NDAA FY 2019 – What’s Ahead for Small Business

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On May 24, 2018, the House passed H.R. 5515, the National Defense Authorization Act FY2019. This bill authorizes FY2019 appropriations and sets forth policies for Department of Defense (DOD) programs and activities, including military personnel strengths. It does not provide budget authority, which is provided in subsequent appropriations legislation.

Rep. Mac Thornberry’s (Chair, Armed Service Com.) comments on included reforms:
“For the 58th year, the House has passed an NDAA, one that puts the men and women in uniform first and is another large step in rebuilding and repairing our long-neglected military. Our service members selflessly fight for our freedom every day, and in return, we must ensure that they have the best training, equipment, and support our nation can provide. This bill also continues to reform the Pentagon to help speed up decision-making and get equipment to our warfighters faster.”

The provisions set ahead in the NDAA for 2019 in regards to small business(es) are promising. Rep. Steve Chabot’s (Chair, Small Business Committee) comments regarding small business protections:

“Small businesses play an immeasurable role in keeping America safe and strong. Not only are they the lifeblood of the economy, but they also the lifeblood of our nation’s industrial base. The common sense reforms in this bill will open new avenues for small businesses to flourish in our economy.”

In a series of posts, we will look into six NDAA FY19 bills that will impact small business, summarized below:

H.R. 2056, the Microloan Modernization Act

(Sec. 3) This bill amends the Small Business Act, with respect to the Small Business Administration (SBA) Microloan Program (assisting low-income individuals to start and operate a small business), to increase from $5 million to $6 million the total amount of loans outstanding and committed to any particular intermediary (excluding outstanding grants) from the SBA business loan and investment fund for the remaining years of the intermediary’s participation in the program.

(Sec. 4) SBA-designated microloan intermediary lenders may expend up to 50% (currently, 25%) of the intensive marketing, management, and technical assistance grant funds they receive from the SBA to provide information and technical assistance to small business concerns that are their prospective borrowers.

(Sec. 5) The SBA shall:
● compare the operations of a representative sample of eligible intermediaries that participate in the microloan program and of eligible intermediaries that do not,
● study the reasons why the latter do not participate,
● recommend how to encourage increased participation by intermediaries in the microloan program, and
● recommend how to decrease the associated costs for intermediary participation.

(Sec. 6) The Government Accountability Office shall evaluate:
● SBA oversight of the microloan program, including oversight of participating intermediaries; and
● the specific processes the SBA uses to ensure program compliance by participating intermediaries and overall microloan program performance.

H.R. 4754, the Change Order Transparency for Federal Contractors

Amends the Small Business Act to provide prospective construction contractors with information about an agency’s policies on the administration of change orders to allow such contractors to make informed business decisions regarding the pricing of bids or proposals.

This bill was received in the Senate and read twice and referred to the Committee on Small Business and Entrepreneurship on May 9, 2018.

H.R. 2333, the Small Business Investment Opportunity Act

(Sec. 2) This bill amends the Small Business Investment Act of 1958 to increase the maximum amount of outstanding leverage (i.e., borrowing power) made available to any licensed small business investment company from $150 million to $175 million. This bill was signed into law on June 21, 2018.

H.R. 2364, the Investing in Main Street America Act

(Sec. 2) This bill amends the Small Business Investment Act of 1958 to increase from 5% to 15% of its capital and surplus, the amount a national bank, a member bank of the Federal Reserve System, a nonmember insured bank (to the extent permitted under applicable state law), or a federal savings association may invest in one or more small business investment companies (SBICs), or in any entity established to invest solely in SBICs. The increase is subject to the approval of the appropriate federal banking agency.

H.R. 5337, the Accelerated Payments for Small Businesses Act (applies only to the Department of Defense)

To amend section 3903 of title 31, United States Code, to establish accelerated payments applicable to contracts with certain small business concerns. This bill was referred to the House Committee on Oversight and Government Reform on March 20, 2018.

H.R. 2763, the Small Business Innovation Research and Small Business Technology Transfer Improvements Act (significant portions)

This bill amends the Small Business Act to require:
● the Small Business Administration’s (SBA’s) annual report on the Small Business Information and Research (SBIR) and Small Business Technology Transfer (STTR) programs to be submitted by December 31, and
● each federal agency required to establish an SBIR program to submit its annual report on such program by March 30.

The bill requires (current law authorizes) the Department of Defense (DOD), for any contract under the Commercial Readiness Program with a value of at least $100 million, to:
● establish goals for the transition of Phase III technologies in subcontracting plans, and
● require a prime contractor to report the number and dollar amount of contacts entered into for Phase III SBIR or STTR projects.

The bill authorizes all agencies participating in the SBIR program, during FY2018-FY2022, to provide SBIR Phase II awards for a project to a small business concern without regard to whether such concern was provided a Phase I award for such project.

The bill changes the temporary pilot program that a covered agency may establish for the allocation of SBIR and STTR program funds for awards for technology development, testing, evaluation, and commercialization assistance for SBIR and STTR phase II technologies, or to support the progress of research, research and development, and commercialization conducted under such programs to phase III, to a permanent Civilian Agency Commercialization Readiness Program.

The bill extends until September 30, 2022, the deadline until which the SBA shall allow each agency required to conduct an SBIR program to use not more than 3% of program funds for administrative, oversight, and contract processing costs.


Bills Seek to Increase Opportunities for Women-Owned and Other Minority-Owned Businesses

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On July 18, 2018, the House Small Business Committee approved H.R. 6369, the Expanding Contracting Opportunities for Small Business Act, and H.R. 6382, the Clarity on Small Business Participation in Category Management Act. Among other provisions important to women, the bills seek to increase opportunities for women-owned and other minority-owned businesses.

Regarding the news, Vivian Ling, House Small Business Committee – Majority stated:

“This is a very, very modest proposal to update the size formula from a 3-year look-back to a 5-year look-back. I discussed a number of alternatives with SBA, and after much discussion, this was the only option they were comfortable with.”

H.R. 6369 essentially takes three major actions. The first action is that option years are no longer included in the award price for sole source contracts.

To account for this fact, the maximum award prices were changed from $5M to $7M for contract opportunities assigned an SIC code for manufacturing and from $3M to $4M for all other contract opportunities. Exclusion of option years was applied to sole source contracts, those controlled by service-disabled veterans, women, and women in substantially underrepresented industries.

The second action is that the SBA is to notify the House Small Business Committee and the Senate Small Business and Entrepreneurship Committee when it has established two programs: one to certify concerns of female small business owners, and one to certify concerns of service-disabled veteran small business owners.

This is a significant change requiring certification of “real” WOSBs. Right now the program is self-certified, except in cases using sole source contracts when the contracting officer is required to verify that the business is certified by one of the four designated WOSB certifiers.

The third program is that the GAO will carry out a study to ensure that sole source awards are properly classified and are being awarded to eligible firms. This report is to be delivered to Congress within 18 months after the certification programs begin. The SBA must also report to Congress with the actions it took following the GAO study.

H.R. 6382, otherwise known as the “Clarity on Small Business Participation in Category Management Act of 2018,” amends the Small Business Act to require the Administrator of the Small Business Administration to report certain information to the Congress and to the President, and for other purposes.

Specifically it requires reporting on:

(i) the total amount of spending government wide in such designation;

(ii) the dollar amount of contracts within such category awarded to each of the following—

(I) HUBZone small business concerns;

(II) small business concerns owned and controlled by women;

(III) small business concerns owned and controlled by service-disabled veterans; and

(IV) socially and economically disadvantaged small business concerns.

These changes are a big deal for small firms, especially WOSBs.


WOSB Sole-Source Authority Dispute

This is a guest post by Alice Lipowicz, editor, Set-Aside Alert.

A recent federal audit that found nearly 90% of sole-source contracts awarded to Women-Owned Small Businesses (WOSBs) were improper is getting significant pushback from the Small Business Administration.

The report by SBA’s Acting Inspector General (OIG) Hannibal Ware said four of the five recommendations it made were left unresolved by the SBA.

Most significantly, the SBA and the OIG aired more broadly their disagreement on whether WOSB sole-source awards currently are allowed at all.

While Congress approved authority for such awards in the 2015 National Defense Authorization Act, the SBA and OIG interpretations of the law clash.

The OIG says Congress authorized such awards on the condition that a formal WOSB certification program would be in place.

The SBA, on the other hand, “disagrees with the view that the NDAA of 2015 expressly or implicitly required SBA to establish a certification program concurrently with the sole source authority set forth in the NDAA,” Robb Wong, SBA’s associate administrator for government contracting and business development, wrote to the OIG.

Legal risks

The ongoing conflict about the current legality of the WOSB sole-source awards potentially is risky for small business contractors.

The disagreement may discourage contracting officers from making WOSB sole-source awards. The dispute potentially could be raised in a protest or a court case in an attempt to overturn a WOSB sole-source award.

The SBA currently plans for a formal WOSB certification program to be launched in January 2020. The OIG is urging strongly that the deadline be moved up to June 2019, which the OIG said was previously the launch date set by SBA.

The SBA also accused the OIG of errors in its data and also went on to describe “unique and complex” problems and “structural issues” in the WOSB program, owing to requirements in the law that created the program.

OIG report

The audit found that 50 out of 56 sole-source WOSB contracts reviewed–or 89%–were non-compliant. Those improper contracts totaled $52 million. Irregularities included companies with incomplete or no documentation and contracts awarded in incorrect industries.

As a result, the government’s WOSB achievement may be “overstated,” the report said.

The inspector general made five recommendations for improvements. SBA resolved only one.

On the OIG’s advice to initiate debarments of WOSB firms that violated rules, the SBA said it would complete those actions by September 2020. OIG said that is too late.

Also unresolved was a recommendation for SBA to take a more active role in correcting errors in procurement data from other agencies. Wong said that recommendation was “vague” and not likely to help.

The OIG also wanted SBA to conduct quarterly eligibility reviews of all newly-certified WOSBs and EDWOSBs. That was unresolved. The Women Impacting Public Policy group said they found that recommendation “demeaning” because it applies only to women-owned firms.

SBA’s comments

Wong, in his OIG letter, was critical of the report’s reliance on Federal Procurement Data System-NextGen data, which he said is prone to human error. “SBA’s OIG has not verified that the actions recorded in FPDS are actual contract award actions, or actual sole source awards,” he wrote.

SBA reviewed the OIG’s data for 17 contract actions for which allegedly no documents were on file. Of those, five contracting officers acknowledged they had misclassified the vendor as a WOSB, Wong added.

Furthermore, Wong said the OIG had not taken into account the multi-faceted problems and “structural issues” of the WOSB program, as established by law and regulation.

He noted that WOSB and EDWOSBs set-asides are the only ones limited by NAICS industry codes. Also, it is the only program that, by law, requires participants to provide documents to three government databases certifying their eligibility as WOSBs or EDWOSBs. Contracting officers must review the documents.

These rules have been confounding, Wong wrote, adding that most firms and contracting officers are not aware of the need to submit or review such documents.

Those issues have contributed to “limited success” in the WOSB program, and should have been given more weight in the OIG’s evaluation, according to Wong. Wong did not respond to Set-Aside Alert’s request for further comment.

More information:
OIG report
WIPP statement

Copyright © 2018 by Business Research Services Inc. Story reprinted with permission from June 20 edition of Set-Aside Alert. Founded in 1992 Set-Aside Alert is the only comprehensive news and information source focused solely on small business federal contractors. Check them out at www.setasidealert.com. The publisher Business Research Services is a veteran-owned small business.


Intellectual Property and the NDAA 2018

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Early in 2018, Edmund Amorisi of Smith Pachter McWhorter PLC and and Bill Walters of Dixon Hughes Goodman LLP presented a comprehensive summary of the key provisions of the FY 2018 NDAA. As they explained, Sec. 802 emphasizes DoD’s ongoing interest in intellectual property issues.

It directs DoD establish a “cadre of intellectual property experts” to “ensure a consistent, strategic, and highly knowledgeable approach to acquiring or licensing [IP] by providing expert advice” to the acquisition workforce. Sec. 802 also authorizes DoD to contract with a private-sector entity for “specialized expertise” to support the cadre.

Currently there are FAR and DFAR provisions to protect intellectual property, both the portion that the government should own after something new is developed, and the portion that the contractor brings to the table. However, this expertise does not exist in the regular contracting workforce. So this provision really goes into detail about intellectual property and directs the DoD to establish some intellectual property expertise that they can use.

Any company with an innovation will have a real issue about bringing their innovation into the contracting community because they may not be properly protected to keep their IP. Too often contractors don’t pursue their innovative ideas because they don’t want their innovation to become the property of the government.

So this provision is really about allowing innovation to play a part, and that’s a very good thing.


Commercial Item Contracting Changes in NDAA 2018

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While we at TAPE provide services, other companies provide products, or a combination of the two. In terms of federal contracting, commercial items are all the things that are stuff, for example office supplies like pencils and paper clips.

What Sec. 846 of NDAA 2018 is trying to do is establish Amazon-like online portals where contracting officers and authorized people can simply go online and order their products and commercial items.

That would replace the current process, which in many cases is ordering these supplies off GSA schedules, and will make it easier and more efficient for government buyers to do their job. The problem is whether this takes away opportunities for competition. How do you regulate all of these things?

There is still work to be done to determine who is included in the portal, how search results are delivered, what kind of e-commerce portal do you create, and how this relates to the Federal Acquisition Regulation (FAR) and the Defense Federal Acquisition Regulation Supplement (DFARS).

Until we figure out these things, I don’t think this portal will happen immediately. There doesn’t seem to be a rush to implement this, and this might be partially because GSA sees this as a competitor to their own portal. But I also don’t think we’ll be waiting too long.


Bid Protest Changes in NDAA 2018

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We’ve been taking a closer look at some of the most relevant changes to the 2018 National Defense Authorization Act (NDAA), which includes several provisions designed to reduce the number of protests.

According to the U.S. Government Accountability Office (GAO), “federal agencies are required to award government contracts in accordance with numerous acquisition laws and regulations. If a party interested in a government contract believes that an agency has violated procurement law or regulation in a solicitation for goods or services, or in the award of a contract, it may file a bid protest with our Office.”

With contracting dollars being so tight over the last 10 years, every loss was a big deal, and large losses in particular resulted in long and involved protests. This led to us seeing more and more contracts being protested, which is creating a lot of problems.

So there are a number of things that this provision attempts to do, including to increase the amount of information flow in the debriefing (see: how to take full advantage of a debriefing).

That’s a double-edged sword for both the government and the contractor. On the one hand, it will help bidders better understand the decisions and help them shape future proposals for more success.

For example, they will now allow businesses pursuing contracts of $100 million or greater to see a redacted version of the source selection decision document. This is the recommendation document that goes to the source selection authority (SSA) – the panel that decides who to select among the bids – and is an incredible source of information. Small businesses may request the same disclosure for contracts valued at $10 million or more.

On the other side, these changes will produce a lot more documentation and paper trails, and sometimes when a contractor learns more about a decision, it actually increases the possibility of protest.

Another potential down side is a potential pilot program of charging protesters if they’re unsuccessful when a protest is made and denied. This compensates for the fact that the government has to spend money to defend the protest.

That means you’ll have to really think twice because there is the potential to incur hard costs (where before it was just your legal fees).

The hope in all of this is to get rid of frivolous protests that are only meant to extend existing contracts. Unfortunately, some incumbents who are about to be replaced start a protest knowing that for the 4-6 months while it’s in process, they can still be performing and collecting their money. While the protest is going on the government is prohibited to hire the new company. This is an unfair practice and definitely needs to stop. Time will tell if these changes are successful in doing that.


Acquisition Threshold Changes in NDAA 2018

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Simplified acquisition is “a contracting method which seeks to reduce the amount of work the government must undertake to evaluate an offer. Because source selection is less arduous under simplified acquisition, the dollar value of contracts allowable under simplified acquisition …is capped.” (Georgia Tech Contracting Education Academy.)

In the NDAA 2018, this simplified acquisition threshold increased from $100,000 to $250,000, in order to expand opportunities and increase participation of small and disadvantaged businesses – service-disabled, women-owned, small, and small disadvantaged (what used to be known as 8(a)).

What that means is that contracts valued up to $250,000 – a pretty fair amount to most small businesses – don’t have a justification and authorization requirement (known as a J&A). The government contracting officer can just issue a purchase order to the small business.

The Truthful Cost or Pricing Act (TINA) (previously known as the Truth in Negotiations Act) was instituted to protect government agencies from unfair pricing practices by contractors. NDAA 2018 also bumps up the threshold for which contracts need this particular oversight – from $750,000 to $2 million. From a government standpoint, this means fewer regulations associated with a larger pool of contract dollars.

As we head into the year-end federal purchasing blitz, everybody just got their budgets and they have to spend all of their money by September 30th. These changes give small business contractors important opportunities to get bigger amounts of money in sole sourcing.


So You Won a Multiple-Award IDIQ, Now What Do You Do?

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Winning a multiple-award IDIQ contract does not give you any new work; in fact it causes work, because you’re going to have to go figure out who can use this contract from amongst your customers, and help show them why moving things over to this contract you’ve won is the right step for them (because it’s also the way for you to get more work!).

Look at it this way: If we have a contract with a customer, and that contract is going to be eligible for renewal, would we rather have it competed in its current open scenario, let’s say through FedBizOpps, or would we prefer it to be a more limited competition under one of these multiple award IDIQ vehicles?

Assuming for the moment that we think it’s to our advantage as a small business, we now need to convince the government program office and contracting office that this new vehicle is easier to use and meets their needs better.

In the case of the GSA vehicles, GSA also wants to help you do that. This is not specifically about any particular piece of business, but that the more you actually bring over business or bring over an old customer doing a new function to this new vehicle where they can get to you, the more likely you are to win that work.

You’re trying to convince your existing customer that some piece of work should be put on this vehicle because you can respond to it as a prime. It doesn’t mean you’re going to win over your competitors within the contract, but it does mean that you’re at least going to be in the game as long as you have the capacity to respond.

Multiple-award IDIQs are a tempting source of revenue for small business federal contractors, particularly because the numbers are usually very big. Our VETS 2 contract, for example, has a ceiling of $2 billion! But only if you’re prepared, first to be able to write the proposals, and second to bring in the work where you have the knowledge, background or information. Otherwise it’s going to be like shooting in the dark.

Stay tuned for a later post when we’ll talk about how to pick and choose targets that you didn’t bring to the table.


What is a Multiple-Award IDIQ Contract?

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Many federal contracts are issued as IDIQ – indefinite delivery, indefinite quantity. What an IDIQ means is that although the government may award you a contract with a ceiling value of let’s say $25 million, nothing is guaranteed. It’s all issued in the form of task orders.

That’s what makes this an indefinite quantity, because although there’s a ceiling, there is no actual guaranteed contract. In contrast, you may have an annual contract for $25 million, but it’s what’s called a level-of-effort (LOE) contract. Every year for five years you get an option or agreement for $5 million, one-fifth of your 25 million. That is a definite quantity.

The indefinite delivery refers to the fact that the task orders can be for differing durations – you could get a task order for one month, six months, or longer. They’re not for a specified time frame. Your LOE contract, on the other hand, has a set delivery schedule of one year, repeated four times.

The next distinction we have to make is between single award and multiple award. Obviously if you win a single-award contract you’re the only awardee. Everything that’s done under that contract is done by you. You may have sub-contractors, but in essence you’re the prime; all the revenue comes through you.

In a multiple-award, not only are the projects issued as task orders, but you have competitors who may also be able to bid on and win those items. For example, with the GSA’s IT Schedule 70, you don’t have to compete to get your contract, but every task order is competed. So you don’t actually get any work or any revenue unless you win a task order under the contract.

While a lot of this is changing (we won’t go into that here) the reality is that almost every agency uses some form of multiple-award IDIQ to focus portions of their effort. It may be something central to their mission, or it may be a service that contributes to the mission, like information technology or something of that nature.

There are several GSA multiple-award IDIQs in the information technology and engineering areas, such as Alliant, the Veterans Technology Services 2 (VETS 2) program, which is limited to service-disabled veteran-owned small businesses), STARS, which is limited to companies designated 8(a) or small disadvantaged businesses, and OASIS, that’s limited to engineering and related companies in various size standards.

Most of thee contracts will have a small business set-aside component, as well as an unrestricted or large business component. Think a multiple-award IDIQ is for you? Stay tuned for the next post, where we’ll discuss what to do once you’ve actually won one.


The 2018 National Defense Authorization Act – A Summary of Changes

soldiers

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This is a guest post from Dave Moyer, part-time senior analyst for TAPE, LLC.

As a member of a group of adjunct professors for the Graduate School USA, we collectively develop abstracts of pertinent, current legislation for use by the group in multiple class presentations. We attempt to author papers that enlighten our students and occasionally will develop papers that are of use to entities working in the government arena.

The follow paper was developed by four of the financial management professors and contains information that would be of interest to government contractors. In my ongoing capacity as a senior analyst for TAPE, I condensed this information, which is available in the public domain, in an effort to make it a handy thumbnail of the latest NDAA.

On December 12, 2017, President Trump signed the 2018 National Defense Authorization Act (NDAA) (Public Law 115-91). It contains many significant changes to DoD operations and organization, as well as some government-wide changes. Here are some of the important changes, starting with a new law with government-wide applicability:

Subtitle G of the NDAA is referred to as the Modernizing Government Technology Act. It establishes a Technology Modernization Fund and a Technology Modernization Board. The Act also authorizes any agency (not just DoD) to establish an information technology working capital fund (WCF) to improve, retire, or replace existing systems, and for any project, program, or activity related to IT modernization.

An interesting aspect of these WCFs will be their funding sources, and the length of availability of the funds. Agencies are given the authority to transfer other appropriations into the fund, and the WCFs may also receive discretionary appropriations. Thus, the WCFs won’t rely on sales to customers to earn revenue.

In addition, due to their nature, currently WCF balances are always available without fiscal year limitations (that is, no-year). This is no longer true, as these WCF balances will be available for only three years after the year in which funds are transferred in, or the appropriation is received from Congress. After three years, any unobligated balances revert to the general fund in Treasury.

Section 806 of the NDAA amends Title 41 of the US Code and applies to all federal agencies. The micro-purchase threshold increases from $3,000 to $10,000.

The following are some DoD-specific provisions to be aware of:

  • Section 827: Directs a pilot program on recovering costs from contractors whose protests are denied by the Government Accountability Office.
  • Section 831: Redefines Major Defense Acquisition Programs and Defense Business Systems.
  • Section 832: Prohibits the use of lowest price technically acceptable source selection process for engineering and manufacturing development contracts for major defense acquisition programs.
  • Sections 841-844: Numerous enhancements relating to the acquisition work force.
  • Section 854: Pilot program for multiyear contracts up to 10 years in length.
  • Section 905: Adds qualifications for appointment as the Under Secretary of Defense (Comptroller) and the Deputy CFO. Adds duties and powers to the Under Secretary’s position.
  • Section 906: Redesignates Principal Deputy Under Secretaries of Defense as Deputy Under Secretaries of Defense.
  • Section 910: Establishes a Chief Management Officer of the Department of Defense. This will be the number three ranking person in the department, below the Secretary and Deputy Secretary, but above the Under Secretaries.
  • Section 921: Adds qualifications for appointment as the Assistant Secretary for Financial Management in each of the three military departments.
  • Section 925: Moves background and security investigations from OPM to DoD.
  • Section 1002: Adds a new chapter to Title 10 consolidating, codifying, and improving authorities and requirements relating to the audit of DoD financial statements. Among many other changes, the Financial Improvement and Audit Readiness (FIAR) plan is now called Financial Improvement and Audit Remediation (FIAR) plan.
  • Section 1004: By mid-March 2018, DoD must submit a report to Congress ranking every DoD component/agency on their auditability.
  • Section 1103: The temporary authority for DoD to offer Voluntary Separation Incentive Program payments up to $40,000 (rather than the old $25,000) will not expire on Sept 30, 2018. It is extended to Sept 30, 2021.
  • Section 1648: Requires a report to Congress by May 1, 2018 on the termination of the dual-hat arrangement for the Commander of the United States Cyber Command.
  • Section 2802: Operation and Maintenance (O&M) appropriations may be used for construction up to $2,000,000 (up from the previous $1,000,000). Also, the unspecified MILCON limit goes from $3,000,000 to $6,000,000.
  • Section 2803: The Secretary of each component will adjust the $6,000,000 unspecified MILCON limit each fiscal year to reflect the local construction cost index, but the limit may not exceed $10,000,000.
  • Section 2805: The Secretary of each component may use O&M funds to replace building damaged or destroyed by natural disasters or terrorism incidents, with a limit of $50,000,000 per fiscal year.

Click here to access the 2018 NDAA.


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