8(A)
JEOPARDY!
Affiliation
M ay the same individual manage more than one
8(a) company owned by the same Indian tribe or
Alaska Native Corporation?
Yes, up to two 8(a) participants.
Individuals responsible for the management and daily
operations of the 8(a) concern can manage up to two
8(a) participants, without violating 15 U.S.C.
§ 636(j)(11)(B)(iii)(II).
Jon DeVo re
Birch Horton Bittner & Cherot
Washington, D.C.
[email protected]
Christine V. Williams
Perkins Coie LLP
Anchorage, Alaska
[email protected]
John Klein
Small Business Administration
Washington, D.C.
W hat are the requirements to ensure that a joint venture is properly recognized under
the affiliation exception regulation?
• The joint venture must be in writing;
• Must do business under its own name; and
• May be a separate legal entity, and if it is, then it may also may have its own employees.
Is compliance with the ostensible subcontractor rule analyzed differently in the context
of construction procurements compared to ordinary services procurements?
Yes
See, e.g., Size Appeal of: Iron Sword Enterprises, LLC, SBA No. SIZ-5503 (Sept. 26, 2013).
“For services, OHA has held ‘the prime contractor must perform the contract's primary and vital
requirements, not merely manage the subcontractor's performance of these tasks.’”…
“In construction contracting, however, OHA has recognized that subcontractors often perform a
majority of the actual construction work, because the prime contractor frequently must engage
multiple subcontractors specializing in a variety of trades and disciplines….”
“The primary role of a prime contractor in a construction project is to superintend, manage, and
schedule the work, including coordinating the work of the various subcontractors.”
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Can a contractor/offeror claim the past performance of another entity, such as a sister or
parent entity, a subcontractor, or a predecessor company in a proposal?
Sometimes.
Yes, under certain circumstances and with consideration of affiliation risks. Whether a contractor
may claim and receive credit for another entity’s past performance depends on:
(1) the relationship to the other entity,
(2) whether the RFP specifies such information will be considered in proposal evaluations, and
(3) the relevancy of the past performance experience.
This question also raises another issue for small businesses, as claiming others’ past performance,
even where expressly allowed, may increase the concern’s risk of affiliation, undue reliance, and
ostensible subcontractor violations. Thus, a small business should ask itself two questions – under
this specific circumstances, can it claim the past performance of other companies, and, if so, should
it claim that past performance in light of increased affiliation risks?
W hat activities fall under the SBA’s entity-owned exception to affiliation for
performance of “common administrative services” by business concerns owned and
controlled by Indian Tribes, ANCs, NH Os, or CDCs?
Duties which are otherwise unrelated to contract performance or management and can be
reasonably pooled or otherwise performed by a holding company or parent entity without
interfering with the control of the subject firm.
Adequate payment must be made for these common administrative services to meet the
requirements of the SBA’s entity-owned exception to affiliation. Examples include: recruiting,
human resource support, cleaning services, record retention not related to a specific contract (such
as employee time and attendance records), maintenance of databases for awarded contracts,
monitoring for regulatory compliance, template development, and assisting accounting with invoice
preparation as needed.
New Laws and Regulations
W hat important change was recently made to NASA’s Small Business Policy?
NASA has added “small disadvantaged businesses, HUBZone small businesses, veteran-owned
small businesses, and service disabled veteran-owned small businesses” to its list of businesses it will
help to enable participate in the Agency’s purchasing procedures.
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H ow did the FY12 NDAA alter small business percentage goals within federal-contractor
subcontracting plans?
Prime contractors may include any tier of small business subcontractor in the small business
utilization percentage goals within the subcontracting plan for contracts with one agency.
Prime contractors may only use first tier subcontractors with plans pertaining to:
More than one contract with one or more executive agencies, or
One contract with more than one executive agency
W hat is the status on developing other mentor-protégé programs for other SBA business
development programs besides the 8(a) Program?
One of the SBA’s priorities during the next 12 months is to issue regulations establishing newly
authorized mentor-protégé programs for the Service Disabled Veteran Owned, HUBZone and
Women-Owned Small Business Programs, similar to the 8(a) mentor-protégé program.
Does the Truth in Negotiations Act (TINA) apply to 8(a) contracts?
In general, yes.
Government contractors must certify that cost or pricing data is current, accurate and complete on
the date of the final agreement
Includes cost and pricing data supporting any advance agreement and forward price rate
agreements
Generally applies to contracts ($700k) and modifications ($550k)
Agencies can require TINA certs for lesser amounts
M ay an agency set aside part or parts of multiple award contracts for small business?
Yes. Federal agencies may:
(1) set aside part or parts of multiple award contracts small businesses;
(2) reserve one or more awards for small businesses on multiple award contracts established for
open competition; and
(3) set-aside orders under multiple award contracts awarded pursuant to full and open competition
that have not been set-aside or partially set-aside nor include a reserve for small businesses.
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Cases and Protests
If a Procurement Center Representative approves a set-aside or procurement strategy,
does that prevent another component of SBA from filing a protest?
No.
In Red River Computer Co., Inc., SIZ-5512 (Nov. 1, 2013), the SBA’s Director of the Office of
Government Contracting (D/GC) did not exceed his authority in bringing a size protest, because
SBA is not bound by the PCR’s interpretation of size standards. PCRs are SBA employees also, but
this was not sufficient to prevent other SBA entities from bringing a size protest.
Do certain types of procurements, such as contracts to service brand -specific governm ent
property, inherently create greater risks of affiliation for small busin esses?
Maybe.
In the Red River case, the U.S. Defense Information Systems Agency-Defense Information
Technology Contracting Organization (DISA-DITCO) issued the an RFP for maintenance of Cisco
brand name hardware and software (already acquired by Army). The CO set aside the procurement
for small businesses and assigned NAICS Code 541519, Other Computer Related Services.
SBA (D/GC) brought a size protest 6 months after Red River began performance on the contract,
alleging that Red River was affiliated with Cisco based on the ostensible subcontractor rule and
undue reliance. SBA alleged that Cisco would be performing “most if not all of the services
required by the solicitation with Cisco employees.”
The protest was based not on the proposal, but on the terms of the solicitation and other publically
available information.
W hat are the statuses of the DynaLantic and Rothe cases, which are pending cases that
involve the constitutionality of the 8(a) Program?
DynaLantic: This case is set to settle, resulting in DynaLantic’s voluntary dismissal of the appeal
after final settlement terms have been reached.
Rothe: This case was stayed pending the outcome of the DynaLantic case and will likely resume
shortly.
H as the SBA been actively enforcing H UBZone compliance recently?
Yes.
The SBA has been actively following up on allegations on HUBZone violations and decertifying
companies that are not in compliance.
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M ay a federal agency, under the FAR, suspend an affiliate of an indicted government
contractor for the duration of the contractor’s legal proceedings?
Yes.
They can according to the case Agility Defense & Government Services, Agility International, Inc.,
v. US Department of Defense, Sec. of Defense, Defense Logistics Agency, D.C. Docket No. 5:11–
CV–04111–CLS, (December 2013) heard in the 11th Circuit.
That court found that when an agency suspends a government contractor, the agency may also
suspend an affiliate of the contractor based solely on its affiliate status.
Mentor-Protégé & Joint Ventures
W hat kinds of small businesses qualify for SBA mentor-protégé programs?
Currently, only 8(a) companies have an SBA mentor-protégé program that applies to contracts
government-wide in terms of affiliation/eligibility protection.
However, the 2013 NDAA authorized SBA to create a mentor-protégé program for all small
businesses.
The new program will closely resemble the 8(a) Mentor-Protégé program, “except that the [SBA]
Administrator may modify the program to the extent necessary given the types of small business
concerns included as protégés. (H.R. 4310-466 Sec. 45 (a) (2)).
Regulations defining the program are expected in 2014.
W hat is required for an 8(a) firm to be a “protégé”?
An 8(a) firm must:
•
•
be in development stage OR have never received an 8(a) contract, or
have ½ size of its primary NAICS code
W hat is required for a joint venture of at least one 8(a) participant and one or more
business concerns to submit an offer for a competitive 8(a) procurement without regard
to affiliation?
(1) Each concern is SMALL under the size standard corresponding to the NAICS code assigned to
the contract,
(2) The size of at least one 8(a) Participant to the joint venture is less than one half the size standard
corresponding to the NAICS code assigned to the contract; and
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(3) For a procurement having a revenue-based size standard: the procurement exceeds half the size
standard corresponding to the NAICS code assigned to the contract; or For a procurement having
an employee-based size standard: the procurement exceeds $10 million.
Besides the SBA, which federal agencies have a mentor-protégé program?
12 Federal Agencies, in addition to SBA (according to GAO)
Do 8(a) mentor-protégé joint ventures need to meet the same size requirements of typical
8(a) joint ventures?
No.
Size requirements are more relaxed for mentor-protégé joint ventures. See 13 CFR 124.513(b).
Size Standards
Effective January 22, 2014, the SBA has issued new rules altering or reaffirming the size
standards for industries within which two NAICS sectors?
Construction (23) & Utilities (22)
These changes may have significant impacts on which companies qualify as small business concerns
for federal procurement.
Apart from Construction and Utilities, what other NAICS sectors has SBA reviewed for
size standards since 2010?
• Sector 54, Professional, Technical, and Scientific Services (effective March 12, 2012)
• Sector 61, Educational Services (effective October 24, 2012)
• Sector 62, Health Care and Social Assistance (effective October 24, 2012)
• Sector 53, Real Estate and Rental and Leasing (effective October 24, 2012)
• Sector 56, Administrative and Support, Waste Management and Remediation Services (effective
January 7, 2013)
• Sector 51, Information (effective January 7, 2013)
• Sector 71, Arts, Entertainment, and Recreation (effective July 22, 2013)
• Sector 52, Finance and Insurance (effective July 22, 2013)
• Sector 55, Management of Companies and Enterprises (effective July 22, 2013)
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• Sector 11, Agriculture, Forestry, Fishing and Hunting (effective July 22, 2013)
Could two participants/applicants have the same primary NAICS code but a different size
standard without violating the two-year rule?
Probably.
We are fairly confident that it would not be a violation of 13 CFR 124.109(c)(3)(ii), because the two
participants would not share the same size standard, even though they share the same NAICs code.
W hat are the penalties for the m isrepresentation of size status?
There are severe criminal penalties for knowingly misrepresenting the small business size status of
the concern in connection with the procurement program. There is also the Presumed Loss Rule,
which can apply when a contractor misrepresents his size standards. FCA can treble the damages.
W hen does the SBA determine the size status of business concerns?
When a firm submits an offer, the SBA determines size as of the initial offer or other formal
response to a solicitation, which includes price.
The concern applying to be certified in the 8(a) Program must qualify as a small business for its
primary industry classification as of the date of its application and the date of certification by the
SBA .
Wild Card
W ho is this?
Maria Contreras-Sweet
Nominated to be the new Small Business Administrator
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• She would replace Karen Mills, who left in September 2013, and acting-Administrator Jeanne
Hulit
• Founder and board chairman of ProAmérica, a community bank in Los Angeles which focuses
on commercial lending to small and mid-sized businesses
• Cabinet Secretary of the California Business, Transportation, and Housing Agency from 19992003
• Appointee to the Federal Glass Ceiling Commission
Did the Federal Government meet its Small Business Goals in Fiscal Year 2013?
Yes!
23.32%:
Of $354.6 billion eligible dollars, the federal government set aside $82.7 billion
According to the Small Business Administration’s real-time dashboard (SmallBusiness.Data.Gov)
H ow does the SBA interpret the “two-year rule” in 13 CFR 124.109(c)(3)(ii), which
prohibits firms owned by Indian tribes and ANCs from gaining admission to the 8(a)
program if the tribe/ANC owns another firm that operated in the program in the same
primary industry classification as the applicant within the previous two years?
The Rule: A Tribe may not own 51% or more of another firm which, either at the time of
application or within the previous two years, has been operating in the 8(a) program under the same
primary NAICS code as the applicant.
A Tribe may, however, own a Participant or other applicant that conducts or will conduct
secondary business in the 8(a) BD program under the NAICS code which is the primary NAICS
code of the applicant concern.
In addition, once an applicant is admitted to the 8(a) BD program, it may not receive an 8(a) sole
source contract that is a follow-on contract to an 8(a) contract that was performed immediately
previously by another Participant (or former Participant) owned by the same Tribe.
For purposes of this paragraph, the same primary NAICS code means the six digit NAICS code
having the same corresponding size standard.
W hat is a Similarly Situated Entity and how does it affect self -performance?
“Similarly situated” means the same type of entity.
For instance, if the prime contractor is an 8(a) contractor performing on an 8(a) contract, and the
subcontractor is an 8(a) contractor, then the prime contractor and the subcontractor are similarly
situated entities and the subcontractor may be counted in fulfilling the self-performance
requirements.
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Does a mandatory disclosure rule apply to firms in the 8(a) program?
Yes.
A disclosure rule applies to all government contractors working on a government contract, in
connection with the award, performance or closeout, that has a value in excess of $5 million and a
performance period of more than 120 days.
A contractor must timely disclose "reportable conduct" namely where the contractor has evidence
of: a violation of federal criminal law involving fraud, conflict of interest, bribery, or gratuity
violations found in Title 18 of the United States code or violation of the civil False Claims Act.
FINAL JEOPARDY
Questions from the audience
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