Legislative and Regulatory Developments

Today, the SBA issued major proposed rule changes to the HUBZone program. This is the first comprehensive revision to the HUBZone rules since the program’s implementation nearly 20 years ago, and the changes are intended to improve the predictability and stability of the program for participants.

In general, to qualify as a HUBZone firm,

Many politically charged issues are likely to steal the headlines during the confirmation hearings for President Trump’s nominee for the U.S. Supreme Court, D.C. Circuit Court of Appeals Judge Brett Kavanaugh.  However, one issue unlikely to make headlines is the impact that Judge Kavanaugh’s confirmation may have on the doctrine that gives “controlling weight” to the way government agencies interpret their own regulations — known as the Auer Deference doctrine.

Given the composition of the Supreme Court, recent Judicial attempts to re-examine the doctrine, and Judge Kavanaugh’s previous statements, Judge Kavanaugh’s confirmation signals the probability of the Supreme Court’s eventual overturning of the Auer Doctrine  — which would be good news for government contractors.

What is Auer Deference?

Auer deference (also referred to as Seminole Rock deference) is a principle of administrative law that requires courts to give “controlling weight” to the way government agencies interpret their own regulations, even where the agency’s interpretation is not “the best” reading of the text in question. Developed from the U.S. Supreme Court’s holdings in Auer v. Robbins, 519 U. S. 452 (1997) and Bowles v. Seminole Rock & Sand Co., 325 U.S. 410 (1945), the doctrine mandates that courts credit the agency’s interpretation as controlling as long as it is not “plainly erroneous or inconsistent with the regulation.”

This obviously puts a thumb on the scale for agencies in the context of contract disputes or bid protests tied to certain regulatory interpretations. It can be particularly harmful to contractors when the agency has altered its interpretation during the performance or procurement of a contract, or worse, during the course of litigation. Unlike agencies whose procurements rely on interpretation of the FAR, agencies that draft and enforce their own regulations (such as the Small Business Administration) are sometimes empowered under Aeur to alter their interpretation to suit the agencies’ needs on a case-to-case basis.
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Six months into Trump’s presidency, we wrote about how Trump’s $1 trillion infrastructure plan was likely to include more federal deregulation, including possible repeal or suspension of the Davis Bacon Act (DBA).  Two months after that article, comments from the House Transportation and Infrastructure Committee suggested Trump had changed his tune and would retain the

Despite recent political shifts away from globalization, international trade – particularly U.S. exports – will remain a substantial component of the U.S. economy. Companies doing business in the U.S. and overseas must be up to date on U.S. export control regulations. An important component of these regulations are the Export Administration Regulations (“EAR”), which are administered by the Department of Commerce, Bureau of Industry and Security (“BIS”). The EAR covers the export of commercial products that have the potential for dual use—meaning the item has both a commercial and military use—and as such, covers a broad range of products, hardware, software, technical information, and data.

Among the EAR requirements is the Unverified List (“UVL”).  An entity listed on the UVL indicates a “red flag” for U.S. companies because the “bona fides” of these foreign recipients cannot be confirmed by the BIS.  Specifically, entities end up on the UVL when BIS cannot verify the “legitimacy and reliability relating to the end use and end user of items subject to the EAR,” 15 CFR § 744.16(c), and, as such, BIS cannot confirm the location of the foreign entity or the stated use of a controlled item by that entity.  (The UVL does not require any active intent to prevent “end use” verification. Foreign entities that have actively failed to cooperate with BIS end-use check risk ending up on the Entity List which imposes specific licensing requirements in addition to the other provisions of EAR.)

The UVL creates additional responsibilities for any exporter who intends to conduct business with an entity on the UVL. While the UVL does not preclude export activity involving UVL entities, U.S. exporters must comply with heightened requirements, including obtaining an end-use statement whereby the U.S. company verifies the proposed end use of the item to be transferred, and agrees to cooperate with any government requested end-use checks and post-shipment verification.  Notably, in such cases, exporters cannot rely on any license exceptions.
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It seems like a yearly ritual.  The U.S. Senate Armed Services Committee (“SASC”) drafts and passes a version of the annual National Defense Authorization Act (“NDAA”) that includes reforms aimed at curtailing bid protests, while the House Armed Services Committee (“HASC”) drafts and passes a version of the NDAA that omits these bid protest reforms.  Every year, the majority of the reforms in Senate are eliminated during the conference committee process.  However, the FY2019 NDAA appears to be headed towards a break in this yearly ritual.

On June 5, 2018, the SASC introduced its version of the FY2019 NDAA to the Senate.  For the first time in several years, the SASC’s proposed version of the FY2019 NDAA does not contain any major reforms to limit bid protests.  The SASC’s proposed FY2019 NDAA (Section 811) contains only a few provisions aimed at bid protests, neither of which would limit bid protests.  Both provisions appear to be related to findings in RAND’s 2018 report of DoD bid protests:


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Back when Congress passed the FY2017 NDAA, they included a provision (Section 1822) requiring SBA to create a pilot program to provide opportunities for qualified subcontractors to obtain past performance ratings. Specifically, Congress mandated that SBA create a 3-year pilot program whereby small business concerns without a past performance rating as a

Oles Morrison partner Adam Lasky will co-present with Shene Commodore, president of Commodore Consulting, LLC during National Contract Management Association’s “Maximizing Teaming Under SBA’s Joint Venture Rules” webinar.

Hear about new rules and major changes the U.S. Small Business Administration (SBA) has made to its joint venture programs.

Learn:

  • SBA’s teaming regulations,
  • Joint venture

As we were reviewing the regulatory agendas of various federal agencies for upcoming regulations that might impact federal contractors, we noticed that the U.S. Small Business Administration’s (“SBA”) most recent regulatory agenda included an upcoming proposed regulation entitled “Consolidation of Mentor Protégé Programs and Other Government Contracting Amendments.”  Specifically, SBA’s regulatory agenda states that:

SBA

For years bid protest filings at the Government Accountability Office (GAO) have been done by e-mail (or even fax, mail or hand delivery).  In January 2014, Congress directed GAO to establish a electronic filing and document dissemination system (not unlike the PACER system used by federal courts), and authorized GAO to charge a filing

As we previously discussed, when Congress passed the FY 2018 NDAA it required the Department of Defense (“DoD”) to issue regulations providing for enhanced post-award debriefing rights on certain DoD procurements.  Specifically, Congress mandated enhanced content requirements, a follow-up question process, and corresponding changes to the time to file a bid protest at GAO with a suspension of performance of the protested contract (a “CICA stay“):

  • Enhanced Content Requirements:  While protecting the confidential and proprietary information of other offerors, the debriefing shall include, at a minimum, the agency’s written source selection award determination, redacted to protect the confidential and proprietary information of other offerors.  These enhanced content requirements apply to “required” debriefings if (1) the contract award exceeds $100M, or (2) the contract award exceeds $10M and the contractor requesting the debriefing is a small business or nontraditional contractor who request such disclosure.
  • Follow-up Question Process:  Disappointed offeror would be allowed the opportunity for follow-up questions within two business days of receiving a post-award debriefing to be answered in writing by the agency within five business days.
  • Time to file protest at GAO and obtain a CICA stay:  The debriefing would not be considered concluded, and the five day post-debriefing period pertaining to when a protest needs to be filed to invoke a CICA stay would not commence, until the day the agency delivers its written responses to the disappointed offeror’s follow-up questions.

The enhanced content requirements were to be implemented through DFARS regulatory changes, which DoD has until June 2018 to issue.  On the other hand, the follow-up question process, and corresponding changes to the time to file a bid protest at GAO with a CICA stay, are already reflected in statutory changes (10 U.S.C. 2305(a)(5) and 31 U.S.C. 3553(d)(4)).  Still, changes to the DFARS were expected to implement the follow-up question process.  But this week, in advance of changes to the DFARS, DoD issued Class Deviation 2018-O0011 – Enhanced Postaward Debriefing Rights, which provides for the immediate implementation of the follow-up question process (and corresponding changes to the time to file a protest at GAO and obtain a CICA stay):
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