On Wednesday, April 28, 2010, the American Small Business League (ASBL) filed suit against NASA in Federal District Court, Northern District of California. The case was filed under the Freedom of Information Act (FOIA) after NASA refused to release subcontracting reports for contracts awarded to General Dynamics C4 Systems Incorporated. (http://www.asbl.com/documents/complaint_GD_NASA.pdf)
The ASBL requested information from NASA on a contract awarded to General Dynamics after discovering that a contracting officer reported the award as a small business contract.
Wednesday’s suit is the second lawsuit filed by the ASBL against NASA. In February of 2007, the ASBL prevailed in its first suit against NASA, forcing the agency to provide detailed information proving the agency falsified its small business contracting statistics by including contracts to a variety of Fortune 500 firms and other large businesses.
Since 2003, over a dozen federal investigations have found billions of dollars a month in federal contracts earmarked for small businesses have been diverted to Fortune 500 firms and some of the largest companies in the world. The large recipients of federal small business contracts include: Lockheed Martin, Boeing, Raytheon, Northrop Grumman, Dell Computer, British Aerospace (BAE), Rolls-Royce, French giant Thales Communications, Ssangyong Corporation headquartered in South Korea, and the Italian firm Finmeccanica SpA. (http://www.asbl.com/documents/20090825TopSmallBusinessContractors2008.pdf)
The ASBL plans to file a series of FOIA requests to NASA as a means of uncovering more federal small business contracts that were diverted to Fortune 500 firms. Specifically, the ASBL intends to uncover contracts awarded to large corporations that were coded as small business contracts by contracting officers.
Section 16(d) of the Small Business Act states, “whoever misrepresents the status of any concern or person as a ‘small business concern’…to obtain for oneself or another,” any prime contract or subcontract with the government shall be subject to penalties of $500,000, 10 years in prison and/or debarment from federal contracting programs. (http://www.sba.gov/regulations/sbaact/sbaact.html)
Attorneys for the ASBL believe federal contracting officials, and possibly even employees of prime contractors, could be held liable for penalties prescribed under section 16(d) of the Small Business Act for fraudulently misrepresenting large firms as small businesses.
“This issue has gone on unabated for over decade. I don’t think these abuses are going to stop until people start going to prison,” ASBL President Lloyd Chapman said.
To watch a clip about the ASBL’s suit click here: http://www.youtube.com/watch?v=Yx-SyChw06I
The US Government Accountability Office (GAO) recently released its bid protest statistics for fiscal year 2009.
The number of protests filed rose to 1,989 cases, an increase of 20 percent from the previous fiscal year. Half of this increase is attributable to the GAO’s recently expanded jurisdiction over bid protests involving task and delivery orders, OMB Circular A-76, and the Transportation Security Administration.
Of 315 decisions on the merits, the GAO sustained 57 protests, which represents a sustain rate of 18 percent. However, the reported “Effectiveness Rate” – which is based on a protester obtaining some form of relief from the contracting agency – was 45%. This indicates that agencies took voluntary corrective action in a significant number of cases.
The GAO also reported that there was one instance in which an agency did not fully implement a recommendation made by the GAO in connection with a bid protest. This case involved the sole-source award of a U.S. Army contract for information technology support for the Office of the Judge Advocate General.
The bid protest statistics are available at http://www.gao.gov/special.pubs/bidpro09.pdf.
Source: Fried Frank Government Contracts Alert ® No. 10-04-09
Lee Adams, president of Fabritex Inc., remembers exactly how his family-owned business started. His entrepreneurial father had purchased a trampoline and realized he could make the metal frame as well as anybody else.
“We started 20 years ago in 1989, and since then, we’ve grown into a 55-employee, 110,000-square-foot facility with an emphasis on tube fabrication and sheet and plate fabrication,” Adams said. “We manufacture everything from tubular wire carriers to stem baskets to annealing process materials. Just because we haven’t built something before doesn’t mean we’re not going to quote on it. We try to think outside the box and sell ourselves as a one-stop shop.”
It was precisely this innovative mindset that brought both opportunity and challenges to Fabritex, based in Hartwell, Ga. In 2007, a customer asked Adams about producing a new product line within a specific timeframe and gradually ramping up production to cut cost. To determine the most efficient way to do so, Adams called on Georgia Tech’s Enterprise Innovation Institute.
Tara Barrett, Danny Duggar and Karen Fite, all project managers with the Enterprise Innovation Institute, led a project in value stream mapping, a technique used to analyze the flow of materials and information required to bring a product or service to a consumer. As part of a value stream mapping project, the team developed a value stream map that identified all the value-added and non-value-added steps then in use, assessed the current state to create product flow by eliminating waste, and drew and implemented a map showing what the future state could be.
“Fabritex needed to increase throughput and reduce cost. The results were that they were able to increase their production to a capacity of 500 units per month and meet their customer’s requirements,” noted Fite. “Our goal is to have Fabritex learn the concepts and continue to implement them after we’re gone.”
According to Adams, the process is now streamlined and more efficient. The company has made nearly $300,000 in capital investments, saved $100,000 and increased sales by more than $1 million. The company also created eight jobs and doubled production.
“Georgia Tech was really able to get the creative juices flowing. It gave the guys working on the floor the encouragement to make improvements and make suggestions where normally they wouldn’t have spoken up,” Adams observed. “Now there’s a craftsmanship to what they do; they’re not just here punching a clock.”
The value stream mapping project proved so successful that the company has continued to partner with Georgia Tech. Dan Trier, sales and marketing manager, has already taken several classes offered through the Georgia Tech Procurement Assistance Center (GTPAC), an organization based at the Enterprise Innovation Institute that helps Georgia businesses identify, compete for and win government contracts.
“We’ve had a Corps of Engineers project for more than 10 years, but this is an area we would like to explore more. I’ve attended classes on how to read and speak government procurement language, which is not easy, as well as learning where to find government contracts, how to read them and how to fill them out,” Trier said. “Joe Beaulieu, Steve Bettner and Chuck Schadl will answer any question we have and have really been helpful in terms of where to find the contract opportunities.”
In addition to classes, GTPAC provides its clients with coaching, mentoring and a set of tools to research and identify government contracting opportunities. Services are available at no cost to any Georgia business, large or small, that possesses the interest and potential to perform work, as a prime contractor or a subcontractor, for federal, state or local government agencies.
According to Fite, Fabritex has all the ingredients for success, especially in these challenging economic times.
“Fabritex had the right culture to accept and tackle this type of project – a strong culture that adapts to change, employees who will create solutions to unique problems, and, most importantly, leadership that promotes continuous improvement through the motivation, guidance and support of employees,” she said.
The U.S. Dept. of Transportation just released details on a new Pilot Bonding Education Program to get small businesses bond-ready.
The program is a collaboration between U.S. DOT’s Office of Small and Disadvantaged Business Utilization (OSDBU) and the Surety and Fidelity Association of America (SFAA) . Becoming bondable is a major obstacle for many disadvantaged businesses, and this pilot program aims to address the issue and help these businesses grow by qualifying for a bond.
The Pilot Bonding Education Program includes a 10-week course covering an array of topics small businesses need to become bondable. At the end of 10 weeks, businesses are paired with local bond producers to work side by side in the bonding process. The three pilot cities and start dates will be:
- Chicago – May 27, 2010
- Dallas – June 10, 2010
- Atlanta – June 24, 2010
For more information about the program to be conducted in Atlanta, please contact:
Atlanta:
Joseph (Joe) Jackson, Jr.
Executive Director, SBTRC
Greater Atlanta Economic Alliance
230 Peachtree Street, N.W.
Suite 530
Atlanta, GA 30303
Ph: (404) 827-9677
Fax: (404) 681-1035
Email: joe.jackson@alliance4u.org
Gwen Coleman Winston
Project Director, SBTRC
Greater Atlanta Economic Alliance
230 Peachtree Street, N.W.
Suite 530
Atlanta, GA 30303
Ph: (404) 827-9677
Fax: (404) 681-1035
Email: gwen.winston@twd-inc.net
The Bonding Education Program (BEP) is composed of two interrelated components:
- The Educational Workshops Component offers a set of ten workshops: 1) an introductory workshop on intake and logistics; 2) eight comprehensive workshops, each of which is designed to provide information to the contractors related to improving their company’s operations and thereby making it easier to be bonded or to increase their bonding capacity; and 3) a closing workshop focused on networking and next steps.
- Kick-Off: Program Description and Initial IntakeThis workshop includes an overview of the Bonding Education Program and its implementation; a presentation of current procurement opportunities; and the scheduling of initial intake interviews with a local surety bond professionals.
- Business Planning and Management for ConstructionThis workshop focuses on such areas as assessing or reassessing the legal form of the company, developing a succession/business continuation plan, managing and controlling growth, and assembling a business team. Subjects covered include legal and corporate structures, certifications, licenses, permits, establishment of goals and objectives for a business plan, and issues related to company management, policies and procedures, and staffing. The team-building portion of the workshop describes: 1) the importance of choosing the right construction lawyer, accountant, banker, insurance agent, and producer; 2) how to identify them; 3) why they are important; 4) what role these individuals will play and how they interrelate, 5) what they will expect from the small business; and 6) how their involvement contributes to the small business’ overall success.
- Construction Accounting and Financial ManagementThis workshop focuses on basic construction accounting concepts and will provide an overview, from job costing to financial reporting, as well as construction-specific practices that introduce the small businesses to construction accounting fundamentals. These fundamentals include: 1) debits and credits and how they work; 2) accounting for job cost; 3) work-in-progress (WIP) schedules; 4) percentage-of-completion revenue recognition; and 5) development of financial statements.
- Banking and Financing for Transportation-Related Small BusinessesThis workshop addresses the need for capital equipment financing, how to determine working capital requirements, the use of lines of credit, and the need to establish a banking relationship.
- Bonding and Insurance for New and Emerging Transportation-Related Small BusinessesThis workshop focuses on: 1) the definition of surety bonds and the various types of surety bonds; 2) how to begin the process of obtaining a bond; 3) the role of the agent/producer and the underwriter; 4) the prequalification process; 5) the 3 “C’s”, capital, capacity and character; 6) the costs of bonding; and 7) how to develop a surety bond relationship. The workshop also covers the various types of insurances required (commercial general liability, Workers Compensation, etc.) and what to look for in an insurance agent relationship. In addition, the workshop covers other bonding assistance programs, such as the SBA Bond Guarantee and Loan Programs, relevant state bond guarantee and loan programs, and any local bonding or financial support programs that might be available for emerging transportation-related small businesses.
- Marketing, Estimating and BiddingThe marketing portion of this workshop focuses on: 1) identifying core company capabilities and determining company capacity; 2) developing a marketing plan; 3) identifying targets of opportunity; and 4) making sales calls and visits. The estimating and bidding portion of the workshop covers: 1) methods of computing measurements, including off-the-shelf estimating software, metric conversions, and essential mathematical formulas for estimating; 2) planning construction projects; and 3) preparation of bid documents.
- Project Management and Field OperationsThis workshop focuses on project-specific activities, including hands-on advice at the job site. The project management portion of this workshop covers: 1) plan reading; 2) types of contracts (lump sum, cost plus fee, etc.); 3) common contract forms; 4) project planning methods; 5) job costing and scheduling; 6) management of subcontractors; 7) the proper expedition of change orders; and 8 measuring project performance. The field operations portion of this workshop covers setting up the job site and on-going job site operations.
- Claims and Dispute ResolutionThis module focuses on: 1) mechanic’s liens; 2) the claims process under Miller Act payment bonds; 3) the various mediation services and approaches available to a contractor in a dispute; 4) the arbitration provision in standard form construction contracts and what it means; and 5) when and under what circumstances is litigation considered.
- Managing Growth: – Why Some Contractors Succeed and Others FailThis workshop identifies the most common reasons why contractors, especially small contractors, fail. The workshop also provides suggestions and approaches as to how to avoid these situations and various management approaches and techniques that will help to ensure the small business’s success. In conducting this workshop, the instructor will present “real world” examples of contractors who have succeeded, what pitfalls they were able to avoid and how.
- Conclusion of Workshop Component and Opportunity NetworkingThis workshop is the conclusion of the educational component of the program and focuses on solidifying the bondability of the contractor and exploiting contracting opportunities through contacts and networking.
- The Bond Readiness Component consists of one-on-one interactions with surety bond producers, underwriters and other professionals. The surety bond professionals will work with the small businesses on a case-by-case basis to assemble the materials necessary for a complete bond application and address any omissions and/or deficiencies that might impede the successful underwriting of a bond. To deliver this component, SFAA will join with the designated Small Business Transportation Resource Centers (SBTRCs) and use the network of local surety associations (LSAs) to identify surety professionals in each local area who will volunteer to assist the small businesses to become bondable or increase their bonding capacity. In addition, the SBTRC is encouraged to assign a full-time staff person with surety experience or contract with a surety consultant to coordinate the program at the local level. Under this component, the local surety association member(s) will work with the SBTRC to establish a bond readiness team ideally comprised of a surety agent, an underwriter, and other professionals as needed. Other professionals may be an accountant, banker, attorney, or technical assistance provider. The team will first develop procedures for the review of the small businesses bonding applications and establish protocols to ensure the confidentiality of their business information. Next, the team or a team member will meet with each small business on an individual basis to assemble a profile of the company, including financials and job performance history. In the event this information is incomplete, the team or the team member will assist the small business to assemble a more thorough package for assessment. The team or the team member will then review the small business’s financials and/or performance history to identify issues that may lead to the denial of bonding. After this step, the team or the team member will identify those factors that would potentially make the small business bondable and develop a strategy to address each of these factors, including referring the small business to specialized project management, accounting, or financing assistance. Lastly, the team or the team member will help the small business to identify and secure bonding for subsequent projects. A similar approach will be taken for those small businesses that need an increase in bonding capacity in order to bid as prime contractors or to take advantage of larger subcontracting opportunities.To recap of the specific steps of this bond readiness component:
- Initial Intake Interview
- Assembling the Company Profile and Bonding Package
- Assessing Company Bondability
- Prescribing Remedies for Bondability
- Referrals and Technical Assistance
- Support in the Bond Application Process
Source: US DOT OSDBU http://www.osdbu.dot.gov/bap/bep_main.cfm published Apr. 27, 2010.
The White House on Monday established a pair of interagency task forces to help federal agencies award more contracts to small businesses.
The first task force will focus on improving procurement opportunities for all small businesses and helping agencies meet statutory contracting goals. The second group will focus exclusively on improving contracting opportunities for small businesses owned by veterans and service-disabled veterans — a subcategory that typically receives among the lowest percentage of set-aside contracts.
“In recent years, the federal government has not consistently reached its small business contracting goals,” President Obama wrote in an April 26 memo to all federal agencies and departments. “Although we have made some progress — particularly with respect to Recovery Act contracts — more work can and should be done. I am committed to ensuring that small businesses, including firms owned by women, minorities, socially and economically disadvantaged individuals, and service-disabled veterans, have fair access to federal government contracting.”
The new Interagency Task Force on Federal Contracting Opportunities for Small Businesses will provide the White House with recommendations in the next 120 days for removing barriers to small business participation in the government marketplace. Those suggestions, according to the memo, could include unbundling large projects, improving the training of federal acquisition officials and using new technologies to enhance federal small business programs.
The memorandum calls for the group to use “innovative strategies, such as teaming, to increase opportunities for small business contractors and utilizing and expanding mentorship programs, such as the mentor-protégé program.”
The task force also should expand outreach strategies to match small businesses with contracting and subcontracting opportunities, as well as revise or clarify existing legislation, regulations or policies, the memo directed. By late July, the White House’s top technology leaders will develop a website that tracks the participation of small businesses in federal contracting, the directive said.
The Commerce Department secretary, director of the Office of Management and Budget, and administrator of the Small Business Administration will serve as co-chairs of the Interagency Task Force on Federal Contracting Opportunities for Small Businesses. At least 15 other senior agency officials also will serve on the panel.
In a separate executive order, Obama established the Interagency Task Force on Veterans Small Business Development. The group will focus on developing policies, such as expanded mentor-protégé relationships, which will help agencies meet the goal of awarding at least 3 percent of their contracts to small businesses owned by disabled veterans.
In recent years, only about 1 percent of all contracts have gone to service-disabled veteran-owned small businesses.
The executive order directs the task force to develop proposals that would improve training and counseling to veteran-owned firms; reduce paperwork and administrative burdens; and enhance the company’s access to capital.
The SBA administrator will run the task force, which will include seven other agencies and four representatives from a veterans’ service or military organization or association.
- by Robert Brodsky - GovernmentExecutive.com – April 26, 2010
Small business designation under the U.S. Small Business Administration can be a lightning rod for success for companies owned by Alaska Native tribes and corporations, which enjoy privileges under the program not afforded to other participants. In particular, only Native-owned businesses have the ability to land sole-source, no-bid, unlimited-value contracts with the federal government — a fact that raises some ire among those who oppose the preferential structure.
Critics claim Native corporations too easily secure big money contracts without doing enough to improve life in their shareholders’ hometowns — a founding ethic of the Alaska Native Claims Settlement Act. Plus, they say, unscrupulous outside interests can use the Native corporations as “front companies” to gain access to big contracts from which they might otherwise be excluded, and further direct work to subcontractors in which they have a financial stake. The worst case scenario? Money and jobs are passed on to entities with no Native ties at all.
Supporters counter that the potential for waste or abuse is not a legitimate excuse to thwart opportunity for Natives. Yet changes are already under way in response to demands for increased public accountability. The SBA has proposed requiring Alaska Native corporations to demonstrate how their contracts benefit their communities, and the Department of Defense — the main source of contracting opportunities — is requiring its officers to justify sole-source awards in excess of $20 million, which are available only to Native-owned corporations. No-bid awards for all other 8(a) businesses are restricted to $5.5 million or less.
Alaskans are resisting the change on both fronts. Many Alaska Native corporations have urged the SBA to rethink some of its intended reforms, and U.S. Senator Lisa Murkowski intends to try to repeal the new DOD reporting requirement. Murkowski says more paperwork will cause a chilling effect on awards, and more red tape won’t necessarily improve transparency. Until she can get the regulation repealed, she’s encouraging Secretary of Defense Robert Gates to proceed cautiously and with input from tribes in implementing the DOD’s new rules. Murkowski says she’s concerned that increased reporting requirements will result in lost opportunities for Native-owned firms.
She also suspects so-called reforms are small steps in a larger, more cutthroat agenda.
“I think it is the intention of some (people) to pull the plug on the 8(a) program for American Indian, Native Alaska and Native Hawaiians because they are demonstrating a level of success as they are pursuing these contracts,” Murkowski said in a phone interview from her Washington, D.C., office. “Their shareholders are benefitting and there are others (small businesses) who are realizing they don’t have the ability to do the same, and there is competition out there.”
Murkowski also believes the preferential treatment Alaska Native corporations receive is a good thing — and equitable in its own way.
“If it was just for Alaska Natives I would say that it is not fair. But it is (open) to all Native Americans,” she said. “There is a trust responsibility that this country owes to our Native Americans. There is a unique political relationship that exists.”
Sarah Lukin, executive director of the Native American Contractors Association and a shareholder in two Alaska Native corporations, agrees.
“Native enterprises are not like an individually owned 8(a) company,” Lukin said. “Native corporations were formed in perpetuity to provide economic, social and cultural benefits to an entire community. How can an individual disadvantaged company or person have equal rights to a social enterprise that’s serving an entire community of disadvantaged people?”
For Lukin, the issue is far more complicated than trying to root out government waste. Native country as it relates to government contracting has the challenging position of colliding with 11 different congressional committees that have jurisdiction over Native participation in governments, along with falling under three major overriding national policies: federal Indian policy, small business policy and federal procurement policy, Lukin said. And within that framework, there are government “contract purists” — people who believe the only way to do contracting is via full and open competition — who “do not believe that social issues should be addressed through government procurement,” Lukin said.
But carried to the extreme, that philosophy will favor the “big boys” and shut out the very people — minorities — for whom the 8(a) program is designed to assist, Lukin said.
In search of accountability
One of the loudest critics is U.S. Sen. Claire McCaskill, D-Mo. In her role on the Subcommittee on Contracting and Oversight, McCaskill has sought to close federal loopholes she believes have led to waste and abuse in government contracting, with the rules favoring Alaska Native corporations squarely in her sights. In October, her efforts paid off when she won tougher oversight of defense contracting in the 2010 National Defense Authorization Act. McCaskill claimed victory for making the process “substantially more difficult to award sole-source contracts” over $20 million, effectively closing a “loophole in government contracting” that exclusively benefitted Alaska Native Corporations.
In summer 2009, Debra Ritt, Assistant Inspector General for Auditing for the SBA, testified before McCaskill’s committee that sole-source awards do have upsides — they are quick, easy and a legal way for federal agencies to meet small business goals. But she also noted that “reports by OIG (Office if the Inspector General) and GAO (Government Accountability Office) have shown that noncompetitive contracts have been misused, resulting in wasted taxpayer resources, poor contractor performance, and inadequate accountability for results.”
A review of comments submitted to the SBA about the proposed changes shows many Native corporations support the agency’s efforts to “mitigate abuse” and “perceived abuse.” They welcome including Native Hawaiians among the Native-owned businesses with access to sole source contracts of unlimited value. They agree that mandatory audits should occur on contracts over $10 million, and they stress that the SBA will require more funding and staffing to fulfill its more strenuous oversight goals. But there are areas where suggested changes have fueled alarm bells. Limits as to how business partnerships may be formed and the length of time Native corporations may stay in the 8(a) program generated comments about “drastic” effects and “catastrophic consequences.” A proposed rule to report yearly on how benefits from 8(a) participation is reaching Native people prompted terms like “onerous” and “burdensome and unreasonable.” Many are also critical of government value judgments about whether the corporations are fulfilling their missions.
“It’s a lot more than just saying how many jobs did you provide to the Native community and how much did you pay in dividends,” Lukin explained. “All of us provide unique benefits. One may focus on cultural aspects while another may fund substance abuse while another may focus on dividends.”
There is also trepidation about offering too much information. The history of the Native community is if you start reporting on something, you are only a step away from government takeover, Lukin said. Where a corporation or tribe may think language preservation is a legitimate benefit, the government may decide job training is more paramount and direct profits to instead be spent in that way. Lukin is also concerned that corporations, villages and tribes vary so greatly in size and need that there is no measurable “benefit” that can apply to all situations. Smaller companies can’t do as much as big ones, and forcing a show of tangible benefits could dissuade reinvestment that would promote company growth, hurting companies on the rise that might one day have the ability to share more with shareholders.
Lukin is convinced the SBA changes will be implemented by year’s end. Whatever the outcome, Native entities will continue to work within the rules and to strive for accountability and transparency, she said. Still, Native corporations argue that they can weed out bad managers and corruption on their own, and question why they should be subject to more stringent performance guidelines than other American companies.
“Very frankly, Native enterprises are an easy target,” Lukin said. “If you are looking at government contracting reform, it is a lot easier to pick on Native enterprises then to deal with broader government procurement reform.”
- Jill Burke – Apr. 22, 2010 – The Alaska Dispatch