IG reports continued weaknesses in small business reporting and 8(a) program

November 13, 2014 by

The Office of the Inspector General (IG) of the U.S. Small Business Administration reports on 11 weaknesses in a range of SBA programs.  Two of the “challenges” identified in the Oct. 17, 2014 report pertain directly to small business participation in federal contracting:

  • Procurement flaws allow large firms to obtain small business awards, and allow agencies to count contracts performed by large firms towards their small business goals.
  • The SBA needs to modify the Section 8(a) Business Development  Program so more firms receive business development assistance, standards for  determining economic disadvantage are justifiable, and the SBA ensures that firms follow 8(a) regulations when completing contracts.

SBA - IGThe IG’s full document, entitled “Report on the Most Serious Management and Performance Challenges Facing the Small Business Administration In Fiscal Year 2015″ can be downloaded here, but the text of the IG’s finding on the two point just cited appears below.

Procurement Reporting

The Small Business Act established a Government-wide goal that 23 percent of the total value of all prime contracts be awarded to small businesses each fiscal year. As the advocate for small business, the SBA should strive to ensure that only small firms obtain and perform small business awards. Further, the SBA should ensure that procuring agencies accurately report contracts awarded to small businesses when representing their progress in meeting small business contracting goals.

In September 2014, we issued a report that identified over $400 million in FY 2013 contract actions that may
have been awarded to ineligible firms. We also identified over $1.5 billion dollars in contract actions for
which the firms were in the 8(a) or HUBZone programs at the time of contract award, but were no longer in
these programs in FY 2013. Previous OIG audits and other Government studies have shown widespread
misreporting by procuring agencies, since many contract awards that were reported as having gone to small
firms have actually been performed by larger companies. While some contractors may misrepresent or
erroneously calculate their size, most of the incorrect reporting results from errors made by Government
contracting personnel, including misapplication of small business contracting rules. In addition, contracting
officers do not always review the on-line certifications that contractors enter into Government databases
prior to awarding contracts. The SBA should ensure that procuring agencies accurately report contracts
awarded to small businesses when representing their progress in meeting small business contracting goals,
and that contracting personnel are reviewing on-line certifications prior to awarding contracts.

The SBA revised its regulations to require firms to meet the size standard for each specific order to address a
loophole within General Services Administration Multiple Awards Schedule (MAS) contracts, which contain
multiple industrial codes that determine the size of the company. Previously, a company awarded an MAS
contract could identify itself as a small business on individual task orders awarded under that contract, even
though it did not meet the size criteria for the applicable task. Thus, agencies received small business credit
for using a firm classified as small, when the firm was not small for specific orders under the MAS contract. In
addition, the SBA submitted a final rule to the Federal Acquisition Regulations (FAR) Council to implement the
changes made to its regulations in the FAR. The SBA also updated its standard operating procedure (SOP) to
ensure consistency in conducting its surveillance reviews to assess Federal agencies’ management of their
small business programs and compliance with regulations and applicable procedures.

While the SBA has made substantial progress on this challenge, we are working with the Agency to verify that
the surveillance reviews were conducted in a thorough and consistent manner.

                                                                                               ***

8(a) Program

The SBA’s 8(a) Business Development (BD) Program was created to assist eligible small disadvantaged
business concerns to compete in the American economy through business development. Previously, the
SBA did not place adequate emphasis on business development to enhance the ability of 8(a) firms to
compete, and did not adequately ensure that only 8(a) firms with economically disadvantaged owners in
need of business development remained in the program. Companies that were “business successes”
were allowed to remain in the program and continue to receive 8(a) contracts, causing fewer companies
to receive most of the 8(a) contract dollars and many to receive none.

The SBA has made progress towards addressing issues that hinder its ability to deliver an effective 8(a)
BD Program. For example, the SBA expanded its ability to provide assistance to program participants
through its resource partners—small business development centers, service corps of retired executives,
and procurement technical assistance centers. In addition, the SBA has taken steps to ensure business
opportunity specialists assess program participants’ business development needs during site visits. The
SBA also revised its regulations, effective March 2011, to ensure that companies deemed “business
successes” graduate from the program. These regulations also establish additional standards to address
the definition of “economic disadvantage.” Agency officials stated that the rule-making process served
as an adequate proxy to objectively and reasonably determine effective measures for economic
disadvantage, and were not aware of any reliable sources of data to determine economic disadvantage.

However, for the second consecutive year, the SBA has not completed updating its SOP for the 8(a) BD
Program to reflect the March 2011 regulatory changes. In addition, we continue to maintain that the
SBA’s standards for determining economic disadvantage are not justified or objective based on the
absence of economic analysis. In December 2011, the SBA awarded a contract to develop and deploy a
new IT system by December 2012 to assist the SBA in monitoring 8(a) program participants. However,
the new system has not been deployed, and its delivery date and capabilities are undetermined at this
time.

8(a) subcontracting limitations: Compliance oversight lacking

October 15, 2014 by

Compliance with the limitations on subcontracting are not adequately being monitored by the contracting officers responsible for 8(a) contracts, according to a recent GAO report.

After reviewing a representative sample of ten 8(a) contracts, the GAO determined that contracting officers effectively monitored subcontracting limit compliance on two of those contracts.  In other cases, agency contracting officers failed to effectively monitor compliance, even in situations presenting a heightened risk of potential violations–such as where ineligible incumbents were serving as subcontractors.

The GAO report documents “confusion” among contracting officers regarding their obligations to ensure compliance with subcontracting limits.  Some contracting officers were confused about what sba-logothe FAR, Small Business Act, and SBA partnership agreements require.  Other contracting officers seemed to assume that their CORs were primarily responsible for ensuring compliance with the subcontracting limits – although all 10 of the CORs in question “stated that contracting officers have not delegated this responsibility to them and they do not take steps to monitor the amount of subcontracted work.”

Keep reading this article at: http://smallgovcon.com/statutes-and-regulations/8a-subcontracting-limitations-compliance-oversight-lacking/

A faster way for contractors to recover on claims

September 4, 2014 by

Filing claims against the government is not contractors’ preferred method of resolving problems on a federal project, but often contractors are left with little choice with federal procurement officials spread thin. For example, the U.S. Army Corps of Engineers has not moved on a significant number of pending changes and refused to pay the contract balance because the Corps has assessed an equal amount in liquidated damages for delay. The delay was caused by a differing site condition, for which the contractor submitted a claim for time and money. After waiting 60 days, the Corps responded by stating that it will issue the contracting officer’s final decision in seven months. Meanwhile, the contractor continues to spend money trying to close out the project. 

How can contractors speed up the claims process, recover on favorable terms, and avoid throwing good money after bad on a multiyear dispute resolution process?   The answer: Unbundle your claims and file as many under $50,000 or $100,000 as possible to take advantage of the various board of contract appeals’ expedited or accelerated procedures. Then consolidate all expedited appeals and push aggressively toward a fast and cost-effective global resolution.

Keep reading this article at: http://www.foxrothschild.com/newspubs/newspubsArticle.aspx?id=15032395091

Get a contracting plan in place early

August 19, 2014 by

When contracting fails, there are several common reasons offered: the source selection and bid protest requirements; onerous acquisition regulations; an understaffed, poorly trained workforce. However, many contracting officers can relate to significant delays during the planning phase, particularly to difficulties obtaining an acquisition plan (AP).

Often it’s developed well after the contracting request for action. When this occurs, it places contract managers in the unenviable position of delaying RFP release, thus risking agency funding, but more importantly, jeopardizing mission success. The alternative is to jump into a contracting process with ambiguous goals or results. Thus, for all the debate about the effectiveness of government contracting, the success or failure of programs involving government contracting is actually determined very early, often unfortunately before the contracting officer’s involvement—that is, during acquisition planning.

Eyes glaze over when someone references the Federal Acquisition Regulation (FAR), and many are on record as wanting to modify, reduce, or even abolish it. However, the FAR’s Part 7 acquisition planning guidance provides a great roadmap to all the many considerations necessary before satisfying a government need via contract. The program office must take non-delegable responsibility to figure out what, why, when, where, and how they will obtain acquired resources to support their goals. This shouldn’t be another paperwork drill, completed by support contractors or the contracting officer and subsequently filed away. However, that sometimes is the case.

Keep reading this article at: http://www.federaltimes.com/article/20140814/BLG06/308140006/Get-contracting-plan-place-early

Defense acquisition rule requiring contractors to report counterfeit parts set to be included in the FAR

June 30, 2014 by

In May, the Department of Defense amended the Defense Federal Acquisition Regulation Supplement (DFARS) to require certain contractors to detect and report counterfeit electronic parts.  (See DFARS rule on “Detection and Avoidance of Counterfeit Electronic Parts” by clicking here.)

Now, the Federal Acquisition Regulation (FAR) Council has published a proposed rule to greatly expand counterfeit reporting obligations.  The newly proposed rule sets forth sweeping requirements for contractors and subcontractors to report nonconforming items.

Unlike the DFARS rule, which limits application to particular electronic parts and a certain category of contractors, the proposed FAR rule extends beyond electronic parts and specific contractors.  In fact, the proposed rule is designed to effect all contracts for acquisition of supplies or services that include supplies.

Under the proposed rule, contractors and subcontractors at all tiers must screen the Government-Industry Exchange Program (GIDEP) as part of their quality control processes.  Further, the proposed rule requires reporting in GIDEP of any “common” items purchased that are counterfeit, suspected to be counterfeit, or contain “major nonconformance” or “critical nonconformance.”   In addition, contractors must notify Contracting Officers, in writing, when they become aware that “any end item, component, subassembly, part or material contracted in supplies purchased by the government” is counterfeit or suspected to be counterfeit.

Written comments on the proposed rule are due by August 11, 2014.   Comments are to be submitted via the Federal eRulemaking portal by searching for ‘‘FAR Case 2013–002’’.    Select the link ‘‘Comment Now’’ that corresponds with ‘‘FAR Case 2013–002.’’ Follow the instructions provided at the ‘‘Comment Now’’ screen. Please include your name, company name (if any), and ‘‘FAR Case 2013-002’’ on your attached document.  Comments may be faxed to 202–501–4067 or mailed to: General Services Administration, Regulatory Secretariat (MVCB), ATTN: Hada Flowers, 1800 F Street NW., 2nd Floor, Washington, DC 20405.

Contractor pay cap will apply to all employees under new rule

June 16, 2014 by

A new rule would limit the amount contractors could charge the government for any of their employees’ salaries under cost-reimbursement contracts.

Currently contractors can charge back $487,000 for employee salaries, but the ceiling only applies to top senior executives. With the new Federal Acquisition Regulation rule, that limit would be expanded to all employees including scientists and engineers.

The final rule, issued May 30, would only affect the Defense Department, NASA and the Coast Guard, and applies retroactively to compensation costs on government contracts signed after Dec. 31, 2011.

Keep reading this article at: http://www.fiercegovernment.com/story/contractor-pay-cap-will-apply-all-employees-under-new-rule/2014-06-03

Limitations on subcontracting: 1099 contractor’s work didn’t count

June 11, 2014 by

Under the FAR’s limitations on subcontracting clause, the work to be performed by a 1099 independent contractor did not count toward the prime contractor’s performance.

In a recent bid protest decision, the GAO held that a procuring agency properly rejected an offeror’s proposal because the offeror was relying, in part, on an independent contractor to meet its obligations under the limitations on subcontracting clause.

The GAO’s decision in MindPoint Group, LLC, B-409562 (May 8, 2014) involved a Department of Justice solicitation for information technology infrastructure support.  The proposal was issued as a set-aside for Economically Disadvantaged Woman Owned Small Businesses (EDWOSBs), and incorporated FAR 52.219-14, the standard limitation on subcontracting clause.  For a services contract, FAR 52.219-14 requires the EDWOSB to perform at least 50 percent of the cost of contract performance incurred for personnel with its own employees.

MindPoint Group, LLC submitted a proposal.  MindPoint’s proposal stated that MindPoint would self-perform 53.3 percent of the contract effort using seven individuals, including an individual designated as the “Systems Administrator MS.”  However, MindPoint’s proposal included a letter of commitment stating that the Systems Administrator MS would be an “independent consultant,” and MindPoint’s price proposal referred to the individual as a “1099 Consultant.”

Keep reading this article at: http://smallgovcon.com/gaobidprotests/limitations-on-subcontracting-1099-contractors-work-didnt-count/

Learn how the government conducts cost and price analysis, starting June 16

June 6, 2014 by

The Contracting Education Academy at Georgia Tech is offering a course focusing on the Fundamentals of Cost & Price Analysis in government contracting.  The course begins June 16, 2014, and will be held at the Global Learning Center located on the midtown Atlanta campus of the Georgia Institute of Technology.

To see details or to register, click here.

Academy identifier - gold & black w-white bkgrndThe Academy’s comprehensive, two-week course begins with an in-depth review of the market research process, and provides instruction to help students understand and analyze contractor pricing strategies.

Attendees will learn to accomplish cost-volume-profit analysis, calculate contribution margin estimates, and develop cost estimating relationships in order to accomplish an effective price analysis pursuant to FAR Subpart 15.4.

After learning the basic elements of price and cost analysis, students will build and defend a pre-negotiation objective, including a minimum and maximum pricing objective with a weighted guidelines assessment.

This course is ideal for new hires in the contracting career field.   In addition, for government contractors, this course provides invaluable insights into the government contracting decision-making process.

Student performance will be assessed by graded exams on math fundamentals and applied course material as well as an exercise for student participation and completion of negotiations.

DAU logoCON 170 – Fundamentals of Cost & Price Analysis is Defense Acquisition University-equivalent training that satisfies the FAC-C and DAWIA certification programs.  Students successfully completing the course earn 7.35 continuing education units.

For more information or to register, please visit: http://www.pe.gatech.edu/courses/con-170-fundamentals-cost-and-price-analysis

How one small word change could mean many more contracting dollars for small businesses

June 3, 2014 by

Sometimes, it’s the most subtle nuances in a phrase that matter most — and for small government contractors, that appears to be the case in the federal procurement rulebook.

The Federal Acquisition Regulation, a long list of government-wide contracting rules established by the heads of several federal agencies, requires all large companies bidding on prime contracts to specify what percentage of the money awarded would flow through to small-business subcontractors.

The rule is meant to ensure that small firms “have the maximum practicable opportunity to participate in performing contracts,” according to the FAR, and to help the government meet its annual goal of awarding 35.9 percent of all subcontracting dollars to small companies. Collectively, federal agencies have missed that mark each of the last five years.

Bob Justis says one odd word on page 1,343 in the rulebook isn’t helping.

“Out of all your planned subcontracting dollars, you’re required to set aside some percentage of that for small businesses,” Justis, head of Justis Consulting, a contracting proposal development firm based in Washington, said in a recent interview. “However, it’s required to be stated as a percentage of your total subcontract dollars — not as a percentage of the total contract dollars.”

It’s a subtle but important distinction, Justis explained, because a large prime contractor can, based on that rule, pledge to commit 40 percent of its subcontracting dollars to small businesses. If the company then handles all the work itself, resulting in a total subcontracting spend of zero, it still met its small-business subcontracting goal.

After all, 40 percent of nothing is nothing.

Keep reading this article at: http://m.washingtonpost.com/business/on-small-business/how-one-small-word-change-could-mean-many-more-contracting-dollars-for-small-businesses/2014/05/22/30b4c0d8-e106-11e3-9743-bb9b59cde7b9_story.html

Learn how to use the FAR beginning June 3rd

May 22, 2014 by

Learning the Federal Acquisition Regulation — the FAR — is a daunting, but necessary, undertaking for both contracting personnel and contractors alike.

The 2,000-page FAR is the rule book federal agencies use to plan, award, and administer virtually all government contracts.  Contracting officers must master the FAR in order to construct contracts correctly.  Likewise, contractors must learn the FAR in order to compete more effectively and execute contract work in accordance with the rules.

On June 3, 2014, Georgia Tech’s Contracting Education Academy is kicking-off an intensive four-day course that helps participants learn how to identify the basic principles of government contracting, access online resources, and locate, cite, and interpret information in the FAR and agency supplements to the FAR such as the Defense Federal Acquisition Regulation Supplement (DFARS).

For more information or to register, click here.

CON 090-1: Contracting Overview of the FAR is actually the first of four modules in the CON 090 – Federal Acquisition Regulation (FAR) Fundamentals series.  Each module involves limited lecture, and features an exercise-based curriculum that takes a look at the federal acquisition environment from a macro-level.

The Contracting Education Academy at Georgia Tech (The Academy) is an approved equivalency training provider to the Defense Acquisition University (DAU) and provides continuing education training to Acquisition and Government Contracting professionals as well as to business professionals working for government contractors or pursuing opportunities in federal contracting.