December of 2018 brought many potential changes to the U.S. Small Business Administration’s (SBA) regulations that impact small businesses. First, on December 4, 2018, the SBA issued a lengthy proposed rule implementing several provisions of the National Defense Authorization Acts (NDAA) of 2016 and 2017, and the Recovery Improvements for Small Entities After Disaster Act of 2015 (RISE Act), as well as other clarifying amendments.  Then, on December 17, 2018, President Trump signed Public Law No. 115-324, the Small Business Runway Extension Act, which modifies the method for determining the size standards for small businesses.

SBA’s Proposed Rule

 The SBA’s proposed rule offers clarification on numerous topics, including but not limited to, recertification requirements, material breach of subcontracting plans for failure to comply in good faith, the inclusion of indirect costs in commercial subcontracting plans, setting aside an order under a set-aside multiple award contract (MAC), the status of independent contractors as employees in certain situations, and limitations on subcontracting compliance.  Comments on the proposed rule are due on February 4, 2019.  Some of the most significant proposed rules are summarized below.

Continue Reading SBA’s Busy Year End Yields Lots of Potential Changes for Small Businesses in 2019

On December 21, 2018, the U.S. Government Accountability Office (GAO) published a report analyzing contract and grant awards of Small Business Innovation Research (SBIR) funding to small businesses owned by multiple venture capital (VC) companies, hedge funds, or private equity firms between 2015 and 2018.  In 2011, agencies were given the authority to award SBIR funds to small businesses owned by multiple venture capital companies, hedge funds, or private equity firms (investment companies and funds), however these awards were not to exceed either 25% or 15% of the agencies’ SBIR budgets depending on which agency was making the award.  The GAO found that of the 11 federal agencies participating in the SBIR program, only three agencies (the Department of Health and Human Services’ National Institutes of Health (NIH), the Department of Energy’s Advanced Research Projects Agency-Energy (ARPA-E), and the Department of Education’s Institute for Education Sciences) awarded contracts or grants to small businesses majority-owned by multiple venture capital operating companies, hedge funds, or private equity firms.  These three agencies made a total of 62 awards and obligated $43.6 million to such businesses from 2015 to 2018, only amounting to 0.1% to 2.7% of the three agencies’ total SBIR awards. Continue Reading Agencies Continue to Shy Away from Awarding SBIR Funds to VC/Private Equity-Backed Small Businesses

On November 5, 2018, the Federal Circuit held in a precedential decision that bonding requirements in FAR 52.228-15, “Performance and Payment Bonds—Construction,” were read into all construction contracts by operation of law at the time of award, pursuant to the Christian doctrine.  FAR 52.228-15 requires an offeror in any construction contract valued over $150,000 to furnish performance and payment bonds:

Performance and Payment Bonds—Construction (OCT 2010)

(b) Amount of required bonds. Unless the resulting contract price is $150,000 or less, the successful offeror shall furnish performance and payment bonds to the Contracting Officer as follows:

(1) Performance bonds (Standard Form 25). The penal amount of performance bonds at the time of contract award shall be 100 percent of the original contract price.
(2) Payment Bonds (Standard Form 25-A). The penal amount of payment bonds at the time of contract award shall be 100 percent of the original contract price.

Continue Reading The <i>Christian</i> Doctrine Strikes Again … To Require Performance and Payment Bonds in all Construction Contracts

I recently authored an article for Strategic Consulting Solutions, Inc. (SCS) GovCon Advisor – a monthly news source for the government contracts industry. The article outlines the requirements of the Small Business Administration’s (SBA) All Small Mentor-Protégé Program (ASMPP), focusing on the Mentor-Protégé Agreement (MPA) and the recent Hendall case. As I point out, “The Hendall case is a great example of one of the primary business development benefits under the ASMPP – the ability for a large business and small business to form a joint venture and pursue a small business set aside contract as a team. Without the ASMPP JV affiliation exception – these businesses would normally be considered affiliates and unable to pursue the opportunity as a joint venture.  The case also highlights the importance of carefully drafting the MPA and being very specific as to the benefits the protégé will receive.”

The full article, “SBA’s All Small Mentor-Protégé Program Provides Critical Affiliation Exception for Eligible Joint Ventures,” is available on the SCS website.

  • Mandatory declarations of certain transactions now required
  • Certain changes to pre-existing regulations also announced and effective immediately
  • Mandatory declaration requirement may not ease burden on parties filing with CFIUS

On October 11, the U.S. Treasury Department took the first steps to implement the significant changes introduced under the Foreign Industrial Review and Risk Modernization Act (FIRRMA). FIRRMA broadens the mandate of the Committee on Foreign Investment in the United States (CFIUS), which reviews foreign investments in the United States that could impact U.S. national security.

Most notably, the Treasury Department is establishing a pilot program that imposes new obligations on foreign parties making investments, even non-controlling investments, in U.S. businesses involved in 27 explicitly designated industries. The pilot program defines such investments as “pilot program investments.”

Continue Reading CFIUS Pilot Program Creates New Obligations and Challenges

Conditioned Agreements to Negotiate (CAN)

When acquiring or selling small businesses, government contractors need to be cognizant of the Small Business Administration’s (SBA) “present effect rule.” Under this rule, SBA will find that certain letters of intent (LOI) or other agreements to merge have a “present effect” on the buyer’s ability to control the small business seller. Numerous decisions by the SBA’s Office of Hearings and Appeals (OHA) have discussed the acceptable parameters of LOIs.

In a recent decision, OHA further refined the elements considered in the determination of whether an LOI amounts to an “agreement in principle.” Continue Reading You “CAN” Avoid Affiliation in Negotiating an Acquisition

On October 16, I am joining Chris Waskowich, CIO of V2 Systems, for an hour-long webinar. We will help you understand what the NIST standards are, how they can impact your current and future DoD work, and most importantly how your company can get into compliance.

I will provide an update on DoD’s recent regulatory and policy updates and the impact of noncompliance, and Chris will provide practical guidance on how to bring your organization into compliance.

On September 24, 2018, the U.S. Department of Veterans Affairs (VA) issued a final rule that alters its regulations governing the Veteran-Owned Small Business Verification Program.  The final rule, “VA Veteran-Owned Small Business (VOSB) Verification Guidelines,” will go into effect on October 1, 2018.  This new rule brings much awaited clarity and uniformity to the regulations governing the VA’s ownership and control requirements for VOSBs and Service-Disabled Veteran-Owned Small Businesses (SDVOSBs).

Details of the VA VOSB Verification Guidelines

The rule places exclusive authority to implement VOSB verification regulations in the Small Business Administration (SBA), and goes so far as to seek the removal of all references to “ownership” or “control” from VA regulations.  Additionally, the rule provides clarification on certain portions of the VA verification process, and outlines the circumstances that will allow a company to qualify as a VOSB or SDVOSB under a surviving spouse or active employee stock ownership plan (ESOP).

Continue Reading VA Concedes Sole Responsibility for Verifying Veteran Contractor Ownership and Control to the SBA

I will be presenting the topic of “Federal Procurement Protests & Appeals” at the 2018 PDS/SCS GovCon Seminar on Thursday, October 18. This event provides attendees with up-to-date information on compliance and changes in the government contracts industry.

For more information about and to register for the event, please visit the event website.

  • FIRRMA would significantly expand CFIUS jurisdiction.
  • Mandatory filing would be required in some cases.
  • Parties that protect and maintain personal information are likely to face more scrutiny.

As we have described in recent blog posts in March 2018, January 2018 and October 2017, a rash of proposed transactions have not survived the Committee on Foreign Investment in the United States (CFIUS) process.  Most notably, as we described here, in March 2018, President Trump announced that he would not allow Singapore-based Broadcom to acquire U.S.-based Qualcomm, a rival chipmaker.

The president made his decision based on the recommendation of CFIUS, the U.S. government’s inter-agency committee that reviews transactions that could result in control of a U.S. business by a foreign person in order to determine if the transaction would have an effect on the national security of the United States.

Continue Reading Proposed CFIUS Reform Moves Forward