The Procurement Playbook

The Procurement Playbook

Legal Insight for Government Contractors

Contracting for Disaster Relief: The Federal Method

Posted in Uncategorized

The American public generally agrees that the federal government’s contracting response is far from efficient. ‘Why did it take so long to get help for Hurricanes Katrina and Sandy and/or the Joplin Missouri Tornado take so long?’ is a commonly asked question. So, while the memories of the Oso, Washington landslide are still fresh in our minds, it might be good to review what the federal government has done since Katrina to assure that the federal government can more quickly and efficiently respond to the next major national disaster.

The federal government has issued a new Part 18 to its Federal Acquisition Regulation (FAR). Part 18 is entitled “Emergency Acquisitions” which is to be used when the President issues an emergency declaration or a major disaster declaration. Part 18 essentially does three things. Because emergencies are, by definition, unusual and a compelling urgency, it recognizes that:

  1. There is typically no need for the federal government to advertise that is it is looking for contractors;
  2. Nor is there any need to require full and open competition, because time simply will not allow it; and accordingly,
  3. Many normal requirements such as bid guarantees or the prohibition against advance payments can be waived.

The issue then becomes, if there is no requirement or even ability to advertise, how can the government quickly find the needed contractors? Continue Reading

SBA Uses “Adverse Inference” Rule to Find Firm Affiliated with 27 Other Companies

Posted in Small Business

One of the most fundamental requirements of Small Business Administration’s (SBA) size protest regulations is that the protested firm must timely produce information/documents that SBA requests to perform its investigation of the firm’s size/status. What is the penalty for failing to provide requested information/documents? SBA may presume the missing information would demonstrate that the concern is other than a small business. This is known as the “adverse inference” rule.

The harsh realities of the “adverse inference” rule were on full display this past month in the Size Appeal of Elite Construction Management Corp., SBA No. SIZ-5565 (2014). In that case, Elite’s size was challenged based on the allegation that Elite was affiliated with 27 other companies through familial identities of interest. In investigating the size protest, SBA requested that Elite produce tax returns and other financial information for 25 of these companies, but Elite only produced the requested information for four companies. Because of Elite’s failure to produce the requested information, rather than allow Elite to rebut the presumption of affiliation, SBA applied the “adverse inference” rule to find that Elite was affiliated with all 27 companies, and thus Elite was not a small business. This finding was affirmed by the SBA Office of Hearings and Appeals (OHA).

The Elite case should serve as a reminder to any protested firm that it must strictly comply with SBA size protest regulations and any requests for information/documents made by SBA during the protest process. A protested firm’s failure to strictly comply with SBA’s requests may result in the protested firm being deprived of the right to contest the allegations on the merits.

The Danger of Uniformed and Inaccurate CPARs

Posted in Bid Protests, Past Performance

In a recent bid protest decision concerning the Department of Energy’s award of legacy management support services award contract, GAO held that the agency acted reasonably when evaluating protestor WSS’s past performance on the incumbent contract by disregarding two Contractor Performance Assessment Reports (“CPARs”), which reflected “exceptional” performance, in favor of a detailed award fee determination reflecting a mix of good and marginal performance. GAO determined that the agency acted reasonably in disregarding the CPARs because

not only were the reports ‘erroneously written and approved by a government employee without the authority or knowledge of the contracting officer and contracting officer representative,’ they were prepared by a person unfamiliar with the contractor’s performance.”

GAO’s discussion of this procurement reflects some serious problems with the CPAR system used for evaluating prime contractor performance on federal contracts. Continue Reading

2014 NDAA to Permit Prime Contractors to Count Lower Tier Subcontractors towards their Small Business Subcontracting Goals

Posted in Legislative and Regulatory Developments, Small Business

Section 1614 of the National Defense Authorization Act for Fiscal Year 2014 (NDAA) offers advantages to small business subcontractors as well as prime contractors, by allowing primes to count second tier small businesses subcontracts toward their small business subcontracting goals. Previously, primes could only count first tier small business subcontractors for their small business subcontracting plans. But under this new legislation, primes will also be able to count lower-tier small subcontractors toward their small business subcontracting goals.

This legislation will have a number of different impacts on small business subcontracting:

  1. Encourages prime contractors to promote small business business participation at every level of the contract.
  2. Increases availability of lower tier subcontracts to small businesses.
  3. Agencies negotiate small business subcontracting goals with prime contractors, and prime contractors pass down the requirements to use small businesses to their own large subcontractors.
  4. All first and second tier subcontracts are applied to the prime’s goal for subcontracted dollars to small businesses.
  5. By basing the goal on all tiers, the amendment allows for higher small business utilization goals in contracts. Continue Reading

Do you have an “ostensible subcontractor” problem?

Posted in Small Business

Size matters. Companies that exceed applicable SBA size standards are ineligible for award of small business set-aside contracts. The SBA uses rules of affiliation to make sure companies do not take unfair advantage of the benefits of small business contracting programs. When measuring whether a company comes within the applicable size standard, the SBA counts not just the company’s own revenue/employees, but also the revenue/employees of the company’s “affiliates.” It is important to understand how affiliation can occur because if companies are found to be “affiliated” lost business opportunities could result. It can be costly (both in time and money) to fight a size protest, even if a company is ultimately vindicated.

There are a number of rules that the SBA looks at to determine whether a contractor is “affiliated” for size purposes, but some are relied on more than others by competitors to protest awards. One of the most litigated areas contractors should be aware of is the “ostensible subcontractor rule.” Under the ostensible subcontractor rule, 13 C.F.R. § 121.103 (h)(4), a prime contractor and its subcontractor will be considered “affiliated” when: Continue Reading

GSA Endorses Third Party Rating Systems for Federal Buildings

Posted in LEED

On October 25, 2013, the U.S. General Services Administration (“GSA”) concluded that federal agencies should continue to use third party rating systems to evaluate the performance of federal buildings. Specifically, GSA advocated that agencies use U.S. Green Building Council’s (USGBC) LEED green building rating system or the Green Globes system to advance energy efficiency and to save taxpayers’ money. For more info on this decision, click here.

Earlier this year, the GSA released its initial findings surrounding green building in the federal government, but announced its intent to seek public input as to which rating systems “are most likely to encourage a comprehensive and environmentally sound approach to the certification of green federal buildings” before issuing its formal recommendation. See Feb 2013 DJC article.

Under Section 436(h) of the Energy Independence and Security Act of 2007 (EISA), GSA is required to identify a certification system that is “most likely to encourage a comprehensive and environmentally sound approach to the certification of green buildings” and made a recommendation to the Secretary of Energy.

GSA’s decision comes a year after more than 1,250 businesses and organizations urged GSA to continue to use LEED to improve the energy and environmental performance of federal buildings, against push back from other groups. Now, based on the findings of the inter-agency “§436(h) Ad-Hoc Review Group on Green Building Certification Systems,” GSA continues to formally voice its support for LEED and Green Globes as third-party rating system for construction of government buildings. Continue Reading

SBA Increases Women-Owned Small Business Opportunities

Posted in Legislative and Regulatory Developments, Small Business

An interim rule, with immediate effect, will amend regulations to the U.S. Small Business Administration’s (“SBA”) Federal Contract Program, allowing for increased access to federal contracting opportunities for women-owned small businesses. This change comes as a result of the National Defense Authorization Act (“NDAA”) signed in January 2013. (For more on the NDAA, see previous postings on Title VIII of the act and the impact of the act on the SBA.)

The interim rule implements Section 1697 of the National Defense Authorization Act and removes the statutory limitation on the dollar amount of a contract that women-owned small businesses can compete for under the Women-Owned Small Business (WOSB) program and Economically Disadvantaged Women-Owned small Business (EDWOSB) program. Previously, the anticipated award price for the contract for WOSB/EDWOSB could not exceed $6.5 million for manufacturing contracts and $4 million for all other contracts. Now, Contracting officers may set-aside contracts under the WOSB/EDWOSB Program at any dollar level, as long as the other requirements for a set-aside under the program are met. The hope is that the change will assist agencies in meeting the existing statutory goal of five percent of federal contracting dollars being awarded to WOSBs.

The SBA is currently working on the changes to the Federal Acquisition Regulations to reflect this rule.

The rule can be accessed at: http://www.gpo.gov/fdsys/pkg/FR-2013-05-07/html/2013-10841.htm and comments can be submitted on or before June 6, 2013, at www.regulations.gov, identified by the following RIN number: RIN 3245-AG55.

Introduction to Domestic Preference Acts

Posted in Buy American Act

It comes as a surprise to no one that Congress has wide-ranging ability to place conditions on the federal government’s ability to spend federal dollars. What may surprise some contractors is the effect that Congress’s power via “domestic preference acts” has to limit how the contractor builds a project and what materials it procures to do so.

What do we mean when we say “domestic preference acts”? These refer to the Acts that establish the long-standing inclination of the United States government to ensure federal dollars are spent on domestic products. For example:

  • Buy American Act of 1933 (41 U.S.C. §10a-d)
  • Trade Agreements Act (19 U.S.C. §§ 2511-2518, implements WTO GPA)
  • Berry Amendment (applicable to DoD)
  • Surface Transportation Assistance Act of 1982 (“Buy America” – which notably is not exactly the same as “Buy American”)

The BAA requires “substantially all” of an acquisition be attributable to American-made components. This has come to mean that at least 50 percent of the costs must be attributable American content. The BAA applies to “construction materials” and “end products,” depending on whether a supply contract or construction contract is involved. A two-part test has developed to determine whether the BAA applies and the GAO applies a case-by-case standard to determine applicability of whether something is “manufactured” in the United States sufficient to meet the requirements of BAA. Continue Reading

When a false certification may not be “false” under the False Claims Act

Posted in False Claims Act

Government contractors routinely provide certifications during the contracting process. For example, these certifications ask the contractor to verify that the cost or pricing data or claims submitted are true and honest. Submitting a false claim can create liability under the Federal False Claims Act (“FCA”). See 31 U.S.C. § 3729. Lawsuits against contractors for potential violations of the FCA may come directly from the Government or through qui tam suits. The central question in these cases is whether the contractor presented a false or fraudulent claim to the Government.

In some jurisdictions, not every failure to comply with a federal statute, regulation, or contract provision automatically creates liability. Courts may distinguish between “express” and “implied” certification theories of liability. Under an “express” certification theory, courts look to whether payment from the Government is contingent on an express requirement to certify compliance with an applicable statute or regulation. Absent an express requirement, a contractor may not be liable for a false certification. Under an “implied” certification theory, the very act of seeking payment implies that the contractor complied with applicable rules and regulations. If a contractor does not comply with applicable rules and regulations, the absence of an express requirement may not bar a court from holding a contractor liable. Continue Reading

More on NDAA 2013: Impact on the Small Business Administration

Posted in Legislative and Regulatory Developments, Small Business

As noted in our earlier blog entry, the National Defense Authorization Act of 2013 (“NDAA”), signed by President Obama on January 3, 2013 included significant changes affecting small business contracting. The changes largely came as a result of the House Armed Services Committee special “Panel on Business Challenges in the Defense Industry.”

Under Section 1641, the NDAA is expanding the mentor-protégé program for “all small business concerns,” from its present application that only applies to 8(a) disadvantaged businesses. The NDAA directs the Small Business Administration (“SBA”) to create mentor-protégé programs for each type of small business concern, for example HUBZone businesses, Service Disabled and Veteran Owned businesses, and Women-Owned small businesses, among others. The NDAA requires the SBA to issue regulations establishing these mentor-protégé programs within 270 days.

The mentor-protégé program as it presently exists, applies to 8(a) disadvantaged businesses, and allows large businesses to act as mentors to small businesses. This permits the two companies to form a joint venture and bid on small business contracts without violating size or affiliation rules. Section 1641 should expand the number of potential protégés and create greater opportunities for large companies to serve as mentors.

The NDAA also changed the regulations on subcontracting calculations. Previously, a small business was required to incur to incur at least 50 percent of the labor costs for service or supply contracts and 25 to 15 percent of the labor cost for general or specialty construction contracts. Sections 1651 and 1652 of the NDAA, change the calculations from “price” to “cost”, requiring a comparison of prime contract price to subcontract prices. The NDAA also creates penalties (of $500,000 or the dollar amount expended in excess of the permitted level, whichever is greater) for violating limits. The changes apply to the following contracts: Continue Reading

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