Small Business

On November 6, 2015, the Department of Veterans Affairs (“VA”) issued a proposed rule (the “Proposed Rule”) to clarify the byzantine verification process for veteran-owned small businesses (“VOSB”) and veteran-owned service-disabled veteran-owned small businesses (“SDVOSB”)1 who want to participate in the VA’s Veterans First Contracting Program.  VA Veteran-Owned Small Business Verification Guidelines, Proposed Rule, 80 Fed. Reg. 68,795 (to be codified at 38 C.F.R. Part 74). The Proposed Rule revises a 2013 advanced notice of proposed rulemaking and considers 39 public comments received in response to the prior notice.  Comments on the latest proposed rule are due on or before January 5, 2016.

Under the Veterans First Contracting Program, the VA offers set-asides and sole source opportunities to certified VOSB and SDVOSB firms.  Unfortunately, the program has struggled to gain a foothold in the government procurement landscape because its VA-administered regulations are confusing and the set-aside opportunities are limited to VA procurements.  At the same time, the Government Accountability Office and the VA’s Office of the Inspector General have targeted the program for pervasive fraud, and stakeholders have criticized the verification program as unnecessarily rigorous when compared against other socio-economic programs administered by the Small Business Administration (“SBA”).

As a result, through its Proposed Rule, the VA “seeks to find an appropriate balance between preventing fraud . . . and providing a process that would make it easier for more VOSBs to become verified.”  The VA attempts to strike this balance by significantly amending the VOSB ownership regulations to make them easier to understand, and bringing many of the requirements in line with SBA interpretations of similar requirements under similar programs.Continue Reading VA Proposes to Make VOSB Verification Easier Under the Veterans First Contracting Program

Recent decisions by the Small Business Administration (“SBA”) Office of Hearings and Appeals (“OHA”) and the Court of Federal Claims offer important advice to anyone in the process of drafting and negotiating a mentor/protégé joint venture agreement:  Be specific.  Those agreements, in many cases, are the crown jewel of the mentor-protégé program enabling mentors and protégés to work together on set-aside opportunities that they would not otherwise have been eligible.  And like anything of great value, it should not be taken for granted.  Instead, as a matter of meeting both regulatory requirements and best practice, mentor/protégé joint venture agreements should specifically list all resources, equipment and facilities (and their estimated values) that each party will provide and detail how work will be shared between the joint venture members.
Continue Reading OHA and COFC Agree: Mentor/Protégé JV Agreements Must Be Specific to Avoid Affiliation

Last month, we discussed Information Technology (IT) Schedule 70, one of the largest contract vehicles administered by the U.S. General Services Administration (GSA). GSA now is evaluating whether Schedule 70 should be made more accessible to certain small contractors, new IT providers, and other, similarly situated firms.
Continue Reading GSA Seeks Input on Eliminating IT Schedule 70’s Two-Year Experience Requirement

In Size Appeal of NMC/Wollard Inc., SBA No. SIZ-5668, the Small Business Administration Office of Hearings and Appeals (“OHA”) clarified the three factor test used to determine whether a small business qualifies as a manufacturer of the end item being procured.  The decision confirmed that no single factor has greater weight than the others, and that a small business can be a manufacturer despite contributing a small percentage of the value of the end item if the contribution was essential to the end item’s function.

Under applicable SBA regulations, a small business manufacturer “is the concern which, with its own facilities, performs the primary activities in transforming inorganic or organic substances, including the assembly of parts and components, into the end item being acquired.”  13 C.F.R. § 121.406(b)(2).  The regulations set forth a three factor test to determine whether a small business is the manufacturer of the end item:

  1. The proportion of total value in the end item added by the efforts of the concern, excluding costs of overhead, testing, quality control, and profit;
  2. The importance of the elements added by the concern to the function of the end item, regardless of their relative value; and
  3. The concern’s technical capabilities; plant, facilities and equipment; production or assembly line processes; packaging and boxing operations; labeling of products; and product warranties.

13 C.F.R. § 121.406(b)(2)(i)(A)-(C).Continue Reading SBA OHA: In Three-Factor Test to Determine Small Business Manufacturers, No Single Factor is Determinative

The FAR Council has released a proposed rule calling for significant revisions to the provisions in FAR Parts 19 and 52 addressing small business subcontracting plans.  The proposed changes, which are intended to implement regulations adopted by the Small Business Administration (SBA) in 2013, should serve as a not-so-subtle reminder of the range of small business-related obligations imposed on prime contractors, as well as the consequences of failing to satisfy those obligations.
Continue Reading FAR Council Beefs Up Small Business Subcontracting Rules

The Small Business Administration’s (“SBA”) Office of Hearings and Appeals (“OHA”) recently issued a decision exemplifying the well-known reality that protest deadlines are short and unforgiving. In Size Appeal of Supplies Now, Inc., SBA No. SIZ-5655 (Apr. 30, 2015), OHA denied, as untimely, an appeal of an SBA Area Office decision. The appellant, Supplies Now, contended it submitted an appeal via email on the 15th day after it received the adverse Area Office decision—the last day to file before the appeal deadline expired. OHA, however, never received the email submission and did not first learn of the protest until Supplies Now called six weeks later inquiring about the status of its appeal.
Continue Reading Lost in Transmission: Email Failure Results in Untimely Size Protest

As Congress considers the FY2016 National Defense Authorization Act (NDAA) this week, political enthusiasts can look forward to plenty of minor dramas playing out on the House floor and in Senate committee rooms.  Small businesses might be more excited about a provision of the NDAA that is unlikely to make the headlines: the prospect of a five-year extension of the popular Rapid Innovation Program.

The Rapid Innovation Program was created five years ago as “a collaborative vehicle for small businesses to provide the department with innovative technologies that can be rapidly inserted into acquisition programs that meet specific defense needs.”  Each year, Department of Defense agencies identify pressing operational requirements and publish them in a broad agency announcement.  Interested bidders offer white papers, which Department representatives evaluate on a “go” or “no-go” basis.  Offerors whose white papers receive a “go” rating are invited to submit full proposals for further evaluation and decision.  The program offers funding of up to $3 million over two years.  From FY2011 to FY2015, the GAO estimates that the government will have signed contracts for 435 projects, representing more than $1.3 billion. 
Continue Reading Extending the Rapid Innovation Program

The Small Business Administration’s Office of Hearing Appeals (“OHA”) recently issued a ruling affirming the SBA’s termination of a contractor from participation in the 8(a) Business Development Program (“8(a) Program”). Yet the OHA’s opinion in The DESA Group, Inc., SBA No. BDPT-543 (2015), is notable not for this conclusion, but rather for the discussion that preceded it. Although the OHA ultimately affirmed the termination of the contractor from the 8(a) Program, it did so only on narrow grounds, and only after subjecting the SBA’s underlying determination to extended (and unusually pointed) criticism. For 8(a) Program participants and their mentors—a class of federal contractors that the SBA has recently proposed to expand—the ruling may serve as a useful roadmap on pushing back against potential overreaching by the SBA.
Continue Reading SBA 8(a) Ruling: Connections Not the Same as Control

On February 11, 2015, the U.S. Small Business Administration issued its final rule implementing statutory revisions that encourage use of small business status advisory opinions from Small Business Development Centers (SBDCs) or Procurement Technical Assistance Centers (PTACs).  Specifically, the new rule implements provisions of the National Defense Authorization Act…
Continue Reading SBA Issues New Rule On Small Business Status Advisory Opinions

Last week, the U.S. Small Business Administration (“SBA”) published a proposed rule that if implemented will increase the opportunity for large and small businesses to partner on unrestricted competitions and small business set asides by creating a comprehensive Mentor-Protégé Program that will allow any type of small business contractor to partner with another company without risking the contractor’s small business status.  The new comprehensive Program is modeled on the current 8(a) Mentor-Protégé Program, which will remain in effect but be modified under the proposed rule to create more opportunities for contracting with small disadvantaged businesses.  The proposed rule comes shortly after another proposal from the SBA that—among other sweeping changes—will create new opportunities for partnerships between similarly situated small businesses, such as allowing joint ventures to qualify as small so long as each individual partner qualifies as small.

The proposed rule implements provisions of the Small Business Jobs Act of 2010 and National Defense Authorization Act for Fiscal Year 2013, which together authorized the SBA to expand the current 8(a) Mentor-Protégé Program to all small businesses, including HUBZone, women-owned, and service-disabled, veteran-owned small businesses, as well as small businesses that do not qualify for a particular socioeconomic subcategory.  The SBA estimates that approximately 2,000 small businesses could participate in the new comprehensive Program, resulting in contracts valued at approximately $2 billion per year.  In addition to creating opportunities for large and small businesses to partner on small business set asides, the comprehensive Program will likely benefit both large and small businesses in unrestricted competitions.  If implemented, small businesses could compete for larger awards and large businesses could take advantage of price evaluation preferences when partnering with HUBZone small businesses and potentially derive other benefits currently offered to large businesses that subcontract with protégé firms, such as receiving evaluation preferences or additional credit toward obtaining small business subcontracting goals.Continue Reading SBA Proposes Comprehensive Small Business Mentor-Protégé Program