Recent developments tim connelly

Recent Developments in Small Business Contrac5ng Connelly Law Oﬃce PLLC 651.270.9346 tconnelly@5mconnellylaw.com

Agenda •  Overview of Small Business Contrac5ng •  Small Business Jobs Act Implementa5on •  Teaming Arrangements Update •  Evolu5on of VA’s “Veterans First” Program •  Ques5ons

Small Business Contrac5ng •  Federal Policy to Promote Small Businesses –  NAICS Codes: revenue or employee based –  CCR/ORCA/bid/proposal: represent size & status –  Small, Disadvantaged, HUB Zone, 8(a), SDVOSB, WOSB, ED WOSB •  Federal Prime Contracts: Par5al/full set-‐asides •  Separate VA “Veterans First” Program •  Subcontrac5ng Assistance Program

Small Business Contrac5ng •  Federal Prime Contrac5ng –  VA veriﬁca5on program for VOSB/SDVOSBs –  Other agencies accept “self-‐cer5ﬁca5on” •  Federal Subcontrac5ng & Teaming –  Small business subcontrac5ng program –  Joint ventures with small businesses –  Small business evalua5on factors

Small Business Contrac5ng •  Concerns with Small Business Fraud & Abuse •  DoD IG Report 29 Feb 12: –  Found fraud and abuse in SDVOSB Program –  Recommends VA-‐style cer5ﬁca5on •  American Small Business League Report –  Washington Post March 2012 –  Listed large ﬁrms that received set-‐asides in 2010 –  Included Honeywell, Oshkosh Truck, Lockheed…

United States v. John White•  New York contractor pleads guilty to defrauding VA and Army•  White falsely claimed to be disabled veteran•  Won $16 million in VA construction contracts•  Faces up to 75 years in prison; $3.75 million fines

Minnesota Transit Constructors Inc. •  Minnesota TC, Inc. was design/build joint venture prime contractor for Hiawatha Light Rail •  Federally-‐funded contract required use of DBE •  Minnesota TC claimed DBEs provided supplies and services actually supplied by non-‐DBE subs •  DBEs were “merely extra par5cipants . . . To make it appear as if a DBE had performed. . .” •  Minn TC 7 “a number of subcontractors” agreed to pay $4.6 million to senle claims under the FCA

Small Business Jobs Act Implementa5on

Small Business Jobs Act of 2010 Miscellaneous Sec5ons of Interest Sec. 1321 – Preven5on of subcontrac5ng misrepresenta5on Sec. 1333 – Encourages agency heads to promote small business and achieve small business goals Sec. 1342 – Annual recer5ﬁca5on of small business size & status Sec. 1343 – Training for contrac5ng and enforcement personnel to properly classify small businesses Sec. 1347 – Small business contrac5ng parity (HUB Zone Rule)

Small Business Jobs Act of 2010 Sec5ons Reviewed Today • 1331– Authority to set aside of MAS/FSS orders • 1344 – Timely payment of subcontractors • 1341 – Deemed knowing cer5ﬁca5on and presumed loss rule • 1322 – Good faith eﬀort to use subcontractors named in bid or proposal

Small Business Jobs Act of 2010 Sec5on 1331 •  Reserva5on of Prime Contract Awards For Small Business: –  Agencies may set aside part(s) of MAS contracts –  Agencies may set aside FSS/MAS orders •  Implemented by Series of Interim Clauses: –  HUBZone, 8(a), SDVOSB, WOSB, EDWOSB… –  Allows for set-‐side orders on exis)ng GSA contract

Small Business Jobs Act of 2010 Sec5on 1331 •  52.219-‐3: NOTICE OF HUBZONE SET-‐ASIDE OR SOLE SOURCE AWARD •  52.219-‐13: NOTICE OF SET-‐ASIDE OF ORDERS •  52.219-‐14: LIMITATIONS ON SUBCONTRACTING •  52.219-‐27: NOTICE OF SERVICE-‐DISABLED VETERAN-‐OWNED SMALL BUSINESS SET-‐ASIDE •  52.219-‐29: NOTICE OF SET-‐ASIDE FOR ECONOMICALLY DISADVANTAGED WOMEN-‐OWNED SMALL BUSINESS (EDWOSB) CONCERNS •  52.219-‐30: NOTICE OF SET-‐ASIDE FOR WOMEN-‐OWNED SMALL BUSINESS CONCERNS ELIGIBLE UNDER THE WOMEN-‐OWNED SMALL BUSINESS PROGRAM

Small Business Jobs Act of 2010 Sec5on 1331 •  KO set-‐aside analysis at the order level •  KR size and status cer5fica5on at the order level •  Large businesses: –  May accept new clauses in GSA/MAS contracts –  Review all GSA orders for set-‐aside language: •  SF 1449 checkboxes •  Presence of set-‐aside clauses •  Take steps to preserve op5ons: –  Procedure required to prevent bid on set-‐asides –  Take steps to correct invalid cer5fica5ons –  Lener to contrac5ng officer

Deemed Cer5fica5on/Presumed Loss Small Business Jobs Act Sec5on 1341 •  Deemed affirma5ve, willful and inten5onal cer5fica5ons: –  Submission of bid or proposal for set-‐aside contract or subcontract –  Submission of bid or proposal for contract or subcontract otherwise counted as small business award –  Registra5on on electronic database – ORCA, CCR, VetBiz •  Presump5on of Loss –  Full contract Price –  No Allowance for Delivered Goods/Services

Deemed Cer5fica5on/Presumed Loss Small Business Jobs Act Sec5on 1341 •  Deemed cer5fica5on and presump5on are irrefutable •  Requires signed cer5fica5on of small business size/status by “authorized official” •  BUT – Contractor can limit liability by showing: –  Uninten5onal error/technical malfunc5on –  Management procedures on representa5ons –  Unclear/ambiguous requirement –  Efforts made to correct invalid cer5fica5on

Payments to Subcontractors Small Business Jobs Act Section 1334•  Requires large prime to notify KO if payment to subcontractor is: –  reduced, or –  more than 90 days past due•  Prime cannot prohibit sub from talking to KO about payments•  KO can require prime to enter into funds control agreement•  Prime with unjustified payment history reported to FAPIIS

Payments to Subcontractors Small Business Jobs Act Section 1334 •  Exploring other opportuni5es to accelerate payments to small business subcontractors to build on SBA’s implementa5on of sec5on 1334 •  OMB issued government-‐wide guidance to agencies on September 14, 2011: –  To the full extent permined by law, agencies shall make their payments to small business contractors as soon as prac5cable –  Goal of making payments within 15 days of receipt

Teaming Arrangements Update

Overview Teaming Arrangements •  A Teaming Arrangement is: –  Two or more companies form a partnership or joint venture to act as a potential prime contractor; or . . . –  A potential prime contractor agrees with one or more other companies to have them act as its subcontractors under a specified Government contract or acquisition program. FAR § 9.601•  Common way to combine resources to compete for a contract

Government Recognition Teaming Arrangements•  Government will recognize integrity and validity of contractor team arrangements; provided - arrangements are identified and company relationships are fully disclosed in an offer or, - for arrangements entered after submission of an offer, before arrangement becomes effective•  The Government will not normally require or encourage the dissolution of contractor team arrangements FAR § 9.603

Government Recognition Teaming Arrangements•  Government reservation of rights: –  Require consent to subcontracts under FAR Part 44 –  Determine the responsibility of the prime contractor under FAR subpart 9.1, on the basis of the stated teaming arrangement –  Enforce policy on competitive subcontracting at any time during contract performance –  Look to the prime contractor as the party fully responsible for contract performance, notwithstanding any teaming arrangement FAR § 9.604

Enforceability Teaming Arrangements•  A contract is, “a mutually binding legal relationship obligating the seller to furnish the supplies or services … and the buyer to pay for them.” FAR § 2.101•  Requires “meeting of the minds” on basic terms of the contract: –  Price –  Subject matter –  Delivery Schedule

Enforceability Teaming Arrangements•  Teaming agreements generally not intended to be a binding contract between the parties. –  Forward looking and general – not likely to be a contract –  Detailed as to terms of payment, performance, and timelines – may be a contract•  Druar v. Ellerbee & Co., 222 Minn. 383, 24 N.W. 2d 820 (1946): Agreement to pursue military construction contracts unenforceable

Enforceability Teaming Arrangements•  Teaming agreements may be construed as a binding contract between the parties•  Contract formation in Virginia: (1) Scope of the work to be performed + (2) the compensation to be paid + (3) the terms of the agreement = Intent to enter into a contact•  EG&G Technical Services v. Cube Corporation, Fairfax County, VA: Small business prime bound to contract with Beltway sub for Navy baseops contract

Small Business Jobs Act of 2010 Sec5on 1322 •  Offeror will make “good faith effort” to acquire supplies, services, materials from small business “used in preparing and submirng” bid or proposal •  Offeror will “provide to the contrac5ng officer a wri0en explana5on if the offeror or bidder fails” to acquire supplies, services, materials from small business “used in preparing and submirng” bid or proposal

Small Business Jobs Act of 2010 Sec5on 1322 •  A prime contractor “uses” a subcontractor in preparing its bid if: –  Proposal or bid references small business, or –  Offeror has subcontract or agreement in principle to use subcontractor for por5on of specific contract, or –  Small business drased part of proposal or offeror used small business cost/pricing or technical exper5se, and –  There is “an intent or understanding that SBC will be awarded a subcontract…”

Small Business Jobs Act of 2010 Sec5on 1332 •  Does not change substan5ve law – –  subcontract forma5on governed by state law “mee5ng of of the minds” – objec5ve test –  “Good faith eﬀort” alone does not force prime to use subcontractor unless there is agreement on all elements of subcontract •  In SBA’s eyes “good faith eﬀort” probably requires use of subcontractor at stated price •  Can KO refuse to approve other subcontractors under FAR Part 44?

Small Business Jobs Act of 2010 Sec5on 1332 •  Small Business Strategy: –  Get named in the proposal –  Dras part of proposal –  If not awarded subcontract FOIA prime’s “wrinen explana5on” to KO •  Large Business Strategy: –  Clear agreement that no subcontract is guaranteed –  Include valid business reason in explana5on to KO –  Avoid doing work in house/using large business sub

Brooks Range Contract Serv., Inc. CoFC, Jan 6, 2012 Teaming Arrangements •  Post-‐award bid protest of GSA building management services contract •  Awardee proposed a “Contractor Teaming Agreement” under solicita5on & GSA guidance: –  Joint venture must have own GSA contract –  Each member must have schedule contract

Brooks Range Contract Serv., Inc. CoFC, Jan 6, 2012 Teaming Agreements •  Protestor claimed: –  Awardee’s CTA was a JV under Georgia law –  Award to JV w/o GSA contract not allowed •  CoFC Replied (in dicta): –  Protest denied on “standing” grounds, but… –  Contrac5ng Oﬃcer not required to do detailed legal analysis of Teaming Agreement –  This Teaming Agreement complied with the solicita5on and GSA guidance

Mentor Protégé Programs Teaming Agreements •  Small Business Jobs Act Sec5on 1347: –  New authority for SDVOSB, WOSB, HUB Zone mentor-‐protégé programs –  SBA will apply special aﬃlia5on rules to statutory mentor-‐protégé programs •  Calls for study of Mentor-‐Protégé Programs and report to Congress

Evolu5on of VA’s “Veterans First” Program

“Veterans First” Program SDVOSB Program •  Agencies may set aside contracts for compe55on among SDVOSBs: –  If the contrac5ng oﬃcer has a reasonable belief that two or more SDVOSBs will compete; and –  The contract will be awarded at a fair market price •  Agencies may also award contracts on a sole source basis to SDVOSBs •  VOSB subcontrac5ng opportuni5es exist

“Veterans First” Program Kingdomware Tech. Inc., Nov 10, 2011 •  Dept. of Educa5on requirement for no5ﬁca5on system with “social media emergency no5ﬁca5on capability” •  Unrestricted RFQ issued to GSA federal supply schedule contractors •  Previous successful protest of a brand-‐name RFQ issued to Schedule 70 contractors

“Veterans First” Program Kingdomware Tech. Inc., Nov 10, 2011 •  RFQ for emergency no5ce to/from employees through IM, Facebook, Twiner, etc. •  “go/no go” evalua5on factor: “Small Business” •  Protest claimed that DOE was required to set aside RFQ for Small Business, speciﬁcally, SDVOSBs •  Protest denied: Under the FAR, FSS purchases are excluded from set-‐aside requirements

Veterans First Contrac5ng Program “[T]he contrac5ng oﬃcer shall set aside [contracts for ] SDVOSB concerns upon a reasonable expecta5on that: (1) Oﬀers will be received from two or more eligible SDVOSB concerns and; (2) Award will be made at a reasonable price

“Veterans First” Program Aldevra, B-405271, Oct. 11, 2011•  VA unrestricted RFQ for kitchen equipment from FSS contract holders•  Protest: VA must set aside all procurements for VOSB/SDVOSB subject to rule of 2•  GAO: Sustained. –  The Vets First statute has no exceptions for FSS contract procurements –  VA must conduct market research to find SDVOSBs

“Veterans First” Program Aldevra, B-405271, Oct. 11, 2011 •  VA RFQ to FSS contractors for cooking pans/ skillets for Chicago & Wilkes-‐Barre VA •  VA followed FAR Part 8.4 procedures and issued RFQ on an unrestricted basis •  Aldevra protest claimed that was required to: –  conduct market research to ﬁnd SDVOSB/VOSB –  limit compe55on to SDVOSB/VOSB

“Veterans First” Program Aldevra, B-405271, Oct. 11, 2011 •  VA agreed there were two SDVOSB that could perform Chicago RFQ (but not Wilkes-‐Barre) •  VA argued that it had discre5on to use FSS without following SDVOSB rules •  Protest sustained: –  VA Act & VAAR state that VA “shall” award contracts to VOSB/SDVOSB –  There is no excep5on for FSS purchases for VA –  VA must set aside Chicago; research Wilkes-‐Barre

“Veterans First” Program Alterna5ve Contrac5ng Enterprises, Mar. 26, 2012 •  VA awarded purchase orders for surgical gloves to Bosma Industries for the Blind, of Indianapolis •  Javits-‐Wagner-‐O’Day Act requires non-‐compe55ve use of non-‐profit agencies employing the blind & disabled for items on “procurement list” of approved items/services •  2009 VA Rulemaking acknowledged that JWOD Act s5ll gave priority to non-‐profit agencies for item/services on procurement list •  Held: VA reasonably interpreted VA Act and JWOD Act to allow for priority to non-‐profit agencies for procurement list items/services

“Veterans First” Program •  Dras Proposed Rule to Implement VA’s Restric5ve View of VOSB/SDVOSB Authority •  Set-‐aside authority would not apply to: –  FSS contract orders/RFQs –  JWOD “Ability One” Program –  Government prin5ng oﬃce orders –  Orders under ID/IQ contract (FAR art 16.5) •  Interim rule not yet published

“Veterans First” Program •  April 18: Proposed rule to require electronic payment requests •  “VA determined would improve the accuracy and eﬃciency of payment processing.” •  Interim Clause allows but does not require electronic invoicing by EDI or EIPPS •  VA contractors would be required to submit payment requests electronically under ﬁnal rule •  Comments due June 18, 2012

Commandeer Construc5on Company LLC, Dec. 29, 2011 •  VA IFB for renova5on of med center in Ohio •  IFB included VAAR devia5on clause 804.1102, requiring VA to “fast track” approval of “apparently successful oﬀeror” •  CCC LLC was low oﬀer, but did not receive award – VA had “cancelled” fast track •  GAO: Solicita5on required VA to fast track CCC •  VA is considering new “fast track” rule

H.R. 1657 •  Mandatory 5 year debarment for company that misrepresents its Veteran-‐owned status to the VA •  Includes “all principals of the concern” •  VA must begin proceedings in 30 days •  VA must complete proceedings within 90 days •  Referred to Senate 24 May 11; no cosponsors in House

“Veterans First” Program CS-‐360, LLC Case •  VA denied CS 360’s applica5on for the VetBiz database – Opera5ng Agreement included supermajority vo5ng •  CS 360 quickly made changes to its opera5ng agreement to sa5sfy VA concerns •  VA then denied CS 360’s request for reconsidera5on – because they were made too quickly •  DC District Court reversed VA – no ra5onal basis for decision; take another look

What are your ques5ons?

Recent Developments in Small Business Contrac5ng Connelly Law Oﬃce PLLC 651.270.9346 tconnelly@5mconnellylaw.com

Recent developments tim connelly

by jpeabody on May 01, 2012

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