November 17, 2010 by cs
What makes a good client? A firm that’s established, has deep pockets, and will be around for a long time, right?
Right. So it’s hard to argue—regardless of your personal politics—that the federal government isn’t one of the biggest (and best) potential clients for your business. For many, the federal government isn’t just a source for political debate or theoretical discourse—it’s a significant source of income.
“As you know, federal government is one of the few potential clients that are spending money,” says Bill Lennett, the CEO of Government Contract Associates, a government-contract consulting firm based in California. “So as you can imagine, everybody wants to do business with the government.”
Working With Government Contract Consultants: Why Work With a Consultant?
Unfortunately, working for the federal government is not always that simple. With an aggressive audit system, many small businesses seek out government contract consultants to aid in the federal procurement process. These consultants assist in registering a small business as a contractor, help it write the proposal, and most of all, assist with the accounting processes that are vital to winning bids. While this guide is meant to give you some insight into what government contract consultants can offer, you should know that there are alternatives, too.
If you’re not interested in working with a consultant or you don’t have the cash on hand, you can visit a Procurement Technical Assistance Center (PTAC), which are located throughout the country. The centers help businesses market their services or products to the government, by matching a firm’s strengths and offers with procurement opportunities.
The first step to obtaining a federal contract, according to Dean Koppel, the Assistant Director for Policy and Research at the U.S. Small Business Administration, is to consult the local chapter of the Small Business Administrator. “Any small business that wants to do business with the federal government either as a prime or subcontractor should look at the SBA contracting offices,” he says. The office will supply a business with information to get you started, as well as give more information about current solicitations for contracts.
Working With Government Contract Consultants: Starting Out
Last year, the federal government purchased nearly $100 billion worth of goods and services from small businesses through prime contracting procurements, according to the Small Business Administration. That’s nearly 25 percent of the $400 billion overall federal marketplace. Thousands of small businesses across the country have been winning contracts for years.
It’s especially a great time to be a technology or service company. “The trends [of federal procurement] have been towards services rather than hardware,” says Mike Steen, a senior managing consultant at Beason & Nalley, a consulting group in Huntsville, Alabama, that specializes in government contract consulting. “The federal government has really flip-flopped in terms of what they’re buying. They’re not buying airplanes as much as they’re buying services, and IT fits into that very heavily.”
Before you hire a consultant, though, to become a federal contractor, you’ll need to register your firm in the Central Contractor Registration (CCR) database. While the government contract consultant can assist you in this process, it’s easy enough to do on your own. The CCR is a portal that gives businesses a chance to market their goods and services to the federal government.
Then, you must renew your registration every 12 months from the date you initially registered. An invalid registration will diminish your chances to receive contract awards or payments, so it’s important to stay up to date.
Working With Government Contract Consultants: Accounting, Costs, Proposals
When you’re doing business with the federal government you have to submit proposals and invoice the government using adequate accounting practices, says Linnett: “My area of specialty is a knowledge of specific accounting requirements, and helping contractors prepare proposals and make sure their accountings proposals are consistent with those requirements.”
Having what the government calls ‘adequate accounting’ practices is essential. Many small businesses have accounting methods that are outdated or non-existent. This won’t fly with the federal government. “A company needs to have an accounting system that’s operational,” Steen says. “It can’t be sitting in a box somewhere on a shelf that’ll be implemented if they get the contract.” In other words, you have to be able to prove to the government that your accounting practices are consistent with general ledger accounting.
“It becomes very difficult to get government contracts where billing and proposals are based on costs,” says Linnett. “So if they can show the government that ‘hey our accounting practices are adequate rather than inadequate, that gives them a significant competitive advantage over most companies that don’t. That’s when they contact somebody like me to say ‘Hey, help us make sure that our accounting practices are considered adequate.’”
In general, a consultant will review your practices and recommend certain changes to make sure you get positive feedback from your audit.
What can you charge to the government? What can’t you charge? These are the questions you’ll be working with a consultant to determine. The government puts forth certain requirements that distinguish between “allowable” and “unallowable” costs in your proposal. If you try to get reimbursed for unallowable costs, it could cost you the job, or you could face penalty charges or interest.
Categorically, they’re called ‘cost principles,’ says Steen. “Those cost principles take selected elements of cost such as advertising and interest expense, etc., and tells the government contractor which is allowed,” Steen says. Essentially, it’s a government regulation that defines unallowable costs.
So for example, a consultant will help a business distinguish between direct and indirect costs, remove any unallowable costs, implement processes for compensation and labor charges, and analyze even the small details on a financial statements, like uncompensated overtime.
You’re allowed to charge the government both direct and indirect costs, says Linnet, but there are rules to follow. This is where a consultant like Linnnett might be able to give your company a competitive advantage. “My ability is to be able to structure the way they charge indirect costs to be consistent with their pricing strategy,” he says. “If they’re a sole source and there’s not a lot of competition for their services, they may want to maximize the amount of costs. More often, they’re in a competitive market and so they want to minimize costs charged to the government but still be consistent with the rules.”
First, you have to determine the style or the format, says Robert Horejsh, a government contract consultant and owner of Federal Contract Consultants, LLC, which is based in Wisconsin. “Just about every contract officer has a little different style. Sometimes they tell you exactly what they want and you have to follow their outline.” Other times, there are no guidelines at all.
The government uses the proposals to filter out a lot of potential contractors, Horejsh notes. “If they get something that doesn’t look quite right, they might throw it away. I have heard stories of contract officers throwing away proposals because of an unwritten rule that proposals are not supposed to be stapled.”
How to Work with Government Contract Consultants: The value of patience
Government contracting is not going to happen over night, says Jorejsh. “I tell my clients that I’m not sure if it will take three weeks, three months, or three years,” he says. But the value of consultant is clear: They are working on your behalf to ensure you have the best opportunity to grab a lucrative federal contract. “A consultant hangs in there and looks at what your chances are of actually getting the contract,” he says.
November 16, 2010 by cs
As Air Force officials focused on acquisition of weapon systems and related hardware, Air Force Materiel Command stands to make a noticeable contribution to a stepped-up effort by the federal government to increase awards of contracts to small businesses.
In summer 2009, Department of Commerce and the Small Business Administration officials worked together to ensure small businesses received nearly one-quarter of all federal contracts funded under the American Recovery and Reinvestment Act. Per these two agencies, the success of the ARRA initiative proved the government had the ability to meet or exceed a 23 percent governmentwide small business goal. In the three previous fiscal years, as well as fiscal 2010, the federal government overall had come up just short of the goal at an average of 21.95 percent.
An interagency task force on Federal Contracting Opportunities for Small Businesses has until Dec. 30 to report progress on implementing recommendations aimed at removing barriers and increasing the small business share of federal contracts. President Barack Obama established the task force earlier this year.
‘‘It’s not an exact science and sometimes very difficult to figure out why you’re not meeting the overall 23 percent goal,” said Carol White, the chief of the Small Business Office at AFMC headquarters. ‘‘The findings from the task force will provide new direction, either through policy or legislation, and it may take awhile to flow down. We’ll have to wait for the implementing guidance.”
In fiscal 2009, AFMC budget officials spent 11.75 percent, or $5 billion, on small business contracts, putting the command 6.25 percent shy of reaching its 18 percent goal.
‘‘The Air Force has assigned AFMC goals through fiscal 2013,” Ms. White said. ‘‘In each of these years, our goals increase until we’re aligned with the governmentwide goal of 23 percent. Our fiscal 2010 goal was 20.13 percent, yet preliminary contract-spend data indicate we are likely to finish the year close to where we finished in fiscal 2009. Our fiscal 2011 goal is 20.54 percent.”
AFMC officials are making progress toward those goals, but there is still room for improvement, Ms. White said.
‘‘Although we’ve shown an improvement trend in dollars awarded for small business prime contracts during the past five years, we’re not where we need to be, and we’re encouraging all of our acquisition personnel to step up their effort to maximize small business participation in our acquisitions,” Ms. White said. ‘‘The statutory goals fall into both prime and subcontracting categories.
‘‘The 23-percent overall governmentwide goal is for small business prime contracts only. We can’t meet this goal via subcontracting arrangements,” she said.
Small business office specialists are available to assist internal acquisition organizations in early acquisition planning activities and post award matters, and to assist external industry businesses in a number of different ways.
‘‘We provide one-on-one counseling and are available through telephone and office visits,” Ms. White said. ‘‘We are always encouraging large businesses to partner with small businesses through the Mentor ProtÈgÈ program or via subcontracting.”
Small business office officials also host and sponsor events throughout the year to attract and assist small-business owners in learning how to do business with the government.
‘‘These events are important and help us better understand how small businesses can help AFMC meet warfighter needs,” Ms. White said.
Because the federal government is the largest buyer in the world, spending more than $500 billion in goods and services each year, contracting a fair portion with small businesses just makes sense, Ms. White said.
The federal task force is co-chaired by the Small Business Administration, the Office of Management and Budget and the Department of Commerce. It includes 12 other federal agencies. Three priority objectives and actions were identified:
November 15, 2010 by cs
Be prepared for more competition, tighter margins and big opportunities for politically savvy, nimble-footed companies.
The economy — and specifically the federal market — might seem stuck in dirge mode, but it is changing, in subtle, sometimes dissonant ways. And woe to the company that doesn’t alter its step to match the new tune.
To record and distill those changes, Washington Technology talked for several hours with four federal business gurus to create a chapbook for federal contracting in 2011.
Get any group of experts together, and differences of opinion and points of agreement will arise. So it was with our four: Ray Bjorklund, senior vice president and chief knowledge officer at FedSources Inc.; Philip Kiviat, partner at Guerra Kiviat Inc.; Kevin Plexico, senior vice president of research and analysis services at Input Inc.; and Warren Suss, president of Suss Consulting Inc.
On some points, such as opportunities for the big score, they were unanimous: It ain’t happening.
“We’re definitely seeing a shift away from large-scale, single-award contracts that are intended to build, develop or integrate something,” Plexico said.
“Most of the top opportunities in this year’s [Input top 20 opportunities for 2011] were multiple-award, indefinite-delivery, indefinite-quantity vehicles,” he added.
“Many of the contracts that have driven our community in past years have been the large single-award programs that companies around the Beltway are geared up to respond to,” Suss said. But “the world is going to change, and companies will need to come up with different models to respond to a larger number of small opportunities.”
“Fiscal 2011 will be the year of the task order,” Suss said.
Our gurus also gave politics a stronger new emphasis in their calculations.
“The most important thing I can say when I talk to IT people — who tend to view IT as the most important thing in the world because it’s changing everything — is that IT is important, but it’s not immune to the influence of politics,” Kiviat said.
The recent shift of power in the House will especially bear watching, Bjorklund said. “The White House submits a budget, but Congress does the appropriating,” he added.
And with the collective Republican eye on reducing the federal budget, “everything in IT contracting is a target for political scrimping,” Kiviat said.
“We’re already seeing fewer large procurements” as a result of the Office of Management and Budget’s suspension in June of new financial systems at major agencies, he said.
In September, OMB canceled upgrades at the Small Business Administration and Veterans Affairs Department and is trimming financial IT projects at the Environmental Protection Agency and Housing and Urban Development Department.
The Army’s Enhanced Army Global Logistics Enterprise (EAGLE) contract, set for award in the second quarter of fiscal 2011, has been touted as a $30 billion opportunity, subsuming five programs and about 200 other contracts.
“But when we added up what’s being spent on the contracts it’s replacing, we came up with more like $10 billion, which is still a lot of money,” Bjorklund said. “But it’s not $30 billion.”
EAGLE has a big IT component, although its emphasis is not on conventional IT, such as networks. The contracts that EAGLE replaces have research and development projects, but the new contract has no R&D component, Bjorklund pointed out in FedSources’ Army EAGLE Reality Check report.
OMB’s system slashing is an effort “to reduce the size of large programs, make them more manageable and reduce the risk of failure,” Kiviat said. But it also will contribute to less innovation, he said.
“Whenever you do anything large or innovative, you increase risk,” he said. “Democrats did try to increase innovation, which means increasing risk-taking — what’s the saying? If you’re not failing, you’re not trying hard enough.”
However, Kiviat added, “failures could well be fodder for political grandstanding, so agencies will tend to put themselves up as targets less often, which means less innovation. That’s bad for contractors, especially those companies that are innovators. It will also take people who are interested in innovation and make them look elsewhere: in the commercial market.”
Bad, Getting Worse
To recap for a moment, we’ve got fewer single, big-dollar opportunities, politics stirring the pot more than ever before, trimmed budgets and less risk-taking. Look for those trends to alter the competitive landscape, put pressure on established federal market players and create openings for new ones.
Together with the general pinch and sag of the U.S. and global economies, “overall contract spending dropping by 4.8 percent,” Bjorklund said. “Whenever that happens, many new interests flock to federal government contracts, believing they’re going to be the saving grace for their business.”
Not all will succeed. “Particularly in the federal space, there are steep barriers to entry,” Plexico said. “But once you’re in, you have the credibility you need for agencies to spend contracting dollars.”
Many of the large IDIQ contracts, from the General Services Administration’s $65 billion Alliant to the Centers for Disease Control and Prevention’s $5 billion CDC Information Management Services, have already been awarded.
Contracts that are still to be awarded, in addition to EAGLE, include the Health and Human Services Department’s $30 billion CIO-Solutions and Partners 3 and the Defense Department’s $15 billion DOD Language Interpretation and Translation Enterprises.
Getting on those contracts guarantees nothing. But whether new to the federal market or an old hand, getting on them “is important from a positioning point of view,” Plexico said. “Take an agency like the Homeland Security Department, which may do 40 percent of its work through [DHS' Enterprise Acquisition Gateway for Leading Edge Solutions contract]. If you’re not on EAGLE, you don’t have the opportunity to compete.”
But even when the contract is in place and the money ostensibly is there, it can disappear.
“Companies are going to have to be much more careful in qualifying prospects,” Kiviat said. “It’s not just about: Are the dollars there? But will they stay there? Some already planned procurements may be canceled because of the unknown emphasis of what Republicans will do.”
Take OMB’s halting and trimming of financial system modernization projects, he said. “That could happen to any large enterprisewide modernization project. Say an agency says it wants to modernize human resources management in all its subagencies. The question a contractor has to ask is: Will that project withstand congressional oversight, or could it get frozen?”
Agencies will be showing up not only with smaller purses but also with bigger demands, including tighter margins and greater use.
“DOD wants to avoid having military organizations develop their own systems,” Suss said. “They want to be able to invest once in a new utility or capability, then allow its use many times by all DOD users. For example, the Army, rather than go with its own enterprise e-mail systems just handed over [that acquisition] to DISA.”
The increased competition and decreased budgets will help ensure that big protests will continue. The lack of a government acquisition workforce that is large enough and experienced enough will contribute to protests.
“Take the recent protest by Google over the Interior Department contract, which mandated use of Microsoft software,” Kiviat said. “Everyone in procurement knew that protest was coming. As long as you have acquisition people who do something like that and don’t figure out how to do deal with it beforehand, you’ll continue to have protests.”
Once hardware-heavy, contracts increasingly are shifting to services — by 50 percent during the past four to five years, according to Input.
“When contracts were for hardware, all you’d have to do was deliver it. You didn’t even have to know what it did,” Kiviat said. “In services, it’s important to know what they need to have done and how to do it.”
For those companies that know that, there will be more opportunities for providing managed services at a fixed price, Suss said. A shift to cloud-based services “will drive companies to make more upfront investments in infrastructure and technology before realizing a return,” he said. “That may create a significant disequilibrium in the federal environment.”
Thinking about cloud must go beyond the hype, beyond the buzzwords to be a viable technology for government, Plexico said. “Agencies — and contractors hoping to win their business — have to ask themselves: What’s the agency’s exit strategy for dealing with sensitive data if there’s an incident?”
It’s also “going to require a different bidding model than the current [time-and-materials] model,” Suss said. “In this new environment, shops will have to deliver quick turnarounds on proposals,” a feat not all companies will be able to pull off.
More than ever before, success in the federal market will require a defined goal and an informed strategy for attaining it, our experts said.
“Big companies sometimes have a strategy,” Kiviat said. “Small companies don’t have them; they just fight each battle as it comes up. This is time for some strategic thinking, no matter what size you are.”
With so many potential pitfalls, it’s important to keep your sense of perspective, Plexico said. “The federal space is still a healthy and vibrant market as compared to the rest of the economic environment.”
Here also, our experts found agreement. The status quo is transitory, existing only for an instant and not to be confused with a promise.
“There are going to be losers,” Suss said. “Some companies that are in business now won’t be able to stay in business next year.”
But when a window closes, a door opens. “It’s going to create a fertile ground for mergers and acquisitions, and I think we’ll see an increase in that area,” Suss said.
– By Sami Lais – Washington Technology magazine – Nov. 10, 2010 – About the Author: Sami Lais is a special contributor to Washington Technology.
November 11, 2010 by cs
Want a piece of the $500 billion the U.S. government spends on goods and services each year? Your chances of winning a federal contract are better if you team up with other small businesses, says a new study.
Compared with so-called “active contractors” overall – “active” being defined as a small business that’s received a government contract within the past 3 years – small-business owners who paired up with other small firms or acted as subcontractors won 50 percent more contracts, according to the American Express OPEN Victory in Procurement report. The survey included 1,500 small-business owners chosen randomly from the Federal Procurement Data System, which logs all federal contracts.
Two-thirds of small-business contractors that have partnered with other small firms to jointly bid on contracts have won more than $1 million in federal contracts to date. A further 38 percent of the same group has won in excess of $10 million.
Small businesses that hitch themselves to a larger contractor also have a higher hit rate than average, says the report. Some three in five small firms (61 percent) that act as subcontractors report winning federal contracts worth more than $1 million to date, compared to 46 percent of “active contractor” small firms. Nearly a third (31 percent) of small companies who have subcontracted have won more than $10 million, compared to 21 percent of all active contractor small firms.
Firms tend to turn to subcontracting first, usually when revenues from the contract reach $250,000. Partnering typically occurs around the $1 million mark.
The increased revenues garnered from partnering and subcontracting don’t come cheap. Active contractors invest more than $86,000 in cash and staff time pursuing contracts. Firms that go for subcontracting pour some $122,685 annually into their efforts, while partnering with other small firms in pursuit of federal opportunities costs $149,317 on average per year.
– By Courtney Rubin - INC magazine – Nov. 9, 2010
October 25, 2010 by cs
However, a court cannot enforce an illegal contract, and the loan servicing support contract was an “agreement conceived in fraud.” The parties deliberately procured a government contract that violated applicable federal regulations, including SBA 121.103 and SBA 125.6(a), and they were not eligible for the contract under those regulations. Under SBA 121.103(h)(4), “[a] contractor and its ostensible subcontractor are treated as joint venturers, and therefore affiliates, for size determination purposes.” The Small Business Administration uses a seven-part test to determine whether a small business is unusually reliant on its subcontractors, and here, six of those factors weighed heavily in favor of a finding of undue reliance. The subcontractor had equal management rights; it had the requisite background and expertise to carry out the contract; it was the party that “chased the contract”; the parties collaborated on the bid; the parties contemplated a relationship where the subcontractor would perform a relatively large share of the contract; and the subcontractor was the party that would perform the more complex and costly contract functions. A review of SBA precedent confirmed that the loan servicing support contract violated the “ostensible subcontractor” rule, and as a result, the parties were affiliates and ineligible for award.
Further, the parties did not comply with the “50% Rule” of SBA 125.6(a), which requires the SDB to perform at least 50 percent of the cost of the contract incurred for personnel with its own employees. A letter from a Certified Public Accountant stated the actual costs incurred by the parties did not meet “either the intent or letter” of the 50% Rule, and the parties’ expense reports showed the subcontractor incurred approximately 62 percent of the parties’ labor costs in one fiscal year and approximately 59 percent of the labor costs in another fiscal year. Since the prime was affiliated with the subcontractor under SBA 121.103, it was an other-than-small business concern, and because the prime’s certification that it was a small business concern was false, the parties’ bid was fraudulent at the time it was made. The court also held the parties’ subcontract was unenforceable and the requested relief was barred by the doctrine of unclean hands. (Morris-Griffin Corp. v. C & L Service Corp., DC ED Va, 54 CCF ¶79,415)
– October 18, 2010 – Walters Kluwer Law and Business
October 19, 2010 by cs
Valerie Lilley’s Navy coat contract was part of a government set-aside program aimed at growing small businesses. Since 1997, Congress has had a goal of awarding 23 percent of government contracts to small businesses.
But a study by a business credit card unit of American Express found that on average it takes a small business nearly two years of trying before it wins its first contract.
“There are systemic problems with the procurement process. The government has not made the kind of progress it really needs to in moving away from very detailed specifications for very common items,” said Robert Burton, a partner at Venable LLP, who formerly served as the top career federal procurement official at the Office of Federal Procurement Policy.
In his former role, Burton said, he saw 15-page documents listing specifications for making everything from toothbrushes to toilet paper.
Of Toluca Tailoring’s failure, which was partly related to not meeting precise stitching requirements, Burton said, “It’s a coat. It’s a coat. It’s not a weapons system. It’s a coat.”
Just as whales can eat smaller fish simply by sucking in the water around them, the mismatch between big government and a small business can make them “just disappear,” said Michelle Randall, principal of Enriching Leadership International, a global executive coaching and consulting firm.
“The amount of paperwork is substantial,” Randall said. “It could overwhelm a small business.”
Pamela J. Beavers, the Small Business Administration’s director of government contracting for Area IV, said small businesses should have other contracts and orders in the pipeline, along with about 10 months’ worth of financing, before trying for a government contract.
Successful contractors spend an average of $86,000 a year in staff time pursuing contract opportunities, the American Express study found.
In this sputtering economy, the situation Toluca Tailoring found itself in wasn’t uncommon. Small businesses are more likely to count on winning a single big order after they run out of options, said Scott Testa, a professor of business administration at Cabrini College in Radnor, Pa. That’s why, he said, small businesses should carefully read a contract to account for any potential payment lags.
“Some of these decisions that may be important from the small business owner’s perspective may not be a priority for these huge government agencies,” Testa said.
– Oct 13, 2010 – Chicago Tribune-McClatchy-Tribune News Service Visit the Chicago Tribune on the Internet at http://www.chicagotribune.com. Distributed by McClatchy-Tribune Information Services
October 13, 2010 by cs
Looking for help with the GSA Schedule process before the next class is available through the Georgia Tech Procurement Assistance Center (GTPAC)?
Now, GSA Schedules training is being offered by GSA on-line. The webinar-format training will be offered in both Novemeber and December 2010.
GSA’s free webinars are designed to support small businesses interested in obtaining a GSA Multiple Award Schedules contract. You must pre-register for the GSA webinar.
- Register for the Nov. 15 webinar at https://www2.gotomeeting.com/register/670264562.
- Register for the Dec. 13 webinar at https://www2.gotomeeting.com/register/913141458.
If you have questions regarding these webinars, please contact Christy Jackiewicz by email at firstname.lastname@example.org or by telephone at (202) 219-0396.
October 11, 2010 by cs
On Wednesday, the Small Business Administration published a final rule revising upward the size standards that determine eligibility for S.B.A. programs in three broad sectors of the economy. And that is good news for nearly 18,000 businesses that until now have been unable to take a government-backed loan or to get assistance winning federal contracts. But it makes the term “small business” a little more ambiguous.
S.B.A. size standards vary by industry (as enumerated in the North American Industry Classification System). Generally, caps are set based either on number of employees or average annual receipts, a system that was put in place in 1984. Apart from occasional inflation adjustments and other tweaks, the standards have remained largely the same since then. The changes announced this week, for the retail, accommodation and food service, and “other services” sectors, are the first to result from what the agency calls the first “comprehensive review” of size standards in nearly 30 years.
For the most part, industry size standards now set at $7 million in average annual receipts will be doubled or more, in some cases increasing to $30 million or $35.5 million. But these are not nearly as drastic as the adjustment made for new car dealers. Initially, the S.B.A. proposed raising the maximum receipts to $30 million, from $29 million, or, alternatively, setting the maximum level of employees at 100. But after lobbying from the National Automobile Dealers Association, the S.B.A. adopted a standard that defines dealers with up to 200 employees as small.
According to the S.B.A., nearly a third of those 18,000 companies, scattered across 70 industries, soon to fall under the small-business rubric are new-car dealers. Figures from the Census Bureau indicate that 83 percent to 93 percent — and probably closer to 93 percent — of all new-car dealerships will now be considered small. Moreover, the largest of those now-small firms will have annual revenue of around $120 million.
An S.B.A. spokesman, Jonathan Swain, said senior agency officials were not immediately available to discuss whether, or why, auto dealers had been singled out by the new policy. However, since the Obama administration effectively nationalized much of the General Motors and Chrysler last year, it has used the S.B.A. to alleviate the suffering of the politically powerful car dealer industry, even as it simultaneously pushed G.M. and Chrysler to shutter many of their dealers.
In May 2009, the S.B.A. created an alternative size standard for the purposes of getting a government-backed loan, in effect through last month. The alternative — which replaced the average revenue or headcount threshold with a maximum net worth of up to $8.5 million, combined with a net income capped at $3 million — was not specifically aimed at auto dealers, administration officials said at the time. However, they pointed out that relaxing the rule would increase the share of all new car dealers eligible for an S.B.A-backed loaned from 25 to 50 percent. A few weeks later, the agency announced a new, also temporary, “floor plan financing” program specifically devised to allow hard-pressed vehicle dealers to use the agency’s general business loans to finance inventory.
Andy Koblenz, the dealer association’s vice president of legal and regulatory affairs, defended the new size standard. “The top line revenue is not relevant because of the nature of the products,” he said. “If you’re selling books, or you’re selling clothing or you’re selling cars, the businesses are comparably sized in terms of physical plant, sales staff and management structure.” According to the association, the average pretax profit margin for its members has hovered around 1.5 percent in recent years, among the lowest margins of any American industry that’s turning a profit (on average, a dealer with $120 million in revenue would earn a taxable income of $1.8 million).
The new size standards take effect on Nov. 5. Meanwhile, the recently enacted small-business jobs bill directed the S.B.A. to put into effect another, still more generous, temporary alternative size standard for S.B.A. loans to supersede the expiring standard put in place in May 2009. Under the new law, the cap on net worth was raised to $15 million and the limit on income bumped to $5 million. On Friday, the S.B.A. announced that it had enacted the new standard.
Political pressures inexorably push up small-business size definitions. That, at least, is the theory of Jonathan Bean, author of a history of the S.B.A. provocatively titled “Big Government and Affirmative Action.” As the name suggests, this is not exactly a work of scholarship; it’s a polemic offered by an ideologue staunchly opposed to any S.B.A.-style intervention in supposedly free markets. Nonetheless, the events of the last several weeks suggest Mr. Bean has a point.
The pressure comes not just from Congress. In fact, in each of the three sectors the S.B.A. analyzed in its own review, the agency found many industries where the data suggested actually reducing size standards. But in each instance, it declined to do so. “S.B.A. believes that lowering size standard for those industries would not be in the best interests of small businesses when the economy is in a deep recession,” the agency wrote when it proposed these rules in October 2009.
Nor, apparently, is it in their interests after the economy exits recession. “Further,” the agency continued, “S.B.A. does not anticipate that it will propose to lower size standards after the Recovery Act terminates on September 30, 2010. S.B.A. intends for the proposed size standards, if adopted, to remain in effect unless and until it receives information or data that suggests a change is needed.”
In other words, we are all small businesses now.
– by Robb Mandelbaum, New York Times – Oct. 9, 2010
October 4, 2010 by cs
The Office of Small Business Utilization of the General Services Administration (GSA) is conducting a free one-hour webinar on Monday, Oct. 18, 2010 to explain the agency’s Mentor-Protégé Program.
The webinar provides both potential mentors and protégés with a general overview of GSA’s Mentor-Protégé Program as well as a review of the policies and procedures for participation.
You must REGISTER for this webinar in advance. If you have questions regarding this webinar, please contact Anthony “Tony” Eiland by email at email@example.com or by telephone at (202) 208-0257.
September 23, 2010 by cs
Recent settlements of allegations brought under the False Claims Act of defective pricing serve as reminder to companies doing business with the government to tighten up their procedures around pricing.
Cisco Systems and Westcon Group North America agreed to pay $48 million to settle claims they made misrepresentations to the General Services Administration and other federal agencies in violation of the False Claims Act.
The civil settlement announced by the Justice Department Sept. 7 resolves allegations that that Cisco and Westcon knowingly provided incomplete information to GSA contracting officers during negotiations related to Westcon’s contract with the GSA, resulting in defective pricing of Cisco products and submission of false claims to the government, according to the DOJ press release.
The settlement is part of a continued trend by DoJ to crack down on defective pricing by contractors. Federal contracts generally require companies to give the government the best price they give any customer. Failure to do so violates the False Claims Act. Under the Act, whistleblowers who report fraud against the government can become qui tam relators and collect a piece of any recovery, which can sometimes be worth millions of dollars.
In announcing the settlement, Tony West, Assistant Attorney General for the DoJ’s Civil Division, warned that, “When contractors provide incomplete and untruthful information to the government, we will take action to restore the integrity of the procurement process and protect taxpayer dollars.”
Likewise, GSA Inspector General Brian Miller said the agency’s auditors and special agents “keep vigilant watch to ensure contractors stay honest.”
Joseph Warin, a partner in the law firm Gibson, Dunn & Crutcher, says the type of settlement announced by Cisco and Westcon ”is not new, but it certainly is consistent” with past FCA enforcement activity.
In August, Hewlett-Packard agreed to pay DoJ $55 million to settle claims it defrauded the GSA and other federal agencies. That settlement resolved FCA allegations that HP knowingly paid kickbacks, or “influencer fees,” to systems integrator companies in return for recommendations that federal agencies purchase its products, and claims that HP’s 2002 contract with the GSA was defectively priced because HP provided incomplete information to GSA contracting officers during contract negotiations. EMC Corp. agreed to pay $87.5 million to settle similar claims in May.
Warin says it’s not hard for companies with large sales forces selling various products and services around the world to inadvertently fly afoul of the GSA regulations.
“As the sophistication and diversity of the products, add-ons and services become more varied, it becomes harder for companies to provide an apples-to-apples pricing comparison,” he says. “It’s a reminder that corporations with huge sales forces located in all four corners of the globe need to have an internal controls system that centralizes pricing and doesn’t allow for exceptions and variations.”
As a part of the Cisco Westcon settlement, the government agreed to dismiss a whistleblower lawsuit filed in 2004 in an Arkansas District Court, United States ex rel. Rille. v. Cisco Systems, Inc.
– Sept. 9, 2010 – ComplianceWeek.com