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  1. 1. What Every Corporate Counsel Needs To Know About Doing Business With the Federal Government Presented By: <ul><li>David Kessler, Symantec Corporation </li></ul><ul><li>Bill Walsh, Venable LLP </li></ul><ul><li>Scott Hommer, Venable LLP </li></ul>© 2008 Venable LLP
  2. 2. Major Differences Between Government and Commercial Contracting <ul><li>Government policy establishes competition criteria for procurements </li></ul><ul><li>Government contracts contain extensive clauses, many of which are non-negotiable by law </li></ul><ul><li>Government may terminate a contract for failure to make progress or for its convenience </li></ul><ul><li>Extensive reporting requirements </li></ul><ul><li>Company determines competition criteria </li></ul><ul><li>Uniform Commercial Code and agreed-upon provisions govern the contract </li></ul><ul><li>Unilateral termination right is usually not available unless mutually agreed upon </li></ul><ul><li>Social pressures dictate whether socioeconomic policies are included, some required by law </li></ul><ul><li>No reporting required unless agreed upon by the parties </li></ul>© 2008 Venable LLP Government Contracting Commercial Contracting
  3. 3. Understanding Government Contracts © 2008 Venable LLP Sealed Bidding (IFB) Contract Awarded: Responsible Bidder with Lowest Responsive Bid Contract Awarded: Best Value Proposal Bid Protest Competitive Negotiation (RFP) Federal Acquisition Regulation (FAR) Full and Open Competition Contract Performance Contract Performance
  4. 4. Understanding Government Contracts Cont’d © 2008 Venable LLP Court of Federal Claims Decision Agency Level Protest GAO Decision Bid Protest Contract Performance Contract Close-Out Claims & Disputes
  5. 5. Basic Structure of Government Contracts <ul><li>Cover Page </li></ul><ul><li>Section A: Solicitation/Contract Form </li></ul><ul><li>Section B: Supplies or Services and Prices/Costs </li></ul><ul><li>Section C: Description/Specs/Work Statement </li></ul><ul><li>Section D: Packaging and Marking </li></ul><ul><li>Section E: Inspection and Acceptance </li></ul><ul><li>Section F: Deliveries or Performance </li></ul><ul><li>Section G: Contract Administration Data </li></ul><ul><li>Section H: Special Contract Requirements </li></ul><ul><li>Section I: Contract Clauses </li></ul><ul><li>Section J: List of Attachments </li></ul><ul><li>Section K: Representations, Certifications, Other Offeror Statements </li></ul><ul><li>Section L: Instructions, Conditions, Notices to Offerors </li></ul><ul><li>Section M: Evaluation Factors For Award </li></ul>© 2008 Venable LLP
  6. 6. The Regulations <ul><li>Federal Acquisition Regulation (FAR) </li></ul><ul><ul><li>Sets forth policies and procedures for acquisitions by all executive agencies. </li></ul></ul><ul><ul><ul><li>Codified at Title 48 of the Code of Federal Regulations. </li></ul></ul></ul><ul><ul><li>While the FAR is the primary document, each agency may – and most often does – adopt acquisition regulations that supplement the FAR. </li></ul></ul><ul><ul><ul><li>Examples include: </li></ul></ul></ul><ul><ul><ul><ul><li>Department of Defense (DFAR) </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Department of Agriculture (AGAR) </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Department of Education (DEAR) </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Environmental Protection Agency (EPAAR) </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Department of Transportation (TAR) </li></ul></ul></ul></ul><ul><li>The FAR and Agency Supplements to the FAR Include Standard Solicitation Provisions and Contract Clauses. </li></ul>© 2008 Venable LLP
  7. 7. Non-Negotiability of Almost All Clauses <ul><li>No deviations from Standard FAR Clauses </li></ul><ul><ul><li>“ Individual deviations affect only one contract action, and . . . may be authorized by the agency head.” FAR 1.403 </li></ul></ul><ul><ul><li>But under FAR Part 12 – Commercial Item Acquisition – Contracting Officers may “tailor” </li></ul></ul><ul><ul><li>“ Homemade” clauses </li></ul></ul><ul><li>To challenge the inclusion of a clause in a solicitation, an offeror must protest the terms of a solicitation prior to bidding </li></ul>© 2008 Venable LLP
  8. 8. Contract Types (FAR part 16) <ul><li>Cost-reimbursement </li></ul><ul><li>Time-and-materials; Fixed Labor Hour </li></ul><ul><li>Fixed-price </li></ul><ul><ul><li>Risk to Contractors Varies With Contract Type </li></ul></ul><ul><ul><li>Contract Type Will Drive Application of Certain FAR Provisions </li></ul></ul>© 2008 Venable LLP
  9. 9. Acquisition Methods: Soliciting Bids / Proposals <ul><li>Full and Open Competition </li></ul><ul><ul><li>In 1984, the Competition in Contracting Act (CICA) was enacted, requiring executive agencies to achieve “full and open competition” in the acquisition process unless an enumerated exception applies. </li></ul></ul><ul><li>Two Basic Methods: </li></ul><ul><ul><ul><li>Sealed Bidding </li></ul></ul></ul><ul><ul><ul><ul><li>Government issues an “Invitation for Bids” (IFB) </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Rigid adherence to formal procedures </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Agency must award to the responsible bidder with the lowest responsive bid </li></ul></ul></ul></ul><ul><ul><ul><li>Competitive Negotiation </li></ul></ul></ul><ul><ul><ul><ul><li>Government issues a “Request for Proposals” (RFP) </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Flexible procedures </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Agency may conduct discussion, evaluate offers, permit revisions, and award the contract using price and other factors </li></ul></ul></ul></ul>© 2008 Venable LLP
  10. 10. Exceptions to “Full & Open Competition”: GSA Schedule Contracting & GWACS <ul><li>Federal Supply Schedule (FSS) Contracts </li></ul><ul><ul><li>Under the GSA Schedules (also referred to as Multiple Award Schedules and Federal Supply Schedules) Program, GSA establishes long-term, government-wide contracts with commercial firms to provide access to over 11 million commercial supplies (products) and services that can be ordered directly from GSA Schedule contractors or through the GSA Advantage!® online shopping and ordering system. </li></ul></ul>© 2008 Venable LLP
  11. 11. Exceptions to “Full & Open Competition”: GSA Schedule Contracting & GWACS <ul><li>Blanket Purchase Agreements (BPAs) </li></ul><ul><ul><li>A simplified method of filling anticipated repetitive needs for services and supplies </li></ul></ul><ul><ul><li>Akin to &quot;charge accounts&quot; established with schedule contractors by ordering agencies </li></ul></ul><ul><li>Government-Wide Acquisition Contracts (GWACs) </li></ul><ul><ul><li>Issued by Agencies Other Than GSA, Usually for a Discrete Range of Supplies or Services </li></ul></ul><ul><li>GWAC Examples Include : </li></ul><ul><ul><li>ITOP - IT Omnibus Procurement - includes technical services, hardware and software </li></ul></ul><ul><ul><li>Millennia Lite – Performance based, full spectrum IT </li></ul></ul><ul><ul><li>MOBIS - Management, Organizational and Business Improvement Services </li></ul></ul>© 2008 Venable LLP
  12. 12. Multiple Award Contracts (MACs) <ul><li>Historically, Single Award Contracts (i.e., one contract, one contractor) Were the Norm </li></ul><ul><li>Federal Acquisition Streamlining Act of 1994 (FASA) </li></ul><ul><ul><li>Made multiple award a preference over single award contracts </li></ul></ul><ul><li>MACs Emphasize the Task Order Environment </li></ul><ul><ul><li>Individual contract order placed under overall contract vehicle </li></ul></ul><ul><li>Competition for Task Orders is Limited to MAC Contractors </li></ul><ul><ul><li>“ Hunting License” </li></ul></ul><ul><li>Limited Right to Protest Task Order Award </li></ul><ul><ul><li>Items that can be protested include maximum value, scope or period, or orders in excess of $10M </li></ul></ul>© 2008 Venable LLP
  13. 13. Unique Concepts of Government Contracting <ul><li>Actual Authority Doctrine </li></ul><ul><ul><li>Only those with actual authority may bind the government </li></ul></ul><ul><ul><ul><li>Contracting Officer versus COTR </li></ul></ul></ul><ul><li>Termination for Convenience </li></ul><ul><ul><li>Government may terminate in whole or in part at any time when in “the Government’s best interest” </li></ul></ul><ul><li>Flowdowns to Subcontractors </li></ul><ul><ul><li>Many standard FAR contract clauses require the prime contract to make the terms of such clauses applicable to its subcontractors </li></ul></ul><ul><ul><li>Prime Contractors often go beyond mandatory flow-down clauses and impose additional or different terms and conditions, leading to issues for negotiation </li></ul></ul><ul><li>Changes Clause </li></ul><ul><ul><li>Allows the Government to unilaterally issue orders to the contractor to change the terms of the contract </li></ul></ul><ul><ul><ul><li>Contractor may submit request for equitable adjustment to price, schedule and other applicable terms </li></ul></ul></ul><ul><ul><li>FAR Part 12 requires bilateral modifications to change the terms of the contract </li></ul></ul>© 2008 Venable LLP
  14. 14. Unique Concepts of Government Contracting <ul><li>Christian Doctrine </li></ul><ul><ul><li>In the event that the Government contracting officer fails to include a mandatory contract clause in a prime contract, the omitted clause will be “read into” and made applicable to the contract by operation of law under the Christian doctrine, enunciated in G.L. Christian & Assoc. v. U.S . </li></ul></ul><ul><li>Commercial Item Acquisitions </li></ul><ul><ul><li>To implement the Federal Government’s preference for acquiring commercial items, policies and procedures more closely resembling those of the commercial marketplace were added to the FAR. </li></ul></ul><ul><ul><li>For commercial item acquisitions, Government contracting officers are authorized to tailor all but a few of the standard FAR contract clauses in a manner that is not inconsistent with customary commercial practice for the item being acquired. </li></ul></ul>© 2008 Venable LLP
  15. 15. Unique Concepts of Government Contracting <ul><li>Truth in Negotiations Act (TINA) </li></ul><ul><ul><li>Contractors must submit “cost or pricing data” where any negotiated contract is expected to exceed $500,000 </li></ul></ul><ul><ul><ul><li>Government obtains substantial visibility into underlying elements of pricing </li></ul></ul></ul><ul><li>Cost Principles </li></ul><ul><ul><li>Define when and to what extent costs can be recovered under a government contract </li></ul></ul><ul><ul><ul><li>All costs must be allowable, allocable, and reasonable </li></ul></ul></ul><ul><li>Cost Accounting Standards (CAS) </li></ul><ul><ul><li>Certain contractors and subcontractors are required to comply with CAS and to disclose in writing, and follow consistently, their cost accounting practices. </li></ul></ul><ul><li>Audits </li></ul><ul><ul><li>Government may audit a contractor’s proposal price, as well as any other data of the contractor for up to three years after the final contract payment </li></ul></ul><ul><ul><li>DCAA audits many aspects of government contractor operations, including: purchasing, government property, estimating, compensation, and management information systems </li></ul></ul>© 2008 Venable LLP
  16. 16. Bid Protests <ul><li>Choice of Forum = CO, GAO, USCOFC </li></ul><ul><li>Timeliness Rules </li></ul><ul><li>Varying Degrees of Discovery </li></ul><ul><li>Protective Orders for Competition Sensitive and Source Selection Sensitive Information </li></ul><ul><li>Stay of Contract Performance During the Pendency of the Protest </li></ul><ul><li>Remedies </li></ul>© 2008 Venable LLP
  17. 17. Contract Disputes Act of 1978 <ul><li>Contract Disputes Act (CDA) </li></ul><ul><ul><li>Codified a special process for disputes arising under a government contract between the Government and the contractor </li></ul></ul><ul><ul><li>Contractors must follow the mandated procedures of the CDA, or risk waiving or otherwise losing their right to proceed against the agency </li></ul></ul><ul><ul><li>The FAR implements the CDA through the standard “disputes clause” </li></ul></ul><ul><li>The “Disputes Clause” Defines a Claim as: </li></ul><ul><ul><li>“ A written demand or written assertion by one of the contracting parties seeking, as a matter of right, the payment of money in a sum certain, the adjustment or interpretation of contract terms, or other relief arising under or relating to [the] contract.” </li></ul></ul><ul><li>Contractors Must Continue Performance Pending Resolution of a Dispute with the Government </li></ul>© 2008 Venable LLP
  18. 18. Presentation of a “Claim” <ul><li>Contractor Initiates the Dispute Process by Submitting a Claim to the Contracting Officer (CO) </li></ul><ul><li>Claims Over $100,000 Must be Certified by the Contractor </li></ul><ul><li>If the Contractor and the Government are Unable to Negotiate a Resolution to the Dispute, the CO Must Issue a “Final Decision” </li></ul><ul><li>Once a Final Decision (or Sufficient Passage of Time) has Occurred, the Contractor may “Appeal” the CO’s Final Decision </li></ul>© 2008 Venable LLP
  19. 19. Steps In Claims Litigation <ul><li>Request for Final Decision </li></ul><ul><li>Issuance of Contracting Officer’s (CO’s) Final Decision </li></ul><ul><li>Notice of Appeal and Filing of the Complaint </li></ul><ul><li>Civilian Agency Board of Contract Appeals or Armed Services Board of Contract Appeals or the U.S. Court of Federal Claims </li></ul><ul><li>Appeal to the U.S. Court of Appeals for the Federal Circuit </li></ul>© 2008 Venable LLP
  20. 20. Candidate Issues for Contract Disputes <ul><li>IP Rights </li></ul><ul><li>Contractor Claims for Money </li></ul><ul><li>Government Claims </li></ul><ul><li>Termination for Default </li></ul>© 2008 Venable LLP
  21. 21. Termination for Default (T4D) <ul><li>Cure Notice </li></ul><ul><li>Show Cause Notice </li></ul><ul><li>Challenging the T4D </li></ul><ul><li>Past Performance </li></ul><ul><li>Non-responsibility </li></ul><ul><li>Excess Reprocurement Costs </li></ul>© 2008 Venable LLP
  22. 22. Oversight Issues – GSA’s Get It Right Program <ul><li>Are Agencies Ordering Properly – scope issues? </li></ul><ul><li>Contractors are Expected to be Proactive </li></ul><ul><li>Ensuring Competition on Schedules </li></ul><ul><li>Do Contractors Report Sales Correctly? </li></ul>© 2008 Venable LLP
  23. 23. Avoiding Government Contracting Pitfalls <ul><li>Civil False Claims Act </li></ul><ul><ul><li>Provides for treble damages and civil fines for the reckless submission of false claims for payment to the Government. </li></ul></ul><ul><ul><ul><li>Also includes whistleblower (or qui tam ) provisions. </li></ul></ul></ul><ul><li>Improper Business Practices </li></ul><ul><ul><li>The FAR contains several prohibitions and restrictions on actual (and sometimes only apparent) improper business practices, including: </li></ul></ul><ul><ul><ul><li>Contractor gratuities to Government personnel, kickbacks, antitrust violations, agreements to pay contingent fees, prohibitions on placing unreasonable restrictions on subcontractor sales, and Organizational Conflicts of Interest (OCIs) </li></ul></ul></ul><ul><ul><li>Remedies available to the Government include criminal and civil penalties, default termination of affected contracts, and suspension and debarment from Federal acquisitions. </li></ul></ul>© 2008 Venable LLP
  24. 24. Avoiding Government Contracting Pitfalls <ul><li>Mandatory Disclosure </li></ul><ul><ul><li>Requires mandatory disclosure in writing to the Office of the Inspector General with a copy to the contracting officer whenever, in connection with the award, performance, or closeout of a contract or any subcontract, the contractor has credible evidence of: </li></ul></ul><ul><ul><ul><li>Criminal law violations involving fraud, conflict of interest, bribery, or gratuity violations; </li></ul></ul></ul><ul><ul><ul><li>Civil False Claims Act violations; or </li></ul></ul></ul><ul><ul><ul><li>Significant overpayments. </li></ul></ul></ul><ul><ul><li>Mandatory Disclosure Rule provides for suspension or debarment penalty for knowing failure to timely disclose . </li></ul></ul>© 2008 Venable LLP
  25. 25. Avoiding Government Contracting Pitfalls <ul><li>Ethics and Compliance Programs </li></ul><ul><li>Recent FAR changes require companies to have an ongoing business ethics and compliance program and internal control system within 90 days of contract award (not required for small business or commercial item contracts). </li></ul><ul><li>Program requires companies to: </li></ul><ul><ul><li>“ Establish standards and procedures to facilitate timely discovery of improper conduct in connection with Government contracts”; </li></ul></ul><ul><ul><li>“ Ensure corrective measures are promptly instituted and carried out”; </li></ul></ul><ul><ul><li>Assign responsibility at a sufficiently high level and provide adequate resources to ensure effectiveness of the business ethics awareness and compliance program and internal control system; and </li></ul></ul><ul><ul><li>Exclude principals “whom due diligence would have exposed as having engaged in conduct that is in conflict with the Contractor’s code of business ethics and conduct.” </li></ul></ul>© 2008 Venable LLP
  26. 26. Avoiding Government Contracting Pitfalls <ul><li>Intellectual Property Rights – The FAR and agency supplements to the FAR contain complex provisions applicable to intellectual property rights </li></ul><ul><ul><li>For example, unless the contractor takes steps to identify limitations on the Government’s rights to the contractor’s intellectual property ( e.g. , technical data), the Government may acquire “unlimited” rights to such property, meaning that the Government has the right to use, disclose, reproduce, prepare derivative works, distribute copies to the public, and perform publicly and display publicly, in any manner and for any purpose, and to have or permit others to do so. </li></ul></ul><ul><li>Revolving Door Restri ctions – Restrictions and/or limitations apply to post-Government employment activities of certain former Government employees </li></ul>© 2008 Venable LLP
  27. 27. Socioeconomic Program Opportunities: An Overview <ul><li>The Federal Acquisition Regulation (FAR) Part 19 Implements Socioeconomic Programs Applicable to Agency Acquisitions: </li></ul><ul><ul><li>Small business program </li></ul></ul><ul><ul><li>Small disadvantaged business program </li></ul></ul><ul><ul><li>Economically and socially disadvantaged (8(a)) business program </li></ul></ul><ul><ul><li>Woman-owned business program </li></ul></ul><ul><ul><li>Historically underutilized business zone (HUBZone) program </li></ul></ul><ul><ul><li>Veteran-owned small business program </li></ul></ul><ul><ul><li>Service-Disabled Veteran-Owned small business program </li></ul></ul><ul><ul><li>Native American, Alaskan, and Hawaiian program incentives </li></ul></ul><ul><li>Qualifying Contractors may Receive Preferential Treatment or Competitive Price Reductions </li></ul>© 2008 Venable LLP
  28. 28. Small Business Program: Gaining a Competitive Edge <ul><li>Benefits of Contracting with Qualified Companies Under the Small Business Program Include : </li></ul><ul><ul><li>Contracts being totally or partially set-aside for small businesses; </li></ul></ul><ul><ul><li>Competitive contracts being awarded with a price elevation preference; and/or </li></ul></ul><ul><ul><li>Subcontracting plans for large business Federal contractors including a small business subcontracting goal. </li></ul></ul><ul><li>Disadvantages(?) to Consider: </li></ul><ul><ul><li>Control and Affiliation Pitfalls </li></ul></ul>© 2008 Venable LLP
  29. 29. First Steps: What is small? <ul><li>A Company Must be “Small” According to the SBA for Entry into any Small Business Program </li></ul><ul><li>Size Standards are Based on the North American Industry Classification System (“NAICS”), Which Establishes Standards for Various Types of Industries </li></ul><ul><li>Under the NAICS, Size is Based on Either: </li></ul><ul><ul><li>1. Number of Employees: The number of employees of the concern (including part-time employees and the employees of domestic and foreign affiliates) based on number of employees for each of the pay periods over the past 12 months; or </li></ul></ul><ul><li>2. Annual Receipts: Gross revenue averaged over previous three years. </li></ul>© 2008 Venable LLP
  30. 30. Small Disadvantaged Business (SDB) Program <ul><li>A Business Development Program Created to Help Small Disadvantaged Businesses Compete and Access the Federal Procurement Market. </li></ul><ul><li>To Qualify, a Company Must: </li></ul><ul><ul><li>Meet applicable size standards for small businesses; </li></ul></ul><ul><ul><li>Be at least 51% owned and controlled by a socially and economically disadvantaged individual or individuals; </li></ul></ul><ul><ul><ul><li>African Americans, Hispanic Americans, Asian Pacific Americans, Subcontinent Asian Americans, and Native Americans are presumed to qualify; </li></ul></ul></ul><ul><ul><ul><li>Other individuals can qualify if they show by a </li></ul></ul></ul><ul><ul><ul><li>“ preponderance of the evidence” that they are disadvantaged; </li></ul></ul></ul><ul><ul><li>All individuals must have a net worth of less than $750,000, excluding the equity of their business and primary residence. </li></ul></ul>© 2008 Venable LLP
  31. 31. Small Disadvantaged Business (SDB) Program: Benefits <ul><li>Qualified prime contractors can receive an evaluation price credit of 10% in competing with other contractors if: </li></ul><ul><ul><ul><li>The SDB is certified by the SBA; and </li></ul></ul></ul><ul><ul><ul><li>The procurement is a competitive negotiated acquisition over $500,000, or $1,000,000 in construction </li></ul></ul></ul><ul><li>The evaluation credit does not apply to small business set asides, 8(a) acquisitions, or contracts performed entirely outside the United States. </li></ul>© 2008 Venable LLP
  32. 32. 8(a) Business Program <ul><li>Offers a Broad Scope of Assistance to Socially and Economically Disadvantaged Firms and Does Not Strictly Pertain to Benefits in Federal Procurement, as does the SDB Program. </li></ul><ul><ul><li>Qualified companies may remain in the 8(a) program for a total of 9 years. </li></ul></ul><ul><ul><li>8(a) Firms Automatically Qualify for SDB Certification. </li></ul></ul><ul><li>In Addition to the Qualifications Necessary for SDB Certification, 8(a) Firms Must: </li></ul><ul><ul><li>Be in business for at least two years; </li></ul></ul><ul><ul><li>Display reasonable success potential; </li></ul></ul><ul><ul><li>Demonstrate good character; and </li></ul></ul><ul><ul><li>All individuals must have a net worth of less than $250,000, excluding the value of their business and personnel residence. </li></ul></ul>© 2008 Venable LLP
  33. 33. 8(a) Business Program: Benefits <ul><li>8(a) Firms may form Joint Ventures and Teams to Bid on Contracts; </li></ul><ul><li>This Enhances the Ability of 8(a) Firms to Perform Larger Prime Contracts and Overcome the Effects of Contract Bundling; </li></ul><ul><li>Sole Source Awards When no Reasonable Expectation that Two Eligible Firms will Submit Offers and Award will not Exceed $5M for Contracts Assigned NAICS Codes and $3M for all Other Contracts. </li></ul>© 2008 Venable LLP
  34. 34. Woman-Owned Business Program <ul><li>The Federal Acquisition Streamlining Act of 1994 Established the Government-wide Goal for Participation by Small Business Concerns Owned and Controlled by Women at not Less than 5% of the Total Value of All Prime Contract and Subcontract Awards. </li></ul><ul><ul><li>Normally, a self-certification process. </li></ul></ul><ul><li>Benefits of Subcontracting with a Woman-Owned Business: </li></ul><ul><ul><li>Although there are currently no set-aside procurement programs or incentives for contracting with women-owned businesses, the 5% procurement goal established by FASA means agencies have a strong incentive to look for qualified women-owned businesses when filling contractual needs. </li></ul></ul>© 2008 Venable LLP
  35. 35. Historically Underutilized Business Zone “HUBZone” Program <ul><li>The HUBZone Empowerment Contracting Program is Designed to Stimulate Economic Development and Encourage Job Creation in Urban and Rural Communities. </li></ul><ul><li>To Qualify a Company: </li></ul><ul><ul><li>Must be a small business; </li></ul></ul><ul><ul><li>Must be owned and controlled by U.S. citizens; </li></ul></ul><ul><ul><li>35% of employees must live in a HUBZone; and </li></ul></ul><ul><ul><li>Must maintain a principal office in a HUBZone. </li></ul></ul><ul><li>Woman-Owned Businesses, 8(a) Participants, and SDBs can Qualify as HUBZone SBCs, and Receive Preferential Treatment, including: </li></ul><ul><ul><li>Permanent status as an HUBZone SBC, if otherwise qualified </li></ul></ul><ul><li>Benefits of Contracting with a HUBZone Company: </li></ul><ul><ul><li>HUBZone companies receive federal contracting preferences . </li></ul></ul>© 2008 Venable LLP
  36. 36. Service-Disabled Veteran Owned Business Program <ul><li>Benefits for Service Disabled Veteran Owned Businesses </li></ul><ul><ul><li>Veterans Entrepreneurship and Small Business Development Act of 1999, Expanded the Eligibility for Certain Small Business Assistance Programs to Include Veterans: </li></ul></ul><ul><ul><li>Veterans Benefits Act of 2003 authorized agencies to award sole source or set-aside contracts to service disabled veteran owned businesses </li></ul></ul><ul><li>Benefits of Contracting with a Veteran-Owned Companies: </li></ul><ul><ul><li>Federal contracting agencies must establish and achieve a participation goal of 3% of the total value of all prime contract and subcontract awards for each fiscal year for small businesses owned and controlled by veterans with service-connected disabilities. </li></ul></ul>© 2008 Venable LLP
  37. 37. Native American, Alaskan & Hawaiian Objectives and Initiatives <ul><li>Office of Native American Affairs is Devoted to Ensuring American Indians, Native Alaskans and Native Hawaiians Seeking to Create, Develop and Expand Small Businesses Have Full Access to Business Development and Expansion Tools Available Through the Agency's Entrepreneurial Development, Lending and Procurement Programs . </li></ul><ul><ul><li>SBA has a particular interest in assisting small business and economic development in disadvantaged tribal areas. </li></ul></ul><ul><ul><li>Native American businesses increased 84% from 1992 to 1997. </li></ul></ul><ul><li>Benefits of Contracting with Native American Businesses: </li></ul><ul><ul><li>May permanently remain an 8(a) company, if otherwise qualified </li></ul></ul><ul><ul><li>Rebuttable presumption of socially disadvantaged status. </li></ul></ul>© 2008 Venable LLP
  38. 38. SBA, DOD & NASA Mentor / Protégé Programs <ul><li>No Determination of Affiliation or Control: </li></ul><ul><ul><li>Between a protégé firm and its mentor based on the mentor/protégé agreement or any assistance provided pursuant to the agreement. </li></ul></ul><ul><li>Generally, a Mentor May Only Have one Protégé at a Time . </li></ul><ul><li>Credit Under Subcontracting Plans for Un-reimbursed costs: </li></ul><ul><ul><li>Mentor’s may receive credit for certain costs incurred under the Program in providing developmental assistance to protégé firms </li></ul></ul>© 2008 Venable LLP
  39. 39. Subcontracting Plans for Large Business Federal Contractors <ul><li>A Plan, Adopted by the Contractor, to Further the Government's Program Under the Small Business Act </li></ul><ul><li>Successful Offerors Under both Negotiated and Sealed Bidding Acquisitions that are Expected to Exceed $500,000 ($1M for construction) and that have Subcontracting Possibilities must Provide a Formal Subcontracting Plan </li></ul><ul><ul><li>Percentage Goals for using Small Business Concerns, SDBs, Woman-owned Small Businesses </li></ul></ul><ul><ul><li>The name of the individual who will administer the offeror's subcontracting program; </li></ul></ul><ul><ul><li>A description of the efforts the offeror will make to ensure that small businesses have an equitable opportunity to compete for subcontracts; </li></ul></ul><ul><ul><li>Assurances that the offeror will include the clause at FAR 52.219-8 (Utilization of Small Business Concerns, SDB and Woman-owned Small Business Concerns); </li></ul></ul><ul><ul><li>Additional Assurances A recitation of the records the offeror will maintain </li></ul></ul><ul><ul><li>to demonstrate procedures adopted to comply with the plan </li></ul></ul>© 2008 Venable LLP
  40. 40. Teaming Arrangements <ul><li>Enforceability? </li></ul><ul><li>Trend is Toward Larger and More Complex Teams </li></ul><ul><li>How to Avoid a Finding of “Affiliation” if Teaming to Win a Set-Aside Procurement </li></ul>© 2008 Venable LLP
  41. 41. Problems Under Contractor Team Arrangements: The 50% Rule <ul><li>A Concern May not be Awarded a Contract Under Subsection (a) of this Section as a Small Business Concern Unless the Concern Agrees That - </li></ul><ul><ul><li>in the case of a contract for services (except construction), at least 50 percent of the cost of contract performance incurred for personnel shall be expended for employees of the concern; or </li></ul></ul><ul><ul><li>in the case of a contract for procurement of supplies (other than procurement from a regular dealer in such supplies), the concern will perform work for at least 50 percent of the cost of manufacturing the supplies (not including the cost of materials). </li></ul></ul><ul><li>15 U.S.C. 644(o)(1) </li></ul>© 2008 Venable LLP
  42. 42. Problems Under Contractor Team Arrangements: The 50% Rule <ul><li>Small Business Administration Regulations, 13 C.F.R. 125 </li></ul><ul><ul><li>Generally defines the “cost of performing the contract” as “All allowable direct and indirect costs allocable to the contract, excluding profit or fee.” </li></ul></ul><ul><li>Cost of Manufacturing </li></ul><ul><ul><li>Those costs incurred by the firm in the production of the end item being acquired </li></ul></ul><ul><li>Cost of Service Contract </li></ul><ul><ul><li>Direct labor costs plus any overhead which has only direct labor as its base, plus general and administrative costs multiplied by the labor cost </li></ul></ul>© 2008 Venable LLP
  43. 43. Watching Out for “Affiliation” Problems When Contracting With Large Businesses <ul><li>For Restricted Procurements (other than 8(a)), the Following Individuals or Entities may Challenge an Offeror’s Self-Certification as a Small Business: </li></ul><ul><ul><ul><li>The Contracting Officer may protest the representation of an offeror; </li></ul></ul></ul><ul><ul><ul><li>An offeror, the SBA, or other interested party may protest the representation of an offeror in a specific offer; and/or </li></ul></ul></ul><ul><ul><ul><li>A protest may be lodged by any “interested party.” </li></ul></ul></ul><ul><ul><li>FAR 19.302(a) & (b) </li></ul></ul>© 2008 Venable LLP
  44. 44. “ Affiliation” Defined <ul><li>The Regulation: </li></ul><ul><li>“ A contractor and subcontractor are treated as joint venturers if the ostensible subcontractor will perform primary and vital requirements of a contract or if the prime contractor is unusually reliant upon the ostensible subcontractor. All requirements of the contract are considered in reviewing such relationship, including contract management, technical responsibility, and the percentage of subcontracted work.” </li></ul><ul><li>13 C.F.R. § 121.103(f)(4) </li></ul>© 2008 Venable LLP
  45. 45. The Case Law: Affiliation = “The Totality of the Circumstances” Test <ul><li>Courts Look To: </li></ul><ul><li>Who will manage the contract? </li></ul><ul><li>Which party possesses the requisite background and expertise to carry out the contract? </li></ul><ul><li>Which party chased the contract? </li></ul><ul><li>What degree of collaboration was there on the bid or proposal? </li></ul><ul><li>Are there discrete tasks to be performed by each concern or is there a commingling of personnel and resources? </li></ul><ul><li>What is the amount of work to be performed by each? </li></ul><ul><li>Which concern will perform the more complex and/or costly contract functions? </li></ul>© 2008 Venable LLP
  46. 46. Affiliation Can Arise: <ul><li>Through Contractual Relationships </li></ul><ul><ul><li>(13 C.F.R. § 121.103(a)) </li></ul></ul><ul><li>Through Common Management </li></ul><ul><ul><li>(13 C.F.R. § 121.103(e)) </li></ul></ul><ul><li>Under Joint Venture Relationships </li></ul><ul><ul><li>(13 C.F.R. § 121.103(f)) </li></ul></ul><ul><li>Through Stock Ownership </li></ul><ul><ul><li>(13 C.F.R. § 121.103(c)) </li></ul></ul><ul><li>The SBA will closely scrutinize a newly organized concern </li></ul>© 2008 Venable LLP
  47. 47. Small Business Size Recertification <ul><li>The Traditional Rule </li></ul><ul><ul><li>SBA determines the size status of a concern, including its affiliates, as of the date the concern submits a written self-certification that it is small to the procuring activity as part of its initial offer . . . which includes price. </li></ul></ul><ul><ul><li>Thus, under the traditional rule, it is irrelevant whether the contractor grows beyond the size standard, or is acquired by a large business, during performance of the contract. </li></ul></ul><ul><ul><li>Several exceptions to the traditional rule have been established. </li></ul></ul>© 2008 Venable LLP
  48. 48. Small Business Size Recertification <ul><li>Novation or Change of Name Agreements </li></ul><ul><ul><li>Within 30 days of an approved contract novation, a contractor must recertify its small business size status to the procuring agency, or inform the procuring agency that it is other than small. If the contractor is other than small, the agency can no longer count the options or orders issued </li></ul></ul><ul><li>Merger or Acquisition </li></ul><ul><ul><li>Where a contract novation is not required, the contractor must, within 30 days of the transaction becoming final, recertify its small business size status to the procuring agency, or inform the procuring agency that it is other than small. If the contractor is other than small, the agency can no longer count the options or orders issued pursuant to the contract, from that point forward, towards its small business goals. The agency and the contractor must immediately revise all applicable Federal contract databases to reflect the new size status. </li></ul></ul>© 2008 Venable LLP
  49. 49. Small Business Size Recertification <ul><li>Long Term Contracts </li></ul><ul><ul><li>Final Rule including these provisions went into effect on April 20, 2009. </li></ul></ul><ul><ul><li>Long term contracts are contracts of more than 5 years, including options. Long term contracts may include Multiple Award Schedule (MAS) Contracts, Multiple Agency Contracts (MACs) and Government-wide Acquisition Contracts (GWACs). </li></ul></ul><ul><ul><li>A contracting officer must request that a business concern re-certify its small business size status no more than 120 days prior to the end of the fifth year of the contract, and no more than 120 days prior to exercising any option thereafter. If the contractor certifies that it is other than small, the agency can no longer count the options or orders issued pursuant to the contract towards its small business prime contracting goals. The agency and the contractor must immediately revise all applicable Federal contract databases to reflect the new size status. </li></ul></ul><ul><ul><li>A business concern that certified itself as other than small, either initially or prior to an option being exercised, may recertify itself as small for a subsequent option period if it meets the applicable size standard. </li></ul></ul>© 2008 Venable LLP
  50. 50. Small Business Size Recertification <ul><li>Long Term Contracts (cont’d) </li></ul><ul><ul><li>Contracting Officer’s Discretion </li></ul></ul><ul><ul><ul><li>A contracting officer may require concerns to recertify their size status in response to a solicitation for an order. The SBA will determine size as of the date the concern submits its self-representation as part of its response to the solicitation for the order. </li></ul></ul></ul><ul><ul><li>Blanket Purchase Agreement </li></ul></ul><ul><ul><ul><li>The SBA does not consider a Blanket Purchase Agreement (BPA) a contract. Goods and services are acquired under a BPA when an order is issued. Thus, a concern's size may not be determined based on its size at the time of a response to a solicitation for a BPA. </li></ul></ul></ul>© 2008 Venable LLP
  51. 51. <ul><li>Comments? </li></ul><ul><li>Questions? </li></ul><ul><li>Thank you! </li></ul>© 2008 Venable LLP