Georgia Tech Procurement Assistance Center

Small business subcontracting for cloud computing gets easier

By

In response to widespread interest in allowing more small business participation in opportunities involving cloud computing, the Small Business Administration (“SBA”) has decided to exclude cloud computing from the limitation on subcontracting rule calculation, in certain circumstances.  Thus, beginning December 30, 2019, small businesses are no longer limited in their ability to subcontract out cloud computing services to larger companies, in connection with performing a Government contract set aside for small businesses, where the small business will perform other services that are the primary purpose of the acquisition.

The limitation on subcontracting rule provides that a small business may not subcontract more than 50% of the prime contract amount, under a services contract, to businesses that are other than small. 13 C.F.R. 125.6; 48 C.F.R. 52.219-14.  In the cloud computing context, this limitation has had the effect of reducing small business participation in IT service contracts with a substantial cloud computing component.  Typically, a small business is not able to commit to a procurement in which it (together with other small businesses, if needed) will provide more than 50% of the services under these contracts.  Certainly not where the cloud computing market is currently dominated by juggernauts who are far larger than “small.”

Continue reading at:  Government Contracts and Investigations Blog

Alpharetta man charged with conspiracy to defraud U.S. government

By

Three men were charged recently in federal court in Boston with conspiracy to defraud the United States and mail fraud in connection with a scheme to obtain government contracts.

Frank Apicella, 63, of Groveland, Massachusetts; Michael Sforza, 59, of Alpharetta; and James Apicella, 37, of Kingston, New Hampshire, were charged with one count of conspiracy to defraud the United States and one count of mail fraud.

According to the charging document, beginning in 2011 the defendants used Tactical Office Solutions, a company run by James Apicella, to bid for and obtain government contract work that was set aside for Service-Disabled Veteran-Owned Small Businesses and Historically Underutilized Business Zone companies.  Although the work was bid by and awarded to Tactical Office Solutions based under these set-aside programs, the work was actually mostly performed by FENS, a company owned and operated by Frank Apicella and Michael Sforza that was not eligible for these contracts.

Continue reading at:  Patch.com

SBA to increase enforcement in 2020 on set-asides and subcontracting

By

One of the most overlooked compliance requirements for set-aside contracts are the limitations on subcontracting.  Don’t take my word for it—GAO has noted in several reports that contracting officers generally do not monitor or enforce the requirement that the small business prime contractor must self-perform a certain percentage of the contract.  The limitations on subcontracting requirements are critical to the efficacy of the small business programs.  Indeed, the goals of the programs are not served if small businesses do not perform contracts reserved explicitly for them.  As new SBA rules have taken effect on December 30th, we expect enforcement to be a more significant focus in 2020.  As a result, government contractors large and small need to make a New Year’s resolution to adjust or implement compliance strategies to ensure they understand and satisfy the limitations on subcontracting for set-aside projects.

Continue reading at:  Piliero Mazza

DOJ cracks down on set-aside contracting fraud

By

This week, the Department of Justice (“DOJ”) issued two press releases regarding companies and individuals that agreed to settle False Claims Act cases related to government contracting fraud.  United States Attorney Maria Chapa Lopez announced that Sunrise Systems of Brevard, Inc. had agreed to pay the United States $500,000 to resolve allegations that it violated the False Claims Act by submitting claims for government funds in violations of Small Business Administration regulations.  According to the settlement agreement, from December 10, 2013, through February 9, 2016, Sunrise partnered with a minority-owned small business, V&R Enterprises of Jacksonville, Inc., but violated the SBA’s labor and work performance requirements in order to access SBA set-aside funds.  The government alleged that Sunrise performed nearly all of the work on the joint venture project and received nearly all of the profits, in violation of the law.  In another case, Luke Hillier, the majority owner and former Chief Executive Officer of Virginia-based defense contractor ADS, Inc., agreed to pay the United States $20 million to settle allegations that he violated the False Claims Act by fraudulently obtaining federal set-aside contracts reserved for small businesses that his company was ineligible to receive.

Both cases illustrate that it is critically important that companies both large and small know and understand the rules and regulations governing small business set-aside procurements.  This is especially important when it comes to performance of work requirements (limitations on subcontracting), which often require the small business on a set-aside procurement to do a requisite amount of work depending on the type of contract at issue.  On a set-aside contract that is restricted for a certain types of small business, it is often illegal for the small business to subcontract out all of the work to a large subcontractor.  Further, small businesses cannot be deemed affiliates or too closely affiliated with a large business or they could lose their small business size status.  Meaning, if your operations are so intertwined and dependent on a large business that you are essentially just a part of that large business, you could be deemed ineligible for small business set-aside work because you are too affiliated with that large business.  The intent of small business set-aside contracts is to truly help bonafide small businesses.  As a result, a substantial portion of the work and benefits of a set-aside contract need to go to small businesses.  If you need help understanding performance of work requirements, limitations on subcontracting, and the affiliation rules, please reach out to a GTPAC counselor and we would be happy to help.

Press releases:

Jacksonville Contractor Agrees to Pay $500,000 to settle False Claims Act liability

Former CEO of Virginia-Based Defense Contractor Agrees to Pay $20 Million to Settle False Claims Act Allegations Related to Fraudulent Procurement of Small Business Contracts

 

 

Long-time GTPAC leader Chuck Schadl is a guest on the Risk GovCon podcast (Part 2)

By

Prior to his retirement, Chuck Schadl, the long-time GTPAC Procurement Counselor and Group Manager of Government Contracting Services at Georgia Tech’s Enterprise Innovation Institute participated as a guest speaker on the Risk GovCon Podcast.

In Part 2 of his two part appearance, which is available for download here, Chuck discusses what prime contractors look for in subcontractors, being procurement ready, resources available to small businesses seeking to do business in the government space, market research, and the limitations on subcontracting rules applicable on small business set-aside contracts.  Part 1 of the two part series is available here.

DoD makes immediate change to limitations on subcontracting rule; FAR Council issues proposed rule

By

The Department of Defense (DoD) has issued a class deviation that resolves the inconsistency between the Small Business Administration (SBA) regulations and the clause at Federal Acquisition Regulation (FAR) 52.219-14 related to the Limitations on Subcontracting Rule (LOSR).

The FAR Council has also issued a proposed rule to amend FAR 52.219-14 to fully resolve this issue for all small businesses. Government contractors should be aware of these new changes and proposed changes.

Generally, the LOSR prevents small business prime contractors from subcontracting the majority of the work under a prime contract to large businesses. The LOSR is intended to ensure that small businesses get the benefit of the set-aside prime contract. The government does not want a small business to get an award, perform only a small portion of the work, and then subcontract out everything else to large businesses.

Since 2016, SBA small businesses have struggled to comply with the LOSR because the regulations at 13 C.F.R. § 125.6 are inconsistent with the contract clause at FAR 52.219-14.

Keep reading this article at: http://www.mondaq.com/article.asp?articleid=777544

See DoD’s Jan. 8, 2019 Class Deviation 2019-O0003 on this subject at: https://www.acq.osd.mil/dpap/policy/policyvault/USA000039-19-DPC_Class_Deviation_2019-O0003.pdf

See the proposed rule here: https://www.govinfo.gov/content/pkg/FR-2018-12-04/pdf/2018-25506.pdf

While FAR Council proposes change to subcontracting limitation rules, DoD issues immediate class deviation

By

More than five years after Congress directed the Executive Branch to change the way small business contract performance requirements are calculated, the U.S. Department of Defense (DoD) and the Federal Acquisition Regulation (FAR) Council announced significant steps yesterday to adopt these new requirements.

By way of background, in June 2016, the U.S. Small Business Administration (SBA) issued a final rule changing its regulations regarding the limitations on subcontracting applicable to small business set-aside contracts. SBA’s amended regulations were promulgated in response to a directive in the 2013 National Defense Authorization Act (2013 NDAA) which required changes to how limitations on subcontracting requirements are quantified and which required inclusion of “Similarly Situated Entities” (SSEs) in the prime contractor’s portion of the work under set-aside contracts.

The contracting community has been anxiously awaiting an amendment to the FAR, which has been asserted to be necessary for these Congressionally-mandated changes to become effective.  On Dec. 5th, the DoD issued a Class Deviation which adopts SBA’s current approach to Limitations on Subcontracting. The Class Deviation is effective immediately and applies to all DoD solicitations and contract awards from that date forward.

DoD’s Class Deviation was issued in conjunction with a notice of proposed rule-making issued by the FAR Council, which proposes to amend the FAR’s Limitations on Subcontracting clause (52.219-14) to conform with the statutory requirement and SBA’s previously announced final rule.

Keep reading this article at: https://www.jdsupra.com/legalnews/dod-issues-a-limitations-on-58789/

See commentary about the limitations on subcontracting rule at: http://smallgovcon.com/statutes-and-regulations/limitations-on-subcontracting-far-council-finally-proposes-rule-change/

Limitations on subcontracting: FAR change in the works

By

It’s been more than a year since the SBA issued a final rule overhauling the limitations on subcontracting for small business contracts.  The SBA’s rule, now codified at 13 C.F.R. 125.6, changes the formulas for calculating compliance with the limitations on subcontracting, and allows small businesses to take credit for work performed by similarly situated subcontractors.

But the FAR’s corresponding clauses have yet to be changed, and this has led to a lot of confusion about which rule applies – especially since many contracting officers abide by the legally-dubious proposition that “if it ain’t in the FAR, it doesn’t count.”  Now, finally, there is some good news: the FAR Council is moving forward with a proposed rule to align the FAR with the SBA’s regulations.

By way of quick background, way back in January 2013, former President Obama signed the 2013 National Defense Authorization Act (NDAA) into law.  The 2013 NDAA made major changes to the limitations on subcontracting.  The law changed the way that compliance with the limitations on subcontracting is calculated for service and supply contracts – from formulas based on “cost of personnel” and “cost of manufacturing,” to formulas based on the amount paid by the government.  And, importantly, the 2013 NDAA allowed small primes to claim performance credit for “similarly situated entities.”

Keep reading this article at: http://smallgovcon.com/uncategorized/limitations-on-subcontracting-far-change-in-the-works/

Ostensible subcontractor rule: SBA OHA confirms ‘four key factors’ to avoid

By

In determining whether a prime contractor and subcontractor are affiliated under the ostensible subcontractor rule, the SBA is supposed to consider the totality of the relationship between the parties.  But when it comes to determining whether the ostensible subcontractor rule has been violated, not all components of the prime/subcontractor relationship are created equal.

In a recent decision, the SBA Office of Hearings and Appeals confirmed that there are “four key factors” that are strongly suggestive of ostensible subcontractor affiliation–especially if the subcontractor will perform a large percentage of the overall contract work.

OHA’s decision in Size Appeal of Charitar Realty, SBA No. SIZ-5806 (2017) involved a GSA solicitation for custodial, landscaping and grounds maintenance at two federal courthouses.  The solicitation was issued as an 8(a) set-aside under NAICS code 561720 (Janitorial Services), with a corresponding $18 million size standard.  The solicitation required, among other things, that offerors provide at least three past performance references, completed over the last three years, for similar work.

Keep reading this article at: http://smallgovcon.com/sbaohadecisions/ostensible-subcontractor-rule-oha-confirms-four-key-factors-to-avoid/

Set-aside decision need not consider compliance with limitation on subcontracting

By

GAO-GovernmentAccountabilityOffice-SealBefore deciding whether to set-aside a solicitation for small businesses under FAR 19.502-2, should the contracting officer first determine whether those small business will be able to provide the needed services while, at the same time, complying with the limitation on subcontracting?

No, according to a recent Government Accountability Office (GAO) bid protest decision. Instead, an agency’s determination whether a small business will comply with the limitation on subcontracting should be made as part of its award decision (following the evaluation of proposals), not during its initial set-aside determination.

Under FAR 19.502-2(b), a procurement with an anticipated dollar amount greater than $150,000 must be set-aside for small businesses where there is a reasonable expectation that offers will be received from at least two responsible small businesses and that award will be made at fair market prices. Though orders under Federal Supply Schedule (FSS) contracts (issued under FAR part 8.4) are exempt from these small business programs, a contracting officer nonetheless has discretion to set-aside FSS orders for small businesses.

Keep reading this article at: http://smallgovcon.com/gaobidprotests/set-aside-decision-need-not-consider-compliance-with-limitation-on-subcontracting/

Contracting News

Read More

Contracting Tips

Read More

GTPAC News

Read More

Georgia Tech News

Read More