria for “best-in-class,” according to GSA’s website, are much less rigorous than what Field described.
GSA says to be “best-in-class” a contract must:
- Allow acquisition experts to take advantage of pre-vetted, governmentwide contract solutions;
- Support a governmentwide migration to solutions that are mature and market-proven;
- Assist in the optimization of spend, within the governmentwide category management framework;
- Increase the transactional data available for agency level and governmentwide analysis of buying behavior.
Field said OFPP, GSA and other agencies look at those contracts to make sure they meet all these criteria as well as others, such as ensuring they support contracting with small businesses.
Roger Waldron, president of the Coalition for Government Procurement, said his members and others in the federal community are concerned about the impact the “best-in-class” designation could have on the marketplace.
“To the extent that ‘best-in-class’ contracts are selected, it’s like picking winners and losers. It could lead to less competition and higher prices in the long run,” Waldron said. “Industry also is scratching their collective heads about what criteria should be used, and even if it’s the right idea. Best-in-class predisposes that it’s the right way to go, but what if it’s a platform or new idea instead of just a contract?”
Waldron said the Federal Acquisition Regulations already tell agencies there are priority sources of supply, so if OFPP wants to hold agencies accountable for using these “best-in-class” contracts, what does it mean for the small business community?
“Is best-in-class establishing a different framework for priorities?” he said. “We don’t understand why OFPP isn’t going through a typical rulemaking process. The Obama administration put out the circular and asked for some comment on it. We submitted a series of comments and questions, and to date, we’ve received no response from the executive branch. I’m not sure how OFPP can implement category management and best-in-class without addressing industry questions and concerns. It doesn’t demonstrate a real partnership.”
Industry isn’t the only place where collaboration may be falling short.
The second government source said OFPP has talked — but not to the acquisition community — about category management and the use of “best-in-class” contracts.
“I’ve been told our comments will be addressed,” the source said. “This is a leftover initiative from the last administration and they are just keeping it going without taking a new look at the effort.”
Sources said OFPP should bring the Chief Acquisition Officer’s Council together to discuss category management and what “best-in-class” really means before creating what some may view as a mandate to use these designated contracts.
Government and industry experts say OFPP should reconsider what “best-in-class” really means.
The government source said maybe it’s around acquisition practices and not contracts.
Waldron said maybe OFPP should consider identifying key characteristics of contracts to drive the best value.
“The only thing we have is criteria that were identified in the draft circular that are all process-driven, not outcome-driven,” he said. “Plus, the definition of best-in-class in government seems to be different than best-in-class in the private sector.”
Sources say one problem with the entire category management effort is it’s being driven by GSA and they stand to gain from the effort.
The first government source said OFPP needs to be more flexible in how it requires agencies to use these contracts. The source said they can’t understand how the GSA Schedules are considered “best-in-class,” given how many vendors there are and the fact that the prices aren’t great to start.
“The way GSA negotiates them means you are not getting the best price, because anyone can get on it as long as you are a legitimate company, you don’t have any failed past performance and can offer a decent price,” the source said. “To me, ‘best-in-class’ means you negotiated and are getting a good deal. Best-in-class should minimize my work and Schedule 70 doesn’t do that, and that’s where I get a little nervous because OFPP is going to an extreme. Best-in-class should be contracts that are products or services that are proven, efficient and cost-effective. You are after quality, timely delivery and cost-effective buying. Right now, the criteria is too loosely written.”
This post originally appeared on the Federal News Radio site at https://federalnewsradio.com/reporters-notebook-jason-miller/2017/11/ofpp-drafts-memo-to-replace-category-management-circular/ and was reprinted with permission. You can also click here to listen to Jason Miller discuss the topic on the Federal Drive podcast with Tom Temin.
The Promoting Value Based Procurement Act was forwarded by House Oversight lawmakers in September 2017. Its purpose is to require executive agencies to avoid using lowest price technically acceptable source selection criteria in certain circumstances, and for other purposes.
This is an important change that has been coming down the pike for several years. Increasingly, government procurement officials and their customers, the actual government activities, have noticed again and again, that “lowest price technically acceptable” contracts are a problem – especially after award.
LPTA was originally designed to give the contracting officers a tool to force lower prices and make easier bid decisions. They could assess the technical response on a pass-fail, then just award the lowest price bidder. Yet the end result has been disastrous, such companies who’ve lowered their labor prices so much that they’re unable to hire at those low rates.
These practices have already led to the decline of LPTA contracts, but this legislative initiative codifies that effect and makes it extremely difficult to use LPTA.
I discussed this with my favorite experienced (now retired) contracting officer (CO), and he did raise one interesting side effect: he postulated that we’ll see ‘better’ proposals. I disagreed, but we do agree that we’ll see more technology and innovation proposed in best value procurements; people will look for where they can get discriminators and have the right technical outcome.
In conclusion – we’ll see! In the meantime, for more insights on this legislation, see this NextGov article: House Panel Moves Bill Urging Federal Buyers to Consider Quality, Not Just Cost.
We’ve been taking a look at the biggest changes affecting small businesses in the National Defense Authorization Act for FY 2018. In a previous post we looked at H.R. 1773, meant to clarify terminology and improve uniformity, and today we’ll move on to H.R. 1774.
H.R. 1774, Developing the Next Generation of Small Businesses Act of 2017
This act aims to expand the entrepreneurial development programs to further the important work being done by the House Armed Services Committee on procurement reform, by ensuring that SBA is effectively introducing the next generation of entrepreneurs to the opportunities afforded by federal procurement contracts.
Within H.R. 1774, the following bills are found:
- H.R.1702 – Small Business Development Centers Improvement Act of 2017 – This bill amends the Small Business Act with respect to the authority of the Small Business Administration (SBA) to use certain SBA programs, including the small business development center (SBDC) program, to provide grants, financial assistance, loans, export assistance, and subcontracting opportunities on federal contracts to specified small businesses, organizations, state governments, universities, companies, and other entities that assist smaller enterprises.
- H.R.1680 – Women’s Business Centers Improvements Act of 2017 – The bill revises the duties of the Office of Women’s Business Ownership and declares it is the Office’s mission to assist women entrepreneurs to start, grow, and compete in global markets by providing quality support with access to capital, access to markets, job creation, growth, and counseling.
- H.R.1700 – SCORE for Small Business Act of 2017 – This bill amends the Small Business Act to reauthorize the SCORE program (Service Corps of Retired Executives) for FY2018-FY2019. The program is renamed as simply the SCORE program.
So this NDAA is a little less “bold” – more has been packed into other versions of NDAAs over the years that had a material impact. The items here in H.R. 1774 focus on SBA programs, which are impacting the overall health of small businesses, but do not address the really punishing occasional prejudice that can occur during and after contract procurement.
Remember, too, that the hurricanes will have some material impact on how SBA sees their mission, as they struggle to help small businesses in SE Texas/Louisiana, then Florida and the Gulf Coast, and finally the Caribbean.
Stay tuned, more will be coming in the budget, in the NDAA for FY19, and as tax reform/tax cuts hit the legislative calendars.
As we shared in a previous post, on July 14, 2017 the House passed H.R. 2810, the FY2018 National Defense Authorization Act.
Focusing on small businesses, the NDAA is comprised primarily of two main pieces of legislation. We’ll cover one in this post, and follow up with a separate post about the other.
H.R. 1773, the Clarity for America’s Small Contractors Act of 2017
This act amends the Small Business Act to improve reporting on small business goals, achieve uniformity in procurement terminology, clarify the role of small business advocates, and for other purposes.
It modernizes the Small Business Act to ensure that the language used is clear and consistent across federal procurement programs. Heaven knows that the lingo used in legislation is designed for lawyers and lobbyists, and certainly not for the actual small businesses they are addressing.
It strengthens the small business advocates within the Small Business Administration (SBA), who routinely work with Department of Defense contracts by promoting competition and making sure laws are followed, including the NDAA. We know that some small business advocates are not as strong advocates, and legislation that empowers them can only improve things for everyone involved.
The bill implements common sense reforms to ensure transparency and accountability by requiring that important information be provided that clearly shows where taxpayer dollars are being spent on which small business programs. This has always been an issue – small business impact is not easy to track, and then you have complications like mid-tier businesses and sometimes active opposition from the large businesses. Again these are good things – not fixing legislative issues, but strengthening the processes.
Within H.R. 1773, the following bills are found:
- R.1597 – Commercial Market Representatives Clarification Act – This bill amends the Small Business Act to specify the principal duties of Commercial Market Representatives, government contracting staff stationed at area Small Business Administration (SBA) offices and reporting to specified senior SBA officers.
- R.1641 – To amend the Small Business Act to clarify the responsibilities of Business Opportunity Specialists, and for other purposes. – This bill amends the Small Business Act to declare that the exclusive duties of a Business Opportunity Specialist reporting to the senior official (or designee) appointed by the Small Business Administration (SBA) with certain SBA loan responsibilities, including the procurement program for small business concerns owned and controlled by service-disabled veterans and the Historically Underutilized Business Zone (HUBZone) program, shall be to implement specified SBA loan programs, and complete other duties related to contracting programs.
- R. 1693 – Improving Contract Procurement for Small Businesses through More Accurate Reporting Act of 2017 – This bill amends the Small Business Act to require the Small Business Administration to report to the President and Congress an analysis of the number and dollar amount of prime contracts awarded by federal agencies each fiscal year to small business concerns.
- R.1640 – To amend the Small Business Act to ensure uniformity in procurement terminology, and for other purposes. While this might seem the least important, fixing definitions so everyone is on the same page is a big deal.
All told, these changes are mostly about the processes that govern our small business management, but truly do make incremental improvements that will make a difference.
Stay tuned for a separate post about the other important NDAA FY18 act that affects small businesses.
This is a guest post from Mark Amadeo, principal at Amadeo Law Firm, PLLC.
Last week the SBA published its semiannual Regulatory Agenda (the “Agenda”), which is a summary of current and projected regulatory actions and completed actions. The Agenda (which can be downloaded here) highlights several anticipated changes to regulations that impact small business government contractors, including women-owned small businesses (WOSB’s), service-disabled veteran owned small businesses (SDVOSB’s) and HUBZone small businesses. Below are several of the anticipated changes that government contractors should look out for in the very near future.
WOSB & EDWOSB certification procedures
As we wrote about in a prior edition of The GovCon Bulletin™ (here), the National Defense Authorization Act for Fiscal Year 2015 (NDAA 2015) imposed several mandates on the SBA’s WOSB program, including a requirement that a firm be certified as a WOSB or economically-disadvantaged women owned small business (EDWOSB) under one of four options: By a federal agency, by a state government, by the SBA, or by a national certifying entity approved by the SBA.
The SBA subsequently issued an advanced notice of proposed rule-making on December 18, 2015, again described in the same edition of the The GovCon Bulletin,™ in which the SBA raised several pointed questions and sought public input on each of the four proposed certification options. The comment period ended on February 16, 2016 and now the SBA intends to issue a new rule that will propose certification standards and procedures.
In addition, the new rule will revise procedures for continuing eligibility, program examinations, protests and appeals. Although not much is known about the specific changes, the SBA did make clear that the new certification procedures will include an electronic WOSB and EDWOSB application and certification process.
NDAA 2016 & 2017 mandated rules
The Agenda also anticipates that in the near future the SBA will implement a variety of rule changes required under the National Defense Authorization Act for Fiscal Year 2016 (NDAA 2016) and National Defense Authorization Act for Fiscal Year 2017 (NDAA 2017), including requirements concerning SDVOSB ownership and control, a pilot program granting past performance ratings to subcontractors, and subcontracting report compliance.
1. SDVOSB ownership and control rules
The Agenda indicates that the SBA will issue a proposed rule establishing a uniform definition of a “small business concern owned and controlled by service-disabled veterans” that will be used for SDVOSB procurements by both the Veterans Administration (VA) and by non-VA agencies. Before NDAA 2017, the definition for purposes of VA SDVOSB procurements was contained in VA statutes under former 38 U.S.C. 8127(l), while a different definition for non-VA procurements was contained in SBA legislation under 15 U.S.C. 632(q)(2). Meanwhile, regulations fleshing out the SDVOSB definitions for purposes of VA procurements are under the VA’s regulations in 38 CFR Part 74 and, for purposes on non-VA procurements, under the SBA regulations in 13 CFR Part 125.
NDAA 2017, however, requires a government-wide uniform definition by amending 38 U.S.C. 8127 to refer back to 15 U.S.C. 632 for one controlling definition. Moreover, NDAA 2017 clears the way for the SBA to provide the sole and definitive guidance on what it means to be owned and controlled by a service-disabled veteran by prohibiting the VA from issuing regulations relating to either small business status or the ownership and control of a small business.
As for the new uniform definition of “small business concern owned and controlled by service-disabled veterans,” NDAA 2017 provides three categories of businesses that will meet the definition:
First, a small business concern (i) not less than 51 percent of which is owned by one or more service-disabled veterans or, in the case of any publicly owned business, not less than 51 percent of the stock (not including any stock owned by an ESOP) of which is owned by one or more service-disabled veterans; and (ii) the management and daily business operations of which are controlled by one or more service-disabled veterans or, in the case of a veteran with permanent and severe disability, the spouse or permanent caregiver of such veteran;
Second, a small business concern (i) not less than 51 percent of which is owned by one or more service-disabled veterans with a disability that is rated by the Secretary of Veterans Affairs as a permanent and total disability who are unable to manage the daily business operations of such concern; or (ii) in the case of a publicly owned business, not less than 51 percent of the stock (not including any stock owned by an ESOP) of which is owned by one or more such veterans; and
Third, a small business concern that met either of the two requirements described above immediately before the death of a service-disabled veteran who was the owner of the concern, the death of whom causes the concern to be less than 51 percent owned by one or more service-disabled veterans, if (i) the surviving spouse of the deceased veteran acquires such veteran’s ownership interest in such concern; (ii) the veteran had a service-connected disability rated as 100 percent disabling by the VA or such veteran died as a result of a service-connected disability; and (iii) immediately prior to the death of such veteran and during the period it is otherwise an SDVOSB the small business concern is included in the VA’s VetBiz database.
A surviving spouse in the third category can only continue to operate the SDVOSB until the tenth anniversary of the veteran’s death, the date he or she remarries, or the date he or she relinquishes ownership, whichever comes first. As for the small businesses in the first two categories, small business owners should take note of the exclusion of stock owned by an ESOP in the determination of whether ownership requirements are met for a publicly owned business.
2. Pilot program for qualified subcontractors to obtain past performance ratings
NDAA 2017 also authorized the SBA to establish a pilot program that would enable first tier small business subcontractors without any past performance rating to, nevertheless, obtain past performance ratings for work done as subcontractors.
Under the proposed pilot program a subcontractor must submit to a designated official an application for a past performance rating for work done under a government contract within either 270 days of the completion of the subcontractor’s work or 180 days after the completion of the prime contractor’s work, whichever is earlier.
The subcontractor is required to include with the application evidence of the past performance factors that it seeks to be rated on, as well as its own suggested past performance ratings. The designated official must then forward the application to the covered contract agency’s Office of Small and Disadvantaged Business Utilization (OSDBU), as well as to the prime contractor. Thereafter, the OSBDU and the prime contractor must submit a response to the subcontractor’s application.
NDAA 2017 provides procedures if there is agreement or disagreement over proposed past performance ratings, as well as a procedure for a small business subcontractor to respond to any disagreements by the OSDBU or a prime contractor over proposed past performance ratings.
3. Failure to act in good faith in submitting timely subcontracting reports will be a material breach of the contract
NDAA 2017 also makes changes to the Small Business Act that makes a failure to act in good faith in providing timely subcontracting reports a material breach of a government contract. NDAA 2017 requires the SBA to provide examples of activities that would be considered a failure to make a good faith effort to comply with requirements.
Comprehensive changes to the HUBZone program
Lastly, the SBA Agenda anticipates significant changes to the SBA’s HUBZone program. Although short on any specifics, the Agenda indicates that “comprehensive” revisions will be made to the HUBZone program and regulations under Part 126 of the SBA’s regulations.
The SBA indicates that its focus will be to make it easier for participants to comply with program requirements and to maximize program benefits, to determine if regulations should be modified, streamlined, expanded or repealed to make the HUBZone program more effective and/or less burdensome on small business concerns, and to maintain a framework that identifies and reduces waste, fraud, and abuse in the program.
The SBA has invited the public to comment on any aspect of its Agenda. (Note from Bill: Look for contact information under each specific section of SBA’s Agenda summary.)
This article was originally posted on LinkedIn at https://www.linkedin.com/pulse/sbas-agenda-anticipates-significant-rule-changes-wosb-mark-amadeo/ and was reprinted with permission.
Mark Amadeo has served as outside counsel to Fortune 200, medium, small, and non-profit companies, local government entities, and government contractors. A skilled advocate who has vigorously pursued and defended claims on behalf of clients in federal and state courts throughout the country, Mr. Amadeo offers a unique litigation perspective that helps government contracting clients avoid traps and pitfalls that can lead to time-consuming and expensive litigation. Sign up for the Amadeo Law Firm’s The GovCon Bulletin™ to receive new insights and announcements by email.
What is the status of the National Defense Authorization Act (NDAA)?
As of July 14th, 2017 the House passed H.R. 2810, the FY2018 National Defense Authorization Act.
Ranking Member Nydia M. Velázquez commented:
“The NDAA bill contains a package of bipartisan, small business legislative proposals that will help small firms win their share of federal contracts, strengthen entrepreneurial development programs and assist cutting edge firms as they bring new technologies and products to market.”
What is the purpose of the NDAA?
This bill aims to authorize appropriations for fiscal year 2018 for military activities of the Department of Defense, for military construction, and for defense activities of the Department of Energy, to prescribe military personnel strengths for such fiscal year, and for other purposes.
Nine members of the Small Business Committee introduced contracting and entrepreneurial development bills this year, which are included in the final draft of the NDAA.
Chairman Steve Chabot of the Small Business Committee commented:
“I am proud that many of the bipartisan bills the House Small Business Committee has worked on were included in the bill. I thank Chairman Thornberry for his hard work putting together this year’s National Defense Authorization Act and for recognizing the vital role small business reforms play in our nation’s security. These provisions will ensure small businesses have a greater opportunity to compete for federal contracts, and bring entrepreneurial development programs up-to-date to better equip our small federal contractors.”
Stay tuned for our follow-up posts about the biggest changes affecting small businesses in NDAA FY18.
SBA had a well-established mentor-protégé program (MPP) for SBA 8(a) certified firms but lacked an MPP program for other small business concerns and specifically, one for specialized certified concerns such as WOSB, EDWOSB, SDVOSB, & HubZone. The 2010 Jobs Act and 2013 NDAA gave SBA the authorization to address this by establishing an all-encompassing mentor-protégé program.
Ms. Sandi Clifford, deputy director of the All Small Mentor-Protégé Program (ASMPP), visited the Mid-Tier Advocacy (MTA) earlier this year to discuss the program.
Here are some of the highlights of this candid and informative discussion:
As Ms. Clifford explained, mentor services to protégés include:
- Management and technical assistance (internal business management systems)
- Financial assistance (in the form of equity investments and/or loans)
- Contracting assistance (contracting processes, capabilities acquisitions and performance)
- International trade education (learn how to export, international trade business plan, finding markets)
- Business development assistance (strategy, finding contracting and partnership opportunities)
- General and/or administrative assistance (business processes and support)
As administrators of the program, SBA provides:
- Central HQ as opposed to 8(a) distributive model
- Online application – certify.SBA.gov
- Online course tutorial requirement
- Annual review and evaluation
- Template agreements, i.e., MPA (Mentor-Protégé Agreement)
Other All-Small Mentor-Protégé Program (ASMPP) details:
- A protégé may generally only have one mentor at a time; SBA may approve a second (two is the maximum) where no competition exists, or if the protégé registers under a new NAICS or otherwise requires new mentor skills.
- Both protégé and mentor must be for-profit (with exception of protégé being an agriculture cooperative).
- A mentor may have no more than three protégés at same time (no lifetime limit).
- A participant can be both a protégé and mentor at the same time, if there is no competition or conflict.
- The ASMPP is self-certifying and is open to businesses who qualify as small in their primary NAICS code, or who are seeking business development assistance in a secondary NAICs where they also qualify as small.
- SBA will not authorize MPAs in second NAICS in which firm has never performed any work; or where firm would only bring “small” status to Mentor and nothing else.
- Existing 8(a) firms in last 6 months of the 8(a) program may transfer their MPA to the ASMPP via the online application process. Coordinate with 8(a) office to fine tune the process but there is no reapplication required.
- Application requirements include upload of business plan, but no financial statements or tax returns.
- JV agreements: ASMPP will not review and approve joint venture agreements.
How to apply for the ASMPP:
- Applicants are required to register in the System for Award Management (SAM) prior to submitting their mentor/protégé application.
- Complete your business profile in certify.SBA.gov.
- Evaluate and select your mentor prior to applying. This is not a matching program. SBA will not find a mentor for you.
- Begin the ASMPP application process.
- Protégés and mentors must complete the online tutorial and have their certificate of completion and all other required documents ready for upload
Thank you to Sandi Clifford, Deputy Director, All Small Mentor-Protégé Program, for this helpful overview. TAPE has mentored several small businesses over it’s life as a large business (we’re large in some NAICS codes, though still small in others) and it has been gratifying, satisfying, and integral to our success. As protégés ourselves, we have benefitted from working with some really classy large businesses, and have also had the experience of being a protégé and really getting no tangible benefits. We are currently working with two small businesses, and negotiating ASMPP agreements.
This is a guest post by A. John Shoraka and Kathryn V. Flood of PilieroMazza.
H.R. 3294, the HUBZone Unification and Business Stability Act of 2017, proposes several changes to the HUBZone program that are intended to reduce certification timelines, stabilize the program, and collect and report on performance metrics designed to measure the success of the HUBZone program. While this is a step in the right direction, the proposed changes do not go far enough to provide a meaningful impact to the deficiencies in the program.
To analyze the positive impact the proposed bill may have on the HUBZone program, we believe it is important to understand the historical weaknesses of the program and why those weaknesses have inhibited the government from meeting the HUBZone set-aside goal. Having experiences interacting and engaging with users of the HUBZone program both inside and outside of the government, we would argue that the weaknesses of the program can be categorized as follows: 1) instability in the ever changing HUBZone designated areas, 2) uncertainty for contracting officers when awarding HUBZone contracts, and 3) the inability to quantify the impact of the HUBZone program.
Rather than get into the weeds with respect to formulations on how HUBZones are designated and when those designations change, generally speaking, the current methodology has created a system where HUBZone areas are tweaked and updated annually, if not more frequently, and are significantly changed when new census data becomes available. Furthermore, once an area falls out of designation, it is “grandfathered” into the program for only a period of three years. This constant and ever-changing landscape makes it difficult for a company to rely on and invest in its HUBZone status and its underlying infrastructure. As a result, fewer and fewer companies are willing to establish or relocate their companies in a HUBZone and invest in HUBZone employees and local communities. This results in the government having fewer and fewer qualified HUBZone companies to procure from in order to meet its 3% goal.
The HUBZone program is the only federal set-aside program that requires small businesses to meet program requirements twice during the procurement process; once at the time of offer, and again at the time of award. If anybody has done work for the federal government, you know that the time between offer and award can range from several weeks to several years. Now imagine trying to monitor and stay abreast of the ever-changing HUBZone designated areas, not only to insure that your principal office is located in a HUBZone, but to insure that 35% of your employees live in a HUBZone. That may be easy to do for a few weeks, but as your firm grows, your employees move and HUBZone areas get redesignated; it is highly unlikely that you remain in compliance once the contract is awarded. This can leave a contracting officer with not only a protest and the need to reissue the award, but it may require an entire new acquisition. This may be why contracting officers are more and more reluctant to use the program.
At its core, the HUBZone program is an economic development program. In order to support the existence of the program it is critical to document its impact on under-utilized communities. Unfortunately, it is not only incredibly difficult to correlate HUBZone contract awards to economic growth; there has never been any funding to support such analysis.
While the proposed bill (H.R. 3294) attempts to address the weaknesses identified above, we are concerned that it does not go far enough.
The proposed bill does attempt to create stability with respect to HUBZone designated areas by changing the calculation for non-metropolitan areas from the most recent data available to a five-year average. This should help to stabilize the volatile swings in economic data and the impact it has on designated areas; however, the bill does nothing to extend the “grandfathering period” beyond the current three years.
The bill also requires the SBA to “go live” with its new calculations on 1 January 2020, allowing firms that were certified into the program on or before the date of the enactment of the bill to retain their HUBZone certification until the new calculations are launched. Thereafter, updates for new HUBZone areas will occur every five years; however, redesignated HUBZones are to be removed immediately after the “grandfathering” period.
These provisions may stabilize the program, but they will also limit the number of HUBZone areas, which would in effect limit the number of HUBZone firms in SBA’s portfolio. What’s more, the proposed bill does nothing to address contracting officers’ concerns regarding the risks associated with HUBZone set-asides.
Finally, it is encouraging that the bill requires the SBA to maintain performance metrics on the impact of the HUBZone program and instructs that these metrics be collected and managed at the regional level. However, it will be extremely difficult for the SBA to meet this mandate without additional resources and upgraded information systems.
This post was originally published on PilieroMazza at http://www.pilieromazza.com/do-the-proposed-changes-to-sbas-hubzone-program-go-far-enough and was reprinted with permission.
Katie Flood is counsel with PilieroMazza in the Government Contracts Group. John Shoraka is the Managing Director of PilieroMazza Advisory Services, LLC, an advisory company to help small businesses navigate in the federal marketplace by developing successful strategies to help businesses thrive. http://www.pilieromazza.com/
This is a guest post by Steven Koprince of SmallGovCon.
The VA cannot buy products or services using the AbilityOne List without first applying the “rule of two” and determining whether qualified SDVOSBs and VOSBs are available to bid.
Today’s decision [originally printed on May 30, 2017] of the U.S. Court of Federal Claims in PDS Consultants, Inc. v. United States, No. 16-1063C (2017) resolves–in favor of veteran-owned businesses–an important question that has been lingering since Kingdomware was decided nearly one year ago. The Court’s decision in PDS Consultants makes clear that at VA, SDVOSBs and VOSBs trump AbilityOne.
The Court’s decision involved an apparent conflict between two statutes: the Javits-Wagner-O’Day Act, or JWOD, and the Veterans Benefits, Health Care, and Information Technology Act of 2006, or VBA.
As SmallGovCon readers know, the VBA states that (with very limited exceptions), the VA must procure goods and services from SDVOSBs and VOSBs when the Contracting Officer has a reasonable expectation of receiving offers from two or more qualified veteran-owned companies at fair market prices. Last year, the Supreme Court unanimously confirmed, in Kingdomware, that the statutory rule of two broadly applies.
The JWOD predates the VBA. It provides that government agencies, including the VA, must purpose certain products and services from designated non-profits that employ blind and otherwise severely disabled people. The products and services subject to the JWOD’s requirements appear on a list known as the “AbilityOne List.” An entity called the “AbilityOne Commission” is responsible for placing goods and services on the AbilityOne list.
But which preference takes priority at VA? In other words, when a product or service is on the AbilityOne list, does the rule of two still apply? That’s where PDS Consultants, Inc. enters the picture.
The AbilityOne Commission added certain eyewear products and services for four Veterans Integrated Service Networks to the AbilityOne List. VISNs 2 and 7 had been added to the AbilityOne List before 2010. VISNs 2 and 8 were added to the AbilityOne list more recently.
PDS filed a bid protest at the Court, arguing that it was improper for the VA to obtain eyewear in all four VISNs without first applying the rule of two. The VA initially defended the protest by arguing that AbilityOne was a “mandatory source,” and that when items were on the AbilityOne List, the VA could (and should) buy them from AbilityOne non-profits instead of SDVOSBs and VOSBs.
But in February 2017, just two days before oral argument was to be held at the Court, the VA switched its position. The VA now stated that it would apply the rule of two before procuring an item from the AbilityOne list “if the item was added to the List on or after January 7, 2010,” the date the VA issued its initial regulations implementing the VBA. For items added to the AbilityOne List beforehand, however, no rule of two analysis would be performed.
(As an aside–the VA seems to be making a habit of switching its positions in these major cases).
The parties agreed that the VA’s new position mooted PDS’s challenges to VISNs 6 and 8, which would now be subject to the rule of two. But what about VISNs 2 and 7? PDS pushed forward, challenging the VA’s position that it could issue new contracts in those VISNs without performing a rule of two analysis. PDS argued, in effect, that nothing in the VBA allowed products added to the AbilityOne List before 2010 to somehow be “grandfathered” around the rule of two.
Judge Nancy Firestone agreed with PDS:
The court finds that the VBA requires the VA 19 to perform the Rule of Two analysis for all new procurements for eyewear, whether or not the product or service appears on the AbilityOne List, because the preference for veterans is the VA’s first priority. If the Rule of Two analysis does not demonstrate that there are two qualified veteran-owned small businesses willing to perform the contract, the VA is then required to use the AbilityOne List as a mandatory source.
Judge Firestone pointed out that under the VBA, “the VA must perform a Rule of Two inquiry that favors veteran-owned small businesses and service-disabled veteran-owned small businesses ‘in all contracting before using competitive procedures’ and limit competition to veteran-owned small businesses when the Rule of Two is satisfied.”
Citing Kingdomware, Judge Firestone wrote that “like the [GSA Schedule], the VBA also does not contain an exception for obtaining goods and services under the AbilityOne program.” Judge Firestone concluded:
[T]he VA has a legal obligation to perform a Rule of Two analysis under the VBA when it seeks to procure eyewear in 2017 for VISNs 2 and 7 that have not gone through such analysis – even though the items were placed on the AbilityOne List before enactment of the VBA. The VA’s position that items added to the List prior to 2010 are forever excepted from the VBA’s requirements is contrary to the VBA statute no matter how many contracts are issued or renewed.
Judge Firestone granted PDS’s motion for judgment and ordered the VA not to enter into any new contracts for eyewear in VISNs 2 and 7 from the AbilityOne List “unless it first performs a Rule of Two analysis and determines that there are not two or more qualified veteran-owned small businesses capable of performing the contracts at a fair price.”
The apparent conflict between JWOD, on the one hand, and the VBA, on the other, was one of the major legal issues left unresolved by Kingdomware. Now, as we approach the one-year anniversary of that landmark decision, the Court of Federal Claims has delivered another big win for SDVOSBs and VOSBs.
This post originally appeared on the SmallGovCon blog at http://smallgovcon.com/service-disabled-veteran-owned-small-businesses/another-big-win-for-vets-sdvosbs-trump-abilityone-at-va-court-rules/#sthash.7trmkUf9.dpuf and was reprinted with permission.
After publishing my article about sole source contracts for women-owned small businesses, I received the following comment on LinkedIn:
“Mr. Jaffe, isn’t it still very difficult for EDWOSB firms that provide services, i.e., program and project management, to receive sole source contracts due to the Rule of Two? The 8(a) program is different in that they can sole source to firms even if there are 100 other 8(a)s that can provide that service, whereas if a client wants a particular firm but there are others that provide the service then they can do a set aside, but can’t directly award a sole source contract to that EDWOSB.
Am I correct in this, or is the program changing so that the Rule of Two will not be a factor and EDWOSB’s are following the same sole source rules as 8(a)?”
When I followed up with Matthew to find out more about what was behind his question, he told me:
“Bugbee Consulting is an EDWOSB for years now and we were excited about the changes to the program, until they were implemented and the rules were more similar to other programs rather than the 8(a). Essentially, no contracting office will attempt a WOSB sole source to a service-oriented firm like Bugbee Consulting due to the Rule of Two.”
My team and I dug a little deeper, but unfortunately we didn’t have any better news for Matthew. Indeed, the Rule of Two applies to the WOSB program, as it does to all other set-aside programs. WOSB sole source requires you follow the same rules that you do for service-disabled veteran-owned small business or HUBZone sole source procurements.
Contracting officers can accept TPC (third-party contracting) when verifying an offeror’s eligibility for WOSB or EDWOSB set-aside contracts or sole source awards. As well, contracting officers can accept a WOSB’s or EDWOSB’s self-certification, as long as the contracting officer verifies that the required documentation has been uploaded to the WOSB Repository.
Contracting Officers’ roles and responsibilities in connection with the WOSB Program are discussed in FAR 19.15. If you have more questions, I’d suggest you contact your local Procurement Center Representative (PCR) for guidance on WOSB Program requirements.