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.
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The Christian Doctrine Strikes Again … To Require Performance and Payment Bonds in all Construction Contracts
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)
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(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.
SBA’s All Small Mentor-Protégé Program Provides Critical Affiliation Exception for Eligible Joint Ventures
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
You “CAN” Avoid Affiliation in Negotiating an Acquisition
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.”
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VA Concedes Sole Responsibility for Verifying Veteran Contractor Ownership and Control to the SBA
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).
Slight Decrease in FY2017 Suspensions and Debarments, but Contractors Should Take Note of the Continued High Level of Activity
On July 31, 2018, the Interagency Suspension and Debarment Committee delivered its annual report to Congress on the status of the suspension and debarment system. The report shows a continued high level of activity relative to the last decade and serves as a reminder that exclusion from the federal marketplace continues to be a risk for contractors that do not “cut square corners” with the government.
Decline in Suspensions May Indicate an Increase of Proactive Communication Between Contractors and Officials
The FY2017 report shows a modest decrease in the number of suspensions, proposed debarments, and debarments from the last fiscal year, a trend that has continued since the high-water mark set in FY2014. But it also notes that the number of exclusions in FY2017, over 3,000, are almost double those reported when the Committee first began formally tracking the data in FY2009, approximately 1,800.
Information on Inquiries Arising from Economic Development Partnership Bidding Process
Bass, Berry & Sims attorney Richard Arnholt provided comments on the questionable communications related to the bidding process for two separate contracts awarded by the St. Louis Economic Development Partnership. In both cases, email exchanges between individuals in the St. Louis county executive and economic partnership offices and a top donor to the county executive’s campaign revealed that the donor requested feedback on his proposal prior to formally submitting the bid. The Economic Development Partnership subsequently awarded the two government contracts to the donor’s company.
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Event – Regulatory and Enforcement Update: Early Themes for Government Contractors Under the Trump Administration
Todd Overman will be presenting at the 31st Annual Government Small Business Conference in Tampa on May 4, 2018. The event, co-hosted by the Florida Procurement Technical Assistance Center at USF and the Florida SBDC at USF, is a unique conference for small business owners to learn how to optimize business opportunities through informative workshops, panel discussions, and a Business Opportunity Expo featuring federal agencies.
Todd’s presentation, “Early Themes for Government Contractors Under the Trump Administration,” will highlight regulatory updates implemented by the Trump Administration that impact government contractors, as well discuss enforcement trends that could impact certain industries. Issues to be covered include domestic preference, small business developments, and cybersecurity enforcement.
EVENT DETAILS:
Richard Arnholt and Sylvia Yi Examine 2018 Changes in Challenges to Bid Protests from NDAA
In an article published by National Defense Magazine, Bass, Berry & Sims attorneys Richard Arnholt and Sylvia Yi provided insight on the significant changes affecting defense contractors from the National Defense Authorization Act (NDAA) for fiscal year 2018, specifically concerning bid protests.
There are two significant big protest changes in the new NDAA:
- the introduction of a new three-year pilot program in which large defense contractors will be required to pay the Department of Defense’s costs where a protest is denied by the Government Accountability Office (GAO); and
- the enhancement of post-award debriefing rights.
Small Business Fraud Leads to Large Monetary Liability in Recent Cases
Two Washington, D.C. area government contractors have agreed to pay the government for their respective roles in defrauding the U.S. Small Business Administration (SBA) in schemes to fraudulently obtain government contracts set aside for small businesses. These two cases highlight the importance of small business compliance and the submission of accurate and complete certifications.
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