The Procurement Playbook

The Procurement Playbook

Legal Insight for Government Contractors

Nearly 1,650 Additional Firms to Become Eligible for Small Business Set-Asides under SBA’s Proposed Size Standard Revisions

Posted in Legislative and Regulatory Developments, Small Business

Over the past two months the U.S. Small Business Administration (“SBA”) has published two proposed rules to revise small business size standards in the North American Industry Classification System (“NAICS”).  If the proposed rules are adopted, nearly 1,650 additional firms will become eligible for small business contracting programs and SBA small business loans.

NAICS is the standard used by the federal government in classifying businesses for the purpose of collecting, analyzing, and publishing statistical data related to the U.S. economy. The SBA uses NAICS as a basis for its small business size standards and is particularly relevant to businesses seeking to qualify for small business set aside contracts. In establishing size standards, the SBA takes into account the structural characteristics of individual industries, including average firm size, startup costs and entry barriers, and small business share of federal contracting dollars. The Small Business Jobs Act of 2010 requires the SBA to review these standards at regular intervals and make adjustments to reflect market conditions.

In summary, the SBA’s most recent proposal would:

  1. Increase increase small business size standards for 209 industries.
  2. Increase the refining capacity component of the Petroleum Refiners (NAICS 324110) size standard to 200,000 barrels per calendar day total capacity for businesses that are primarily engaged in petroleum refining.
  3. Eliminate the requirement that 90 percent of the output being delivered be refined by the bidder.
  1. Increase employee based small business size standards for 30 industries and three sub-industries (primarily in mining, transportation/delivery, publishing related, science R&D, and telecommunications industries).
  2. Decrease employee based small business size standards for three industries (Uranium-Radium-Vanadium Ore Mining; Silver Ore Mining; Anthracite Mining).
  3. Eliminate the Information Technology Value Added Resellers “exception” under NAICS 5411519 and its 150-employee size standard.
  4. Eliminate the Offshore Marine Air Transportation Services “exception” under NAICS 481211 and 481212 and their $30.5 million receipts based size standard.

If adopted, nearly 1,650 new firms will be eligible to compete for small business set-aside procurements. This increase is in addition to the 8,500 newly-eligible companies added by earlier size standard revisions that took effect July 2014. As the SBA’s small business programs offer unique and potentially lucrative business incentives, companies near the threshold for participation should keep a close eye on these proposed rules over the next several months. Comments on the proposed rules for Manufacturing and Non-Manufacturing are due November 10, 2014.

Court of Federal Claims Sanctions EPA for Backdating Document During Bid Protest

Posted in Bid Protests

In a rare move, the U.S. Court of Federal Claims (COFC) imposed sanctions on the United States Environmental Protection Agency (EPA) for its conduct during the bid protest of Coastal Environmental Group, Inc. v. United States.  While the EPA ultimately prevailed on the merits of the protest, the EPA’s conduct was so egregious that COFC took the rare step of publicly chastising the agency for “bad faith” conduct during the protest, and required the EPA to pay a portion of the attorney’s fees incurred by the protestor, plus a $1,000 fine directly to the court.

The protest concerned the EPA’s decision to cancel a procurement for soil remediation services.  During the course of the protest, the EPA prepared a “Determinations and Findings” document explaining the EPA’s reasons for terminating the initial contract awarded to another firm and to use existing contracting vehicles to satisfy its soil remediation needs, and then backdated that document by ten months to make it appear as if it had been prepared at the time the contract was terminated, rather during the course of litigation.  To make matters worse, the document inaccurately reflected that the primary reason for the termination was the EPA’s ability to satisfy its soil remediation needs through existing contracts.

Continue Reading

ASBCA Dismisses Subcontractor’s Appeal that wasn’t Sponsored by Prime Contractor

Posted in Claims and Disputes

When subcontractor claims arise on a federal contract, it is not uncommon for the prime to then assert those claims as pass-through claims against the government.  In such circumstances, it is important for subcontractors to remember that while they have rights to proceed against the prime contractor for those claims, it is ultimately up to the prime contractor whether to prosecute the claims as pass-through claims against the government.  And if the prime does pass-through the claims, and the claims are denied, it is ultimately up to the prime whether to appeal that decision.  If the prime refuses to appeal, the subcontractor cannot file an appeal on its own.

Recently, in Binghamton Simulator Co., the Armed Services Board of Contract Appeals (ASBCA) dismissed a subcontractor’s attempt to directly appeal from a contracting officer’s decision denying the subcontractor’s pass-through claim.  In that case, the prime contractor refused to sponsor the subcontractor’s appeal, even though (according to the subcontractor) the disputes clause of its subcontract required the prime to sponsor the appeal.  In dismissing the subcontractor’s appeal, the ASBCA noted that it was irrelevant whether the subcontract required the prime to sponsor the appeal, because ASBCA did not have jurisdiction to resolve a dispute between a prime contractor and its subcontractor regarding interpretation of the terms of their subcontract.  For ASBCA, the only issue was whether the prime had sponsored the appeal, and because it had not the appeal had to be dismissed. Continue Reading

Debarment: Not Just for the Feds Anymore

Posted in Suspension and Debarment

While suspension and debarment has long been a Federal Government action, state and local governments are starting to adopt the practice as well.  For example, in Cuyahoga County, Ohio, the county contracting code was amended in 2012 to require a 5 year debarment of contractors convicted of bribery and other crimes.  It also allows the county’s inspector general to debar contractors for failing to perform a contract or for having a history of unsatisfactory performance.  The county code was changed in the aftermath of federal corruption scandal that resulted in a complete reorganization of the county’s governmental structure.  As a result of the change to the code 38 individuals and organizations have been debarred by Cuyahoga County in less than a year.  Last week while defending the length of these debarments, the county’s legal department argued that “The intent of the [county] law is to build the trust of the citizens in the contracting system, and we couldn’t afford to have our inspector general to be questioned why you gave this one contractor three years, this other contractor four years or a third contractor five years…That’s why we built in these rigid requirements.”  

Most state procurement codes have suspension and debarment regimes, but the programs are either nonexistent or relatively inactive.  With the increased awareness of the federal suspension and debarment regime, it is not surprising that state and local governments are now becoming more active.  Contractors that participate in only state and local government contracting need to be aware they are not immune from debarment simply because they do not participate in the federal contracting sphere.

Common Bid Protest Mistakes: Extension of the Due Date for Comments Does Not Toll Timeliness Requirements for Asserting Supplemental Protest Grounds

Posted in Bid Protests

This  is the first in a series of posts highlighting common mistakes made (by protestors) in bid protests at GAO.  Today’s post discusses a mistake related to the deadline for filing supplemental protests when an extension is granted for filing comments on the agency report.  This mistake is made by protestors far more often than it should be, and it is a serious mistake given that it usually results in the dismissal of supplemental protest grounds as untimely.

Per GAO’s bid protest regulations, a protestor must file its comments on the agency report “within 10 days after receipt of the report.”  A similar 10-day time limit exists for asserting supplemental protest grounds, which must be filed “not later than 10 days after the basis of protest is known or should have been known (whichever is earlier).”  Because supplemental protest grounds are often uncovered during a protestor’s review of the agency report, the deadline for filing comments and supplemental protests usually is the same date.  But, it is not uncommon for a protestor to request, and GAO to grant, an extension of time for the protestor to file its comments on the agency report (for example, if a dispute over a document request results in the delayed production of certain documents until a few days after the agency report, GAO will often grant a protestor’s request for an extension of the deadline for filing comments).  What protestors do not always realize (even though this point is stressed by GAO in its guide to bid protests) is that when GAO grants the protestor an extension of time for filing its comments, GAO is not granting the protestor an extension of time to file supplemental protest grounds that are based upon information in the agency report.

For example, if the agency report is filed on Day Zero, comments on the agency report and any supplemental protest grounds apparent from the agency report are both due on Day Ten.  If GAO grants the protestor an extension of time for filing comments to Day Eleven, any supplemental protest grounds apparent from the agency report remain due on Day Ten.  If the supplemental protest grounds are filed on Day Eleven, with the protestor’s comments, the supplemental protest grounds will be dismissed as untimely.

Unfortunately for protestors, too many practitioners ignore this aspect of bid protest procedure and as a result supplemental protests arguments (which are often a protestor’s strongest arguments) are commonly dismissed for this reason.  This mistake was recently highlighted by GAO in Chandler Solutions, LLC, B-409655.2, August 13, 2014, 2014 CPD ¶ 239 as the basis for dismissing the protestor’s supplemental protest arguments:    Continue Reading

Two Proposals Receiving Identical Adjectival Ratings are Not Automatically Equal in Merit

Posted in Bid Protests, Past Performance

One might assume that if the top two proposals in a best-value procurement receive the same ratings on all non-price factors, the proposals are obviously equal in technical merit and the award must go to the lower priced proposal.  However, this assumption would be incorrect.  And, as GAO recently pointed out in CPS Professional Services, LLC, B-409811, B-409811.2, August 13, 2014, source selection officials who make this assumption put their contract awards at risk of being overturned by a bid protest.

The CPS Professional Services, LLC protest involved a solicitation issued by the Department of Homeland Security Immigration and Customs Enforcement (ICE) for school certification support services, to be awarded on a best value trade-off basis (three equal factors: price, past performance and technical approach).  ICE received quotes from two firms (CPS and Arc Aspicio), and after evaluating each quotation assigned both firms the same ratings on both non-price factors (Technical Approach: Good; Past Performance: Low Risk).  ICE then awarded the contract to Arc Aspicio “because both firms received identical ratings under the non-price factors” and “Arc Aspicio submitted a lower-priced quotation than CPS.”

CPS protested the award, arguing that ICE had failed to fairly consider the relative merits of the vendors’ respective past performance in its award decision.  GAO agreed. Continue Reading

Terminated for Default? Debarment Could Be In Your Future

Posted in Suspension and Debarment

Debarment is not just for ethics violations anymore. Suspending and Debarring Officials are looking to a new source for referrals – Contracting Officers. FAR 9.406-2(b)(1)(i)(A) and FAR 9.406-2(b)(1)(i)(B) allow Suspending and Debarring Officials to debar companies for a history of performance issues or a willful failure to perform in accordance with the terms of one or more contracts. Debarment is intended to be a business risk decision designed to protect the Government from contractors that present risks, including performance risks. Termination for default is one of the premier ways to demonstrate that a contractor is a performance risk to the Government.

Over the past year, the Air Force has debarred 5 contractors for failing to perform resulting in a termination for default. In each of these cases, the contractor was responsible for performing in accordance with the contract, failed to do so, and eventually was terminated for default. In one particular case, a prime contractor failed to repair deficient work or even respond to the Air Force’s Cure Notice. The prime contractor had a previous contract with the Air Force, which it had also subcontracted to the same contractor that had done the rejected work. The work was satisfactory for this contract, and the prime contractor was paid in full. However, the prime contractor failed to pay its subcontractor. Supporting its debarment decision on both of these bases, the Air Force debarred the prime contractor for three years.  Continue Reading

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