This is a guest post by Haley Claxton of Koprince Law LLC.
Last May, we reported on proposed changes to the SBA’s Women Owned Small Business Program Certification Process. Now, the SBA’s website includes updated information about what those changes may mean for existing and new WOSBs.
As you may recall, in 2019, the SBA (at long last) proposed updates to its WOSB/EDWOSB Program in response to Congress’ 2015 NDAA. The 2015 NDAA required the SBA to remove the option for businesses to self-certify as small businesses owned and controlled by women and replace it with a more robust certification process operated directly by the SBA. The proposed updates intend to do just that.
The SBA indicates that we can expect “that the regulations enacting the statutory requirement will be published on June 30, 2020, and will be effective 30 days later.” But what will this mean for currently certified businesses?
For current third-party certified WOSBs and EDWOSBs, SBA will require re-certification “three years after the date of their most recent re-certification as a third-party certified firm.” Re-certification may be completed through the SBA’s new certification process or again through a third-party certifier.
For WOSBs and EDWOSBs who are currently self-certified with active WOSB or EDWOSB set-aside contracts, SBA clarifies that “[a] firm that was eligible as a WOSB or EDWOSB at the time of offer for the contract is considered a WOSB or EDWOSB throughout the life of the contract.” Even so, where a contract has a duration of more than five years, including options, businesses must be recertified “by SBA or an approved third-party certifier prior to the end of the fifth year of the contract.” For those familiar with SBA’s size status rules, this requirement is similar to the rule for maintaining size status on long-term contracts.
Finally, for WOSBs and EDWOSBs who are currently self-certified with no active WOSB or EDWOSB set-aside contracts, the requirements are a little more complex. If you fall under this category and haven’t been protested or examined by the SBA in the two years prior to the effective date of the new rules, get ready to start preparing your application – you will need SBA or third-party certification before you are considered an eligible WOSB/EDWOSB. In contrast, if you have been protested or examined in the two years prior to the effective date and received a positive final decision, you “must re-certify within 30 days of [your] certification anniversary if there have been no material changes since [your] last certification.” From there, you will have to “undergo a full document review and re-certification” at the end of year 3.
New applicants will be able to start from scratch and certify through the SBA directly when the rule becomes effective, or will still have the option to certify through third-party certifiers. In addition, women-owned businesses already certified through the Department of Transportation’s Disadvantaged Business Enterprise program (DBE), or the Department of Veteran Affairs’ Center for Verification and Evaluation (CVE) are at an advantage: these kinds of certification will be considered equivalent to SBA certification.
The SBA has provided an FAQ and plans to provide more updates on its webpage here. We will also continue to cover the changes as they develop, so keep an eye on the blog. And, as always, if the new rules have you scratching your head, you can call or email us at Koprince Law LLC!
This post originally appeared at SmallGovCon at http://smallgovcon.com/women-owned-small-business-program/this-just-in-sba-provides-updates-on-wosb-certification-changes/ and was reprinted with permission.
This is a guest post by John Abel and Haley Lawrie of Winvale.
The GSA MAS Consolidation is here, and things are changing FAST for government contractors. Not to worry, Winvale is here with all the information your company needs to help successfully navigate the new MAS solicitation updates. We’ve seen the updates and how they affect new offerors, but let’s take a look at how current contractors will be affected.
ALL GSA Schedule holders will be receiving a notice for Mass Modification A812 – MAS Consolidation over the course of the next week or so. Some of those reading this may have already received the notice, depending on Schedule number. Below is a schedule for the release dates of the mass mod across all 24 GSA legacy Schedules:
|Mass Mod A812 Release Date||Legacy Schedule Number|
|Friday, 1/31||03FAC, 23V, 36, 48, 51V, 58 I, 599|
|Monday, 2/3||00CORP (PSS)|
|Tuesday, 2/4||00CORP (PSS) Cont.|
|Thursday, 2/6||70 Cont.|
|Friday, 2/7||56, 66, 67, 71, 71 II K, 72, 73,|
|Monday, 2/10||736, 738X, 75, 751|
|Tuesday, 2/11||76, 78, 81 I B, 84|
Why is the MAS Mass Mod happening?
GSA is making active efforts to modernize and simplify the federal acquisition process by consolidating the current GSA Schedules. This mass modification will be the most important to date for GSA Contractors.
24 Schedules have been consolidated into 1 Multiple Award Schedule, 12 Large Categories, 83 Subcategories, and 316 newly formatted Special Item Numbers. GSA wants to eliminate any duplicate Schedules while continuing to meet the needs of its government buyers.
When do you need to take action on Mass Mod A812?
It is imperative that you check your email regularly to ensure that you’ve received the mass modification notice. If your contract administrator has not received the email by the corresponding date for your specific schedule, contact your GSA Administrative Contracting Officer (ACO) as soon as possible. (Don’t know who your ACO is? Find them here.)
Not only is it essential for contractors to ensure acceptance of this mass modification in order to reap the benefits of the consolidation, it is also mandatory, with a 90-day window for acceptance after the initial email notification is received. Within this mass modification, contractors will be required to:
- Review and accept 210 FAR and GSAM clauses
- Review the updated terms and conditions for the MAS
- Map existing SINs on your current Schedule to new SINs under the applicable Large Categories
If you have taken exception to any solicitation clauses in previous Mass Modifications, these exceptions will not carry over and that process must occur again.
How do you know what SINs you will have awarded after the Mass Mod?
It is important to note that awarded products/services, pricing, contract number, and the period of performance for your GSA Contract will NOT change. While the Contract Type and Special Item Numbers (SINs) will change, the pricing components of your contract won’t change. You don’t need to apply for a new contract and the Mass Mod will not automatically consolidate your contracts down to one contract per your DUNs number.
GSA will provide a mapping of your current SINs to the new SINs that will go into effect upon acceptance. If you are wondering what new SINs your contract will be mapped to, we can help.
Overall, changes from this MAS consolidation will be contingent on Mass Mod A812, but there are a few things on the backend that contractors must complete in order to be fully compliant and ensure proper use of the GSA Schedule to its full potential moving forward. Although accepting the mass modification will update a number of fields within GSA’s internal systems, contractors must still manually complete the updates through programs like SIP to reflect the new MAS structure on GSA eLibrary and GSA Advantage!.
After accepting the mass mod, contractors will need to perform a SIP upload to initiate a “merge” of the legacy SINs to the new SINs within 30 days acceptance. This will ensure that all records remain current with the new MAS solicitation structure and terms and conditions so that buyers will be able to conform to the new structure when seeking out contracting partners.
How will this impact your current GSA Schedule Maintenance?
To ensure there are no hiccups when accepting the Mass Mod, GSA is suspending the ability to submit requests in eMod for “Add SIN” and “Delete SIN” modifications under the legacy Schedules on Jan. 30, 2020. The ability to process “Add SIN” and “Delete SIN” modifications will be restored March 14, 2020. All other modification types will still be accepted throughout Phase II of MAS Consolidation.
With regards to sales reporting, SINS are effective immediately when you sign the Mass Mod, and you will see both legacy SINs and new MAS SINs in SRP for the first sales reporting period after the Mass Mod approval date. After that reporting period has been completed, future reporting periods will only display the new MAS SINs.
The MAS Consolidation may seem like a huge hurdle to overcome, but it is a step in the right direction for GSA and your GSA Schedule contract. To make it easier for our clients, Winvale is hosting a webinar on Tuesday, February 25 about the MAS Consolidation and how it impacts your contract.
If you can’t make the webinar, feel free to contact our consulting team today for more information on how these updates will affect your company’s GSA Schedule and a more in-depth look into the changes. Winvale offers full-service GSA Schedule support from our experienced professionals specializing in SIP, FAR compliance, GSA Advantage! and Schedule compliance.
This post originally appeared on the Winvale blog at https://info.winvale.com/blog/gsa-mas-consolidation-phase-2-current-gsa-contractors and was reprinted with permission.
Our friends at Winvale offered this post from their client Andrea Davis, Director of Contracts at Govplace, who shared these top 15 tips that she’s learned in her 20 years working for government contractors, in no particular order:
1. Late is late.
Electronically submit your competitive proposal at least 24 hours in advance to be safe. Case law is not favorable for contractors who submit their proposal less than 24 hours before the due date, even if the late delivery is the Government’s fault (e.g., the Government’s network is down).
2. Small Businesses with sub-categorizations (e.g., Women-Owned Small Businesses, or HUBZone Businesses) count TWICE OR MORE for small business reporting.
So, if you are wondering why your large business is so excited about subcontracting to a woman-owned small business (WOSB), where the owner happens to be a service-disabled veteran (SDVOSB) doing business in a HUBZone, it is because the dollars subcontracted to this entity likely count towards the subcontracting goals for: 1) Small Business, 2) WOSB, 3) SDVOSB and 4) HUBZone.
3. The subcontract type does not have to match the prime contract type, and the subcontract NAICS code does not have to match the prime contract’s NAICS code.
If I had a dollar for each instance when I heard someone state the opposite of the above truths, I’d be a millionaire.
4. Generally, concerning Government data rights / Intellectual property (IP), even if a company develops software using Government funds under a Government contract, the Government doesn’t own the software.
The Government does have unlimited rights in the software, but so does the company who developed the software.
5. You’ll never regret having a solid process in place for comparing job candidates’ resumes to GSA Labor Category minimum qualifications for education and experience.
For both your company’s employees and any lower tier subcontractor’s employees. People charging to a GSA labor category for which they are not qualified is a compliance issue that can bite you years down the road. By then, people have moved on, resumes cannot be located, the subcontractor is out of business, etc.
6. In Government contracting, ‘realism’ and ‘reasonableness’ have opposite meanings.
When the Government is checking to see if labor costs/prices are too low (i.e., if they are worried about the company being able to retain employees during contract performance), they are evaluating for ‘cost realism,’ but if they are checking to ensure prices/costs are not too high, they’re evaluating ‘cost/price reasonableness.’ It is not correct to use these words interchangeably.
7. FAR 9.6 defines prime-sub relationships, partnerships, and joint ventures as contractor team arrangements (e.g., a classic teaming agreement resulting in a subcontract once the prime contract is awarded).
But a GSA Contractor Teaming Arrangement (CTA) is entirely different. A GSA CTA is a when two companies who each have their own GSA Schedules, join together to co-prime an opportunity. Interesting fact: since all GSA CTA partners are considered co-primes, if any of the GSA CTA partners are ‘other than small’ in the solicitation’s NAICS code, the entire GSA CTA is considered Large.
8. There is a difference between regulation and law.
The FAR is mostly regulation, but it also references statutes/laws. Understand that you can influence regulation by submitting comments when the proposed regulation is posted for public comment.
9. Many non-Federal (state and local) government entities and even commercial companies performing due diligence on a company, will check for SAM.gov active exclusions (formerly, the Excluded Party List System or ‘EPLS’).
Therefore, if you are debarred from Federal contracting, some of your other future non-Federal business may be at risk as well.
10. The protest ‘effectiveness rate’ percentage (in recent years ranging 43-47%) is the best way to gauge how often a protester gets some sort of relief in response to their bid protest at GAO.
If you only look at the sustain rate percentage, which is much lower (ranging 12-17%), you are not getting the full picture. Many protests are dismissed as ‘academic’ before the 100-day time frame at GAO (often because the agency chooses to take corrective action to remedy a procurement flaw) so you can’t just look at the protests that went to a full GAO decision.
11. Post-award obligations in teaming agreements (TAs) (i.e., the requirement to enter into a subcontract) are generally not enforceable in Virginia because Virginia courts have repeatedly interpreted a TA as ‘an agreement to agree in the future.’
But some of the case law highlights things that would have potentially made the particular TA at issue enforceable. Like replacing this language: “The parties will negotiate a subcontract after prime award,” with “Prime shall award a subcontract to the subcontractor after prime award.” If you’re in the subcontractor role, try removing any language where a TA will terminate if negotiations haven’t concluded within x days of prime contract award. Virginia courts have left open the possibility that post-award obligations in TAs could be enforceable, depending on the certainty and specifics provided in the TA.
For example, while often impractical, courts have hinted that attaching a subcontract template to the TA that is contingent upon the prime being awarded the prime contract, would render the promise to award a subcontract enforceable. Note, however, that even when it is difficult for a teammate to enforce a prime’s promise in a TA to award the teammate a subcontract, that does not mean that other requirements and obligations in a TA are unenforceable. For example, the parties are still likely bound by the pre-award obligations to cooperate on preparing a proposal, to be exclusive to one-another (if applicable), and to maintain the confidentiality of information that may be disclosed pursuant to the agreement.
12. As Federal contracts professionals, we still must learn commercial contracts interpretation rules for our commercial negotiations.
The imperative ‘SHALL’ is the strongest language for contracts interpretation. ‘Will,’ ‘may,’ and ‘should’ are not as strong — use ‘shall.’
13. If you want to challenge a solicitation term (e.g., evaluation method, Statement of Work ambiguity, etc.) and you cannot resolve it through Q&As, you MUST submit a PRE-AWARD protest BEFORE THE PROPOSAL DUE DATE.
Otherwise, 98% of the time, a post-award protest challenging the solicitation will be dismissed by as untimely, regardless of the merit.
14. There is a difference between quotes and proposals. A quote is submitted in response to an RFQ and is considered ‘informational.’
The contract is not formed until the Government signs their acceptance of the ‘information’ and the contractor countersigns or starts performing. A proposal is an official offer made in response to an RFP that is valid for a specific duration of time (e.g., 60 days). It becomes a contract when the Government signs a contract with your proposal details in it.
15. Unless there have been some late 2019 cases on this topic, as of right now, the Government Accountability Office (GAO) case law on key personnel who depart a company between the time of a final proposal submission and contract award, is not favorable for contractors.
Companies would be wise to limit named key personnel (not propose more than required), and maybe offer proposed key personnel an incentive to stay until the contract is awarded (and hopefully longer). I’ve also learned that it can be helpful to get a written commitment from a departing key person that they will return to work for the company if an award is made.
This blog post appeared on the Winvale blog at https://info.winvale.com/blog/15-government-contracting-tips-from-winvale-client-govplace and was reprinted with permission.
Acquisition Provisions in 2020 NDAA – 852 Special Pathways for Rapid Acquisition of Software Applications and UpgradesPosted: January 29, 2020
This provision directs the secretary of defense to streamline and coordinate the requirements, budget, and acquisition process in order to rapidly field software applications and software upgrades to embedded systems in a period of not more than one year from the time that the process is initiated.
It will also require the collection of data through continuous engagement with the users of that software, so as to enable engineering and delivery of additional versions in periods of not more than one year each.
We’ve talked earlier about the government’s commitment to innovation, shown through changes to the SBA’s Small Business Information and Research (SBIR) and Small Business Technology Transfer (STTR) programs.
Then a few years ago, the DoD began to pick up a third method called other transaction agreements (OTAs), which allow for more flexible, commercial–like, and novel business solutions than the Federal Acquisition Regulation. OTAs have been enormously successful in delivering technology fast, with rapid development and so forth, with the Army having spent something like 3-and-a-half billion dollars in FY 2018 under OTAs.
This provision 852 directs the secretary to begin to look at all sorts of ways to accelerate fielding acquisition specifically for software purchases and new software engineering, including embedded systems like weapons and simulators. This does bring up the same problem mentioned in Section 831 and elsewhere, which is the need for cybersecurity and integrity – important any time you’re building new stuff.
Acquisition innovation is likely to be a hot topic for the next several years, as DOD and the whole Government grapples with the effects of the rules and regulations that have burdened procurement processes and made the cost of responses perilously high. This will be a continuing part of the conversation throughout the GovCon community.
Watch this space for more on this topic.
This is a guest post by Sam Finnerty of PilieroMazza PLLC, highlighting some upcoming changes to the SBA’s HUBZone program, a program that limits competition for certain contracts to businesses in historically underutilized business zones.
These changes were designed to keep investment flowing into HUBZones and make sure they don’t lose their HUBZone status just because things got better. We don’t want making things better to stop the investment train.
As always, consult an attorney about how these changes might apply to your business.
On November 12-13, 2019, the U.S. Small Business Administration (SBA) hosted its 5th Annual Mentor Protégé Conference where SBA’s John Klein, Associate General Counsel for Procurement Law, answered questions from the audience regarding various mentor-protégé issues. Mr. Klein provided some key insights regarding recent and upcoming SBA rulemakings that will have a significant impact on small business government contractors.
On November 13, 2019,SBA sent a final rule to the Federal Register for publication that will implement comprehensive revisions to the regulations governing the Historically Underutilized Business Zone (HUBZone) Program. These revisions, as proposed in October 2018, are available here. A couple of the key changes are:
(1) an individual will continue to be treated as a HUBZone resident if that individual worked for the firm and resided in a HUBZone at the time the concern was certified or recertified as a HUBZone—even if the area where the individual lives no longer qualifies as a HUBZone or the individual has moved to a non-HUBZone area;
(2) HUBZone firms will only be required to certify on an annual basis, meaning such concerns will no longer be required to expressly qualify as a HUBZone at the time of each offer for a HUBZone contract and award.
In addition to the revisions proposed in October 2018, the final HUBZone rule will also implement a significant change to the regulations that was proposed during public comment. Specifically, the final rule will indicate that when a company buys an office located in a HUBZone or enters into a long-term, 10-year lease for such office space, intending the space to be its principal office, the concern will be able to meet the principal office HUBZone criterion for a period of at least 10 years—even if at some point after the property is purchased or leased, the office location no longer qualifies as a HUBZone. The idea behind this rule is that the HUBZone program should incentivize and reward companies that invest in HUBZones.
For more information on this and other topics impacting government contractors, please contact a member of PilieroMazza’s Government Contracts Group.
Samuel Finnerty, the author of this Client Alert, is a member of the Firm’s Government Contracts, Small Business Programs & Advisory Services, and Government Contracts Claims and Appeals practice groups.
This post originally appeared on the PilieroMazza blog at https://www.pilieromazza.com/this-just-in-sbas-implementation-of-hubzone-changes-and-small-business-runway-extension-act-coming-soon and was adapted and reprinted with permission.
This is a guest post by Ross Statham of Dogwood Services Inc. Note from Bill: In a previous post, Ross shared the top three reasons to hire an executive search firm, and offered his expert tips for ensuring a productive partnership.
Want to tackle the hiring process yourself? Here are some suggestions for how to proceed, though keep in mind that the top talent will rarely respond to job postings.
- Allow sufficient time. My own experience has been to allow two or more hours per day (minimum) for 2-3 weeks.
- Determine the salary range, daily duties, and a brief overview of desired qualifications.
- Ask for help. This could be from your HR department, from subordinates, or from others on your team. They could help you write a good job description, help you better communicate with candidates and help you to find and select better talent.
- Setup someone you trust (HR, a member of your team or subordinate) to do some of the heavy resume filtering before handing them over to you.
- Post your job opening. But as noted above, don’t have the resumes come to your work email (which can be overwhelming), have them go elsewhere for filtration.
- As the resumes arrive to you, toss out those who obviously won’t make your cut. Those who are a “maybe” can be sent a (form email) note thanking them for their interest, and spelling out some details of what you are looking for and painting a realistic picture of the job. Many people can be filtered out this way, saving you additional looking.
- If you need to perform a software “scan” for key words again (perhaps using a Boolean search), now’s probably a good time to do so. This is particularly helpful with technical positions, when you’re looking for details of what they’ve done and when.
- At this point you’re starting to see where some resumes are starting to meet your needs by putting eyeballs on the ones that get your attention. Save these; if you think it appropriate, you can put their names on a spreadsheet (such as Google Sheets) with notes.
- As your eyeballs scan resumes, look at their last three jobs. How long were they there? What did they accomplish? What were their daily duties?
- If they continue to hold your interest, drill down from “scanning” to reading. Look for obvious negative and positives. Red flags may include employment gaps, evidence of decreasing responsibility, a career that has flattened or is moving in the wrong direction, short-term employment at several jobs, and multiple shifts in their career path.
- Continue to review your selected resumes against your criteria and each other.
- Found someone you like? Look them up on LinkedIn and Google them and see what you can learn about them.
- Telephone screen potential candidates.
- Bring in strong candidates for a face-to-face.
Again, you need to ask yourself if you really have the time. If so, then have at it! But if you’re like most busy executives, using an experienced outside expert will tremendously shortcut the process which will save both time and money. Most importantly, it will help you find those harder to find talented people who rarely respond to job openings.
This post was originally printed on LinkedIn at https://www.linkedin.com/pulse/finding-flood-resumes-ross-statham/ and was adapted and reprinted with permission.
The firm I founded and lead (Dogwood) provides talent across a wide range of industries (including the Fortune 10), non-profits and government. Typically we are called in by those who have had previous experience with trying to do their own talent search and found it was much more efficient to use us or other recruiters, or by those who tried to do their own search but realized that it was more than they could effectively take on.
First, let’s discuss the three biggest reasons that organizations use outside search firms:
- The best talent rarely responds to job openings
- Your H/R department may be not equipped to help with this
- Not enough hours in the workday
Challenge #1: The best talent rarely responds to job openings
You’re probably heard it before, and it’s true. The top talent is careful and circumspect as to making career moves. The best talent rarely goes looking for new opportunities – but they will listen when the right opportunity presents itself.
Many years ago this happened to me. I received one of those calls out of the blue, which turned into a great new job well suited to my own talents in the tech field. I loved my new job and never looked back.
Your best talent will usually need to be recruited (reached out to) by someone outside your organization. Executive recruiters use their own databases, can dig and find the right talent and pitch your organization’s strengths to the very best prospective talent.
Challenge #2: Your HR Department may not be fully equipped to help
My general observation is that most HR departments may not be fully equipped to find talent, because it’s not their primary responsibility. Even at the company I lead (a talent acquisition company, no less), our own HR folks are concerned with administering to employees, ensuring that benefits are being properly managed, paperwork is up to date, regulatory compliance is being fully met and in dealing with the myriad of payroll, benefits, vendor, personnel and other HR issues that arise every day.
Most HR departments have stated goals to include talent acquisition in their responsibilities, but even the best HR departments have difficulty in doing so. However, my opinion is that most do an excellent job of supporting the process once candidates are identified and interviewed.
Challenge #3: Not enough hours in the workday
If you’re like most people, you are constantly adjusting your daily priorities in order to get things done on time and under budget.
Do you have time for this? Probably not. Our past experience has shown that those searching for talent need to allocate between 1-3 hours per day per job opening to pore through resumes, screen out those who are completely unqualified, second screen those who may be of interest, conduct basic phone screens and perform some basic information searches on potential candidates.
Free up your time by using an outside expert
By now you are learning why successful executives use outside executive search firms.
First, find someone who already understands your industry (so you don’t have to educate them) and who already knows where some of the best talent can be found. Make sure they’re reputable, well established and have a track record of success. (Yes, it’s okay to ask for references!) Ideally, they’re large enough to be well established, but not so large that your needs can get lost in the shuffle.
You can use a contingency-based firm (where you only pay for success), or use a retained-search firm, where you pay a fee (in advance) and they exclusively represent you to candidates. Either way works, but I generally recommend you select an experienced contingency-based firm that you’re comfortable with and give them an exclusive for 30 days. That way they’re focused on you, you have a definite time frame in front of them, and you’re only paying for results. If they don’t work out, you can add someone else to the mix as needed without additional cost.
Allocating time to your expert
One of the best executive recruiters on our team tells his new clients that he’s their sharpshooter, and they’re his spotter (to tell him how he’s doing with the people he sends them, or in military terms, to tell him where his shots are falling). Because the hiring manager he’s working with has a need for specific talent, they form a “partnership” for a relatively short time while he finds, filters, screens and interviews talent for the client. Keep that in mind – these outside experts need your input for this to work in a timely manner.
During your initial call (which should only take about 15 minutes), tell them what you’re looking for, what you’re trying to accomplish and details about the job as you see it. Perhaps refer them to a subordinate for additional details and discuss compensation and benefits. Good executive recruiters know what kind of questions to ask and will guide you through areas you may not have even thought about.
Once you’ve started the process, turn them loose and let them do their jobs. You should start to see real results within two to five business days, depending upon the complexity of your needs. But remember – they need you to communicate where their shots are falling. Just five minutes per day allocated to your executive recruiter during the search can yield stellar results.
This post was originally printed on LinkedIn at https://www.linkedin.com/pulse/finding-flood-resumes-ross-statham/ and was adapted and reprinted with permission.
This is a guest post by PilieroMazza Partner Megan Connor and PilieroMazza Associate Anna Wright, members of PilieroMazza’s Government Contracts and Small Business Programs & Advisory Services practice groups.
Effective January 6, 2020, SBA will change the period of measurement for receipts-based size calculations from three years to five years. This change is the result of the Small Business Runway Extension Act of 2018 and SBA’s final rulemaking on December 5, 2019. This is a long-awaited change and will have far-reaching impacts for government contractors.
Importantly, SBA is adopting a two-year transition period, until January 6, 2022, during which firms may choose to use either the current three-year calculation or the new five-year calculation. After January 6, 2022, all companies must use the five-year period of measurement in determining their size under a receipts-based calculation. PilieroMazza strongly advocated for a transition period before Congress and in its comments to SBA’s rulemaking.
This shift from using a three-year period to a five-year period for the average annual receipts calculation will affect all of SBA’s receipts-based size standards, though the change in calculation will not yet apply to the SBA Business Loan and Disaster Loan Programs, which will be handled in a separate rulemaking. SBA did not address in its rulemaking how SBA would view contractors that have been using the five-year period of measurement since the Runway Extension Act became law nearly a year ago.
If you would like to know more about these changes and their potential impact on your company, please contact a member of PilieroMazza’s Government Contracts Group.
This is a guest post by Pamela J. Mazza, Managing Partner, PilieroMazza, PLLC.
On November 8, 2019, SBA published a proposed rule to merge its mentor-protégé programs and amend many of its rules governing the 8(a) program and small businesses. The proposed rule would have significant implications for the government contracting community. Comments are due by January 17, 2020, and PilieroMazza’s highlights are below.
The proposed rule would:
- Merge the 8(a) Mentor-Protégé Program into the All Small Mentor-Protégé Program;
- Clarify eligibility criteria for proposed mentors and request comments on whether mentors should be restricted to mid-sized firms;
- Provide flexibility for mentors with protégés with principle places of business in Puerto Rico;
- Provide relief from the two mentors over the life of a protégé rule; and
- Provide generally that protégés should be performing work under the North American Industry Classification System (NAICS) code used to qualify for the program.
The proposed rule would:
- Eliminate joint venture approval requirements for competitive 8(a) contracts, but not sole source awards;
- Eliminate the “three in two” rule;
- Disallow substitution of joint venture partners who exceed the size standard for long-term contracts prior to recertification; and
- Allow joint ventures to be populated with FSOs and provide guidance to agencies on when to allow joint ventures to bid on contracts requiring a clearance.
Multiple-Award Contracts (MAC)
The proposed rule would:
- Require contracting officers to assign the most appropriate single NAICS code to each order under an MAC, whether for a supply or a service to ensure compliance with the non-manufacturer rule, requiring that each NAICS code be included in the underlying MAC;
- Require an offeror to certify as to size and status in order to qualify at the time it submits its initial offer including price for an order under an UNRESTRICTED MAC, except for orders or BPAs issued under an FSS contract;
- Require that, where the socio-economic status is first required at the order level, firms must qualify at that time; and
- Permit size and status protests where the underlying MAC was unrestricted, except for BPAs and orders issued under an FSS schedule.
- The proposed rule would allow a prime to rely on the self-certification of its subcontractor, provided the prime does not have a reason to doubt the certification.
The proposed rule would that:
- If a party to a joint venture becomes acquired or merges, only that partner (and not the non-affected partner) must recertify in order to qualify the joint venture to recertify;
- A firm that mergers between proposal submission and award does not qualify for award if it could not or did not recertify, though size protests are permitted; and
- Tribal entities are not required to recertify where ownership changes but the firm is owned to the same extent (i.e. 51%) by the ultimate entity.
The proposed rule would:
- Define “follow on contract” for purposes of retaining requirements in the program;
- Loosen the prohibition on immediate family members owning 8(a) firms;
- Allow for certain changes of ownership to occur without prior SBA approval;
- Clarify SBA policy on voluntary withdrawals and early graduations from the program; and
- Under some circumstances, allow firms to seek and obtain a multiple contract waiver from the sole-source restrictions for failure to comply with the business activity targets where certain extenuating circumstances exist that apply to multiple contracts.
Tribally-Owned Applicants and Participants
The proposed rule would require that:
- Where a tribe, ANC, NHO, or CDC is reorganizing but ultimate ownership does not change, no prior SBA approval is required;
- If SBA changes the primary NAICS code of a program participant because the participant has not been operating in its designated primary code for the past three years, another tribal entity be immediately qualified to apply using that code: although the program participant stated that code as its primary NAICS code, it really was not the primary NAICS code, so that code is now available for another 8(a) applicant;
- Appeals be authorized where SBA has changed a firm’s primary NAICS code;
- Potential for success be satisfied by a letter from a Section 17 corporation or some other economic development corporation or tribally owned holding company, so long as it can show financial strength;
- Tribal entities not be required to submit small business subcontracting plans, as long as they are small for the NAICS code assigned to the contract; and
- The excessive withdrawal rule generally not be applied to entities at least 51% owned by a tribe, ANC, NHO, or CDC.
Small Business Rules
The proposed rule would:
- Require that mixed contracts include any combination of services, supplies, or construction, though construction was inadvertently omitted from the proposed rule;
- Require that contracting officers consider past performance of first-tier subcontractors for certain bundled or consolidated contracts and for MACs over a certain dollar threshold;
- Clarify that affiliation may be found under the newly organized concern rule where both former and current officers, directors, principal stockholders, managing members, or key employees of one company organize a new company in the same or a related industry; and
- Request comments on how the non-manufacturer rule should be applied to multiple item procurements where one or more of the items are subject to a class waiver.
This post was originally published on the PilieroMazza blog at https://www.pilieromazza.com/blog-sba-publishes-important-proposed-rule-changes-to-8a-and-mentorprotg-programs and was reprinted with permission.
Note from Bill: The goal here is to make the rules consistent for everybody, and this is a very good thing. As a matter of speculation, it is possible we are also heading towards some kind of consolidation between the service-disabled veteran-owned small business program and the 8(a program), which are not exactly the same but probably could be treated the same. It looks like the SBA is moving in that direction, however that is not official yet by any means.
Section 806 of the FY2020 NDAA directs the Under Secretary of Defense for Acquisition and Sustainment to review how the Department of Defense uses fixed-price contracts.
This is a topic that comes up periodically. To the uninitiated, it would seem that a fixed-price contract will result in larger profits, but that is not always the case.
We first have to understand that while it seems that fixed-price contracts have the potential for higher profits, they also have the potential for substantial losses. Assuming that there are no changes made, you will be obligated to deliver some set of things or services or things with services, at a fixed price, and it just isn’t necessarily clear when you go into this arrangement that the arrangement will be profitable.
It is true that you’ve priced it as a contractor to be profitable, however, circumstances change and the project can be different than you anticipated. Yet you’re still obligated to deliver that same set of things or services or things with services, for that same fixed price.
For example, let’s say I’m obligated to deliver 100 people throughout the country at various locations to do some clerical work. I’m required for those workers to have a certain level of skills, and a certain type of clearance. Well, I actually might deliver fewer people for a short period of time, because some people are in transit, or some have quit and not yet been replaced, but I’m still getting paid as if all 100 workers are still in place.
That’s good for me because I’ve getting paid a fixed price for 100 people and there’s only 95 on the job. Of course this is assuming that the number of people I’m not delivering doesn’t upset the client or cause me to miss deadlines or create problems that threaten my contract.
On the risk side, let’s say we’re in a very low unemployment rate, with correspondingly upward pressure on wages and skillsets. While I’ve told my client I’d deliver those 100 people for $65,000 each, now I’ve got to pay my employees $70,000 in order to get the required level of skill and so forth. Then my current people see what the new people are making and they want more money as well. Wages are up, which is good for people in general, but as a contractor I have to pay more and can’t charge the client more because we have a fixed-price contract.
So the reason fixed-price contracts are often won with a lesser value is because the risk is higher and therefore the margin that I pitch is higher. Often we build in contingencies as well, which might mean I think I can hire at $60,000, so I pitch at $65,000. But I could still end up having have to hire some at $68,000 or $70,000 so now I’m starting to lose money on those people.
This provision brings us into the study phase. The 2020 NDAA directs the Defense Department to look at the circumstances in which fixed-price contracts are used and awarded, and the experience from the government’s perspective.
Understand that the legislators are including many different forms of contracting that include the words fixed price that aren’t necessarily completely fixed, which has muddied the waters a little bit. They’ve included cost plus fixed fee, another form of fixed-priced contracting, and fixed labor rates. This will all come out in the wash.
They set a pretty aggressive deadline of February 2020 for the Under Secretary to brief the congressional defense committees on the findings of the review. If you have any comments once the NDAA is approved, let us know and we should be able to put our oar in the water through the Mid-Tier Advocacy group.