We’re continuing our look at SBA’s changes to its small business regulations, as summarized by Sam Finnerty in this PilieroMazza post.
As he wrote:
SBA is also proposing language to clarify that recertification is required on full-and-open contracts when such contracts are awarded to SBCs. In addition, the Rule adds language to SBA’s 8(a) regulations to require recertification under 8(a) contracts. Similar language can be found in SBA’s SDVO, HUBZone, and WOSB/EDWOSB regulations, but had been missing from its 8(a) regulations.
As we know, there are sizing requirements associated with small business set-aside contracts. If a contract is issued as a full and open contract, but there are also small business set-asides that apply within that contract, recertification rules require that every time an option is granted, the small business winners have to recertify in order to establish that they are still that particular type of entity.
As Sam points out, this was really a kind of technical action in one sense, in that this rule already existed almost all of the other specially certified small businesses, except for 8(a) businesses. Now the language is there across the board.
One additional thing that arose at this time was that under the new rules, a prime contractor can now use a “similarly situated entity” (a company who meets the same size standards and set-aside qualifications) to meet the performance requirements.
For example, let’s suppose that I’m bidding on a contract as a service-disabled, veteran-owned small business. Under the rules and regulations as the prime I have to do 51% of the labor costing, however I could engage a fellow service-disabled, veteran-owned small business – one who meets the same size standards and set-aside qualifications as my own company – as a subcontractor, to perform a part of my 51% of the job’s labor.
This new rule states that the similarly situated entity – the subcontractor – must also recertify whenever the prime recertifies. From the perspective of the activity and action, this is no different from what we’ve come to expect, but now the rules are applied across the board.
One effect this will have is that having that similarly situated entity as a subcontractor will not be an open-ended commitment. That business can not, for example, graduate from the small business size standard, or change ownership to a non-member of the service-disabled or veteran-owned class.
The Small Business Runway Extension Act of 2018 (H.R. 6330), authored by U.S. Senator Ben Cardin (D-Md.), Ranking Member of the U.S. Senate Committee on Small Business & Entrepreneurship, passed on December 6th and has now been signed by the President.
As explained in this press release, this legislation (also know as the “5-year look back”) ensures that small business size standards are calculated using average annual receipts from the previous five years, instead of the previous three. This change will significantly reduce the impact of years wherein businesses experience unexpectedly rapid growth, often causing them to prematurely lose their small business status.
While Tonya pointed out that this bill doesn’t help most mid-tiers, it is an incremental start at addressing some of the problems that a growing firm faces as they begin to grow beyond small.
She also passed along a note of thanks from Barbara Ashe, Executive Vice President of the Montgomery County Chamber of Commerce, who thanked MTA for our support as a Coalition Partner in the Midsize Initiative. Ms. Ashe wrote: “Not only does this legislative change open the door to other initiatives for companies bumping up against small business standards, we also successfully changed the term from ‘mid-tier’ to ‘midsize businesses’ in an effort to clarify the businesses we are seeking to assist.”
Welcome back to TAPE’s Alexia Groszer, GPHR, senior human resources generalist. In a previous post, she answered some common questions about HR for small business. Today, we’re looking at size issues from an HR perspective.
Let’s look first at things from an employee’s view. What are the pros and cons of being employed by a small business versus a large business?
Pros: Employees at a small company typically wear more hats, thereby getting exposure to more business areas and skills. The owners and management know employees by name. Good ideas can be implemented quickly. The employee often sees a direct impact of the work they perform and may feel an essential part of a team.
Cons: Job growth is often dependent on the company’s growth. If the company grows rapidly, this could be a pro for the employee who rides the wave of prosperity with the company. Employees who were with Microsoft and AOL in the early days benefited greatly from the rapid growth. However, few small companies have exponential growth. If the company does not grow, the employee may be feel their only option for growth is to leave the company.
Pros: A large company may offer more avenues for career development (types of jobs, levels of management, and more internal job opportunities). Employees may be able to move up or laterally while gaining years of service and benefits within the same organization. Large companies often have more structure. They have tried and true processes which provide excellent on the job training for those new in their careers.
Cons: Since large companies often do work on a large scale, employees at a large company often perform a high volume of work of more limited scope. This could mean limited learning/ growth within the job depending on the position they are in. Large companies can also be very bureaucratic. New ideas may take a long time to get implemented. Employees may not feel any direct impact of their work. They may even feel that they a just a number or not essential to the organization.
One person may prefer a smaller more personable environment where they know everyone by name and can make an immediate impact. Another may thrive working amongst many people at a large corporation with brand recognition and the security of a larger and more established pipeline of continued work. Choosing an employer, small or large, depends on many factors. Researching potential employers and comparing it to your own list of preferences is a good place to begin.
As a small business grows, their HR needs grow and change with them. When should a small business have an in-house HR department versus outsourcing to an HR vendor?
Each company has different business needs, so there is no absolute answer. However, as companies grow they will likely have a bigger need for human resources support. Often they will move from outsourcing to in-house support due to cost.
For start-ups or small companies (5-25) employees, outsourcing HR may be a more cost-effective option, especially if their needs are mainly payroll/benefit administration with only an occasional compliance issue. Advantages of outsourcing include: the employer pays the vendor for support only when it is needed instead of paying for a fulltime employee, they have access to different HR disciplines/experts but only pay for a few hours of advice at time, and they can easily increase or reduce hours of support to match their business needs.
When a company gets bigger and begins using their vendor 40 hours per week or more, they may discover it is more cost-effective to hire their own HR staff. There are advantages to an in-house HR department, too. An internal staff will be more vested in the company’s culture and mission. They can customize policies and processes to fit the needs of that business. The HR staff can build a rapport with employees, providing better customer service and continuity.
This can be especially helpful when there is an employee relations issue or when a manager is seeking general guidance. All of these can create a more cohesive company culture and greater employee engagement.
As I wrote earlier on this blog, “Business growth is something that should be celebrated, yet if you’re a small business whose customer is the federal government, your growth can have a noticeable downside.” Namely, being too big to qualify for small business set-asides.
If your business falls into the mid-tier category of being too big to be eligible for set-asides but too small to compete with industry giants, here are the most important changes from the 2017 NDAA (click the links to learn more about each item):
- Gives certain small subcontractors a new tool to request past performance ratings from the government. If the pilot program works as intended, it may ultimately improve those subcontractors’ competitiveness for prime contract bids, for which a documented history of past performance is often critical (learn more).
- Will require the GAO to issue a report about the number and types of contracts the Department of Defense awarded to minority-owned and women-owned businesses during fiscal years 2010 to 2015. The GAO will be required to submit its report within one year of the statute’s enactment (learn more).
- Designed to help ensure that large prime contractors comply with the Small Business Act’s “good faith” requirement to meet their small business subcontracting goals (learn more).
- Establishes a new prototyping pilot program for small businesses and nontraditional defense contractors to develop new and innovative technologies (learn more).
- Will extend the life of the Small Business Innovation Research and Small Business Technology Transfer programs (learn more).
We’ll keep digging into these topics and what they mean for your federal contracting success. Stay tuned!
This is a guest post by Jon Williams, Partner, PilieroMazza PLLC.
The SBA released proposed increases to the small business standards for many industries that use employee-based size standards. According to the pre-publication of the final rule published on January 26, 2016, the SBA will adopt most of the proposed changes with two key exceptions:
The SBA is not increasing the Environmental Remediation Services (“ERS”) exception under NAICS 562910 from 500 employees to 1,250 employees and it is not eliminating the Information Technology Value Added Resellers (“ITVAR”) exception under NAICS 541519 (Other Computer Related Services).
Regarding NAICS code 562910, the SBA explained that following its evaluation of public comments to the proposed substantial size increase, as well as its evaluation of more recent data, the SBA decided to increase the size standard for the ERS exception under NAICS 562910 from 500 employees to 750 employees, which is considerably lower than the initially proposed size standard increase to 1,250 employees.
The SBA estimates that, as a result of the size standard increase, approximately 10-15 additional firms will likely gain small business status which the SBA believes will not significantly impact the small businesses that currently have fewer than 500 employees.
The SBA has also determined it will not eliminate the ITVAR exception to NAICS 541519 and that it will maintain the 150 employee size standard for this code. However, the SBA will modify Footnote 18 of the size standard table to require supply components of small business set-aside ITVAR contracts to comply with manufacturing performance requirements or to comply with the non-manufacturer rule by supplying the products of small business concerns, unless SBA has issued a class or contract specific waiver.
With regard to the Research and Development exceptions under NAICS 541712, the SBA is adopting modified exceptions and the size standards will either remain the same, or be increased from 1,000 employees to 1,250 employees.
According to the pre-published report, the final size standard increases in these industries will be effective on February 26, 2016. To view a complete copy of the pre-published final rule and/or to view a summary of the SBA’s revised adopted size standards, click here.
Note from Bill:
If you have any questions about the size standard increases, Jon welcomes your questions at http://www.pilieromazza.com/contact.
In 2007, TAPE won an Army support contract that catapulted our growth. It came out of work that our founders had done as employees of a large business, and built on that customer relationship when the Army decided to try a small business solution. After much travail and many late, sleepless nights, we found ourselves the proud winner.
During the transition, many of the same folks that we’d known since the 1980s proved to still be working the job, much expanded. This core group of folks has supported this contract for nearly 30 years, many of them first in uniform as officers, and then as contractors for the various primes and subs. Joel Fleck is one of the key people, who’s been Task Leader, Deputy PM, and now PM/VP of the Training/Optempo Sector. This is a little bit of his story.
How do you keep the perspective and enthusiasm fresh?
First off, the work is important; it has the potential to affect soldiers and units everywhere in all three components – active Army, Reserves, and National Guard. So at the end of most days you go home feeling good about what you did. Second, the people both within the project team and within the Army are so dedicated and appreciative. It is hard not to want to give your best all of the time.
Third, you have to read professional publications to stay abreast of what is going on in the Army and what is the senior leadership trying to do. You need to keep your language up to date, and your empathy fully turned on.
You cannot be a curmudgeon. You can not sound like you came from a different century. You can not become complacent. The longer you are providing them support the more careful you need to be that what you say and do is accurate. You cannot get lazy about fact checking. Credibility is your greatest asset but it is easily lost if you get complacent.
What have you found is the best way to adjust to changes?
Be part of it. Keep an open mind. Try to provide advice and assistance in implementing the change. Being part of it always allows you to lay out the potential challenges and mitigating solutions which helps maintain your relevancy and your credibility.
The focus has to be getting things done right for the Army and always making the client look good. Don’t worry about getting credit.
How do you maintain continuity in your work when new leaders come in at the client, with different leadership styles?
Adjust where you can. Continue providing the best support to those people under the new leader. Continue to build credibility and value. Most of the new leaders got to where they are because they are smart. Once they figure you are an asset, and that you can support and advance their goals, things get better.
Supporting the same client for almost 30 years – inside and outside of uniform – requires several different things: patience, flexibility, honesty, un-abrasiveness, high degrees of accuracy, great co-workers, responsiveness (sometimes 24/7), and assistance to not only the client but those around him.
This is a guest post by Joe Appelbaum of Potomac Companies, Inc.
Special news for our small business readers in Virginia:
Compliance alert: VA House of Delegates passes emergency legislation to maintain small business definition of 50 employees or fewer.
The Virginia House of Delegates voted to maintain the state’s definition of small businesses as employers with 50 employees or fewer. The PACE Act in October 2015 changed a provision of the Affordable Care Act which originally was set to change the definition of the small group market as businesses with 100 employees or fewer.
The Act allowed states to determine the size of their small group market. Maryland and DC maintained their definitions of small groups as those employing 50 or fewer employees, and now in January 2016, Virginia is also maintaining their definition.
If the small group definition had been expanded, small groups would have seen rates rise significantly in a short period of time.
Joe Appelbaum is a lifelong entrepreneur and started his first business at the age of 13. He founded Potomac Companies in 1990 with the mission of helping employers manage the future cost of healthcare and has grown the company to become one of the premier full service employee benefit brokerage and consulting firms in the Washington, D.C. region. Visit them at http://www.potomacco.com/.
This is a guest post by Tonya Saunders of Mid-Tier Advocacy, Inc.
On November 25, 2015 President Obama signed the National Defense Authorization Act (NDAA) for the 2016 fiscal year into law. The NDAA contains many new clauses that affect federal contractors and the Department of Defense (DoD). Among other things, the NDAA aims to increase the capability of small businesses that provide services and products to the federal government.
Here are a few highlights:
- Under this new legislation it requires DoD to notify Congress when Primes are not meeting subcontracting goals under the comprehensive small business-subcontracting plan, to make sure they are getting the most of their contracts.
- It also requires a report to provide an analysis of the reasons for cost and schedule over-runs associated with the program, including with respect to the performance of Prime contractors and subcontractors, and evaluate the future of the requirement.
- It helps new entrants to defense contracting by allowing them to use simpler commercial item purchase procedures rather than the more complex traditional government contracting vehicles.
Under the new NDAA there are a few additional changes that contractors should also be aware of:
- This updated legislation prevents agencies and courts from applying the non-manufacturer rule to small service contractors, so that small service contractors can continue providing incidental items as part of the procurement.
- It also protects small contractors by ensuring that the small business procurement advocates at the Small Business Administration have the correct skill and are receiving the necessary training.
- The Small Business Administration is now required to prioritize prime contracting, subcontracting, participation rates, and industrial diversification when grading agencies on how well they contract with small businesses. This is aimed to address the problem created when the SBA awards an “A” grade to federal agencies even though 100,000 small businesses no longer compete for federal contracts and the agencies do not meet their small business goals, with evidence suggesting that numerous industries have little or no small business participation.
- It allows the small business advocates in each agency to assist small businesses to increase set-aside opportunities with contracts not under consideration for small business participation.
- The NDAA 16 also includes a few protections and enforcements for small and medium size businesses, including the creation of a statutorily independent office to hear challenges to size standards of small business.
- It also empowers the office of the contractor to review the process by which SBA decides the industry-specific small business size standard, since currently small businesses must go to federal court with these challenges.
In short, the NDAA is legislation that continues to receive bi-partisan support that always passes Congress and is usually signed into law by the President – enough said!
About the author: For more than two decades, Tonya Saunders has worked on Capitol Hill, lobbied for client interests, and started her own businesses. As founder and director of Mid-Tier Advocacy, Inc., a 501(c)3 nonprofit national coalition of small, emerging, and medium-sized businesses (primarily federal contractors), Tonya was instrumental in passing legislation that helped these engines of our economy grow and create jobs.
This is a guest post by Keith Stadler of KSA, LLC.
Note from Bill: In last week’s guest post by June Jewell, we looked at project manager accountability. We’ll continue that theme with this look from Keith Stadler at the importance of accountability – authority and responsibility – across your company.
Straightforward organizational challenges can have well-defined solutions around which general agreements are easily made. But for serious matters, the challenges, let alone solutions, are rarely straightforward.
Problems like this are complex, difficult, mysterious, and sometimes require gut-wrenching choices, if properly addressed. This is where a clear understanding of the authority and responsibility to secure the right outcomes is essential.
Surprisingly enough, in many organizations, the matter of making clear in whom the responsibility and authority lays for tasks, projects, and processes is ambiguous; unstated and left to the imagination of the workforce, including the person who will ultimately be seen as the “responsible party.”
It’s not difficult to visualize the effects and results of this kind of arrangement. A consensus-based dynamic necessarily takes over:
- Outputs are the “lowest common denominator” outcome on which all can agree.
- Co-corkers minimize the impact of collaboration on their office rather than maximizing broader organizational benefits.
- Innovation, creativity, adaptation, critical thinking, and advocacy are discouraged, even punished.
- Outspoken personalities dominate collaboration.
- Everyone has a veto, knows it, and feels empowered to exercise it.
- Projects and processes can and do stop altogether when a single party refuses to act.
- It can be difficult to determine if a decision or outcome was reached at all.
- There are minimal or no sustainment of outcomes.
- People simply refuse to show up for planning sessions and meetings.
- Consensus accommodations are made to work around the personalities involved instead of doing what is best for the organization.
- The status quo usually prevails.
So much harm comes of this kind of gap in an organization, but it’s so simple to avoid. Here are 12 things that leaders at every level can do:
- Explicitly and clearly identify the person responsible and confer on her or him the authority need to complete the task, project, or govern the process.
- Make it known to all the participants and their bosses.
- Put it in writing.
- Empower the collaboration effort with your own clear intent. Tell the leader, his team, and their bosses, what is the purpose, a little about the method of getting there, and what the final product will be in your mind.
- Tell them what it is not.
- Be available for follow-up discussions and interim guidance as work proceeds.
- Ask how it is going.
- Make it evident to all that the person in charge is answerable for the final outcome by engaging them as the group leader.
- Ask how you can help the project leader, then do it.
- Precisely capture any decisions that are needed along the way and act on them.
- Follow up with the project leader to ensure that progress is being made. If not, find out why and help fix it.
- Publicly praise and thank the team and especially its leader. Tell their bosses too.
These things easy to do and will be appreciated by everyone involved. Over time, employees will embrace the company’s approach to authority and responsibility and it will become second nature.
Keith Stadler is the founder of KSA, LLC, a company dedicated to advancing organizational visions and fundamentally transforming how businesses everywhere are run. He has over 40 years of leadership experience in organizations from the very large and established to small technology start ups, and everything in between. Visit www.ksaintergration.com for more information.
This is a guest post by June R. Jewell, CPA.
While most project consulting firms expect their project managers (PMs) to deliver profitable projects, many have not put the appropriate measures in place to ensure that it happens. Accountability at the PM level is often vague and unstructured, which can lead to several different consequences – but not the ones we want!
Part of this issue has to do with the many responsibilities given to PMs, and a lack of true visibility into what they are really doing every day. This leads to PMs being given many tasks and little guidance as to how to be successful.
The other big challenge is measuring results. The majority of firms that we work with are not tracking individual performance, or worse, failing to implement consequences even if it is being measured. This has the unwanted effect of grouping good and poor performers together, and the less desired result of passive aggressive behavior on both the PM’s part and the firm’s leadership.
The following are practices that I often see in many project consulting firms that undermine their ability to achieve profitability goals. If you recognize any of the following issues in your firm, they could be costing you a great deal of money! Lost dollars can be found by ensuring that every project hits target profits. If you see any of these practices in your firm, they need to be addressed as soon as possible:
- PM performance is evaluated in an annual review – The annual review is a dreaded process in many firms. Even with top performers, many employees don’t feel adequately recognized, and feedback is often provided too late to make a difference to performance results. A more frequent process of project review can improve financial results and engage employees more in the process of improving their own performance.
- All PMs are given a raise and/or bonus regardless of performance – With the war for talent gaining intensity these days, many firms are afraid of “calling out” mediocre performance. This has the double negative outcome of dis-incentivizing both top performers who don’t see the benefit of going the extra mile, as well as not giving consequence to poor performers for failure to hit goals. Bonuses and raises need to be tied to financial results in order to impact behavior.
- All of our offices do things their own way – This is a common problem in firms that have remote offices, and especially when there has been an acquisition. Many offices take on their own culture, and create their own new processes – from proposals and estimating, to project budgeting and billing. This has the negative impact of making it difficult for leaders to compare one office to the other, determine what is working and not working, and share best practices between groups. It is critical to a profitable firm to get everyone following best practices and operating the same way.
- We never fire anyone – The combination of a family-oriented firm culture along with difficulty finding technical staff has created an environment where many firms tolerate poor performance. This leads to keeping PMs and staff that are actually hurting the profitability of the firm rather than contributing to it. The message that is being delivered to staff is that mediocre or poor performance is acceptable and the ultimate consequence – being terminated – is not a possibility. Without this consequence, it will be very difficult to change behavior or increase profitability.
- We do not have metrics to measure our PMs – How you report on performance is a big indicator of how employees will perform. Many firms choose to measure profit centers, business units, offices, etc. rather than focus on individual results. Without metrics and financial targets, it is much more difficult to evaluate PM performance, and hold them accountable for results. Looking at project profit margins is the most effective way to compare PM performance and the first step to holding them accountable.
All of these flawed business practices add up to lost dollars. So what is the cost of ignoring or even rewarding mediocre or poor performance? It may be much larger than you imagine. On top of the measurable costs of project overruns, rework and scope creep, consider the intangible costs of frustrated staff, unhappy clients and failure to retain your best PMs. This can add up to thousands and even millions of dollars per year in some cases.
Focusing on and improving your firm’s performance management practices can have a huge impact on all of the key metrics you use to measure the health and results of your firm. Special attention should be given to creating a regular rhythm of feedback, establishing clear measures for individual performance and implementing meaningful consequences for attaining financial targets.
This post was originally published on the AEC Business Solutions blog at http://aecbusiness.com/holding-project-managers-accountable-for-profitability-blog/ and was adapted and reprinted with permission.
June R. Jewell, CPA, is the president and CEO of AEC Business Solutions and the author of Find the Lost Dollars: 6 Steps to Increase Profits in Architecture, Engineering and Environmental Firms. Her popular blog covers innovative ideas on business leadership, project management processes, business development and improved operational efficiencies. Register for one of her upcoming webinars at http://aecbusiness.com/webinars/.