Georgia Tech Procurement Assistance Center

OIG report: SBA’s all small mentor-protégé program falling short

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The Small Business Administration (SBA) Office of Inspector General (OIG) recently issued a public report on the SBA’s All Small Mentor-Protégé Program (ASMPP), in which the SBA OIG found certain shortcomings in the SBA’s administration of the program.  As discussed below, the report also provides a series of recommendations, most of which the SBA has accepted.

What is the ASMPP?

The SBA began accepting applications for the ASMPP in 2016 and has seen a surge in applications each subsequent year.  Under the ASMPP, any small business – including 8(a) small businesses, Historically Underutilized Business Zone small businesses, veteran-owned and service-disabled veteran-owned small businesses, woman-owned and economically disadvantaged woman-owned small businesses – may enter into an agreement with a large business under which the large business will provide mentorship and assistance.  In return, the large and small businesses are permitted to joint venture to perform federal small business set-aside contracts.

Continue reading at:  Buildsmart blog

SBA adjusts monetary-based size standards for inflation

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Effective August 19, 2019, the Small Business Administration (“SBA”) has updated and increased the monetary-based size standards (i.e. receipts-based and assets-based size standards).  The SBA announced this change back in July, and explained that the standards were being changed solely to account for inflation.  Pursuant to the Small Business Jobs Act of 2010, the SBA reviews the size standards every five years and makes any necessary inflation-based adjustments.  The SBA also has the power to revise the size standards to account for changes in industry structure and federal market conditions.

Continue reading at:  Obermayer, Rebmann, Maxwell & Hippel LLP

SBA OHA decides 3-year receipts calculation period still applies

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Since being passed by Congress in late 2018, the Runway Extension Act has been the source of great confusion among small business contractors: would size under receipts-based NAICS codes be calculated under the 3-year calculation period set out in the SBA’s regulations, or under the new 5-year calculation period mandated by Congress?

In a decision just publicly released, the SBA Office of Hearings and Appeals has weighed in.  As of now, the SBA will still calculate size under the 3-year calculation period.

The applicability of the Runway Extension Act was debated in Cypher Analytics, Inc. dba Crown Point Systems, SBA No. SIZ-6022 (Aug. 27, 2019).  In that case, Cypher Analytics was found to be other than small under NAICS code 541611 after the SBA applied a 3-year calculation period.

Cypher Analytics appealed to the OHA, arguing that the SBA erred by not applying the 5-year calculation period required under the Runway Extension Act.  Despite several arguments raised on appeal, OHA was unpersuaded that the 5-year calculation period should apply.

To understand the reasoning behind OHA’s decision, visit:  SmallGovCon

SBA hosting access to capital forum Sept. 16th

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The U.S. Small Business Administration’s Georgia District Office is hosting an “Access to Capital” forum for small businesses and entrepreneurs on Monday, September 16th from 10:30 am to 12:30 pm in Gainesville, Georgia at the Brenau Downtown Center & Event Services Building, 301 Main Street SW, Gainesville, GA 30501.

The UGA Small Business Development Center in Gainesville is co-hosting this event and SBA Region IV Administrator Ashley D. Bell will be the host throughout the event.

Please encourage all entrepreneurs to attend this event and learn directly from a panel of lenders, resource partners, and economic development specialists on how to grow your small business.

WHAT:                Access to Capital Forum to Grow & Expand Your Business       

WHEN:                Monday, September 16th from 10:30 am to 12:30 pm

WHERE:              Brenau Downtown Center & Event Services, 301 Main St. SW, Gainesville, GA 30501 (Map)

WHY:                   So small businesses and entrepreneurs can get access to capital and funding

REGISTRATION LINK:  https://www.eventbrite.com/e/access-to-capital-forum-to-grow-expand-your-business-gainesville-ga-tickets-66731404427

DOJ cracks down on set-aside contracting fraud

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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

 

 

A reminder regarding the importance of SDVOSB control rules

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The recent decision in CVE Appeal of Valor Construction, Inc, SBA No CVE-121-A (June 3, 2019) provides a useful reminder to contractors regarding the difference between unconditional ownership and unconditional control, and the importance of assessing both when analyzing service-disabled veteran owned small business (“SDVOSB”) eligibility.  Specifically, the decision in Valor – which was issued by the Small Business Administration’s (“SBA”) Office of Hearings and Appeals (“OHA”) – demonstrates that an individual’s majority ownership of a SDVOSB, alone, does not vest that individual with unconditional control over the SDVOSB.  The Valor decision further reflects how the revised control regulations may cause eligibility problems for contractors.  Avoiding these pitfalls requires some background knowledge regarding the dual SDVOSB programs and the revision of the applicable regulations, a thorough understanding of the revised regulations themselves, and an awareness of the most common eligibility problems that contractors can face under these regulations.

Continue reading at:  Obermayer

Tips to help small businesses find success with government contracting

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Finding new customers is a tough task all small businesses face.  One option many never consider is taking on the federal government as a client.

Government procurement – having the federal government purchase their goods and services – can be a big boon for small businesses.  The government needs a lot more than just items for the military, so small businesses that aren’t defense contractors shouldn’t look the other way on these opportunities.  The U.S. government spends hundreds of billions of dollars each year on a wide range of commercial items.

While many may think government contracts only go to large corporations, that isn’t the case.  The law requires the U.S. government, which is the largest customer in the world, to consider buying from small businesses.  In total, the federal government awards nearly one-quarter of its service contracts to small businesses, according to the U.S. Small Business Administration.

Continue reading at:  Business.com

Five-year annual receipts: Don’t start until SBA says “go!”

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Absent further action by the Small Business Administration (“SBA”) Office of Hearings and Appeals or a Federal Court, the GAO has effectively ended the argument as to whether the Small Business Runway Extension Act of 2018 (“Runway Extension Act”) immediately changed the annual receipt average for revenue-based small business size standards from three years to five.  In short, firms should continue to apply the three-year standard until SBA’s regulatory process runs its course.

Continue reading at:  Morrison & Foerster

Uncertainty in how small business joint ventures must be managed

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U.S. Small Business Administration (“SBA”) regulations require that mentor-protégé and socioeconomic joint ventures designate the protégé or socioeconomic member as the “managing venturer” of the joint venture.  However, the regulations do not define “managing venturer” or state how much control such a “manager” must maintain over the joint venture.  In the context of typical small business operating entities (i.e., notjoint ventures), SBA’s Office of Hearings and Appeals (“OHA”) has offered detailed guidance on what it means to “control” such entities, but this case law has never been applied to joint ventures.  This leaves joint venturing firms without any direction on the subject — beyond the general requirement that they designate a “managing venturer.”

As discussed in more detail below, this is a “gap” in SBA regulations and case law that has led to uncertainty in the governance of small business joint ventures.  Given the increasing use of joint ventures by contractors pursuing small business set-aside procurements, this uncertainty is increasingly harmful to the business community.

This article surveys the available OHA case law in order to identify the specific limits of the aforementioned “gap,” and then offers predictions and recommendations for the way that SBA should define the term “managing venturer” in order to minimize business uncertainty and thereby promote small business development through joint venture participation.

Continue reading at:  Miles and Stockbridge

Highlights from the stalled SBA Reauthorization and Improvement Act of 2019

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Last month, Senator Marco Rubio, Chairman of the Senate Committee on Small Business and Entrepreneurship, released the Chairman’s mark to the Small Business Administration (SBA) Reauthorization and Improvement Act of 2019 (the “SBA Reauthorization Act”).  This legislation aims to modernize and streamline SBA programs, and would be the first comprehensive reauthorization of the Small Business Act in nearly twenty years.  Although the legislation appears stalled, it is likely that many of these initiatives will find their way into future policy initiatives.  Here are a few potential changes to track in the SBA Reauthorization Act:

  • Creation of a Centralized Certification Office.  With a few exceptions, small business programs are based on self-certification by each firm.  This legislation would create a centralized certification office for firms wishing to participate in the SBA’s Socially and Economically Disadvantaged Business Development Program (8(a)), Women-Owned Small Business Program (WOSB), Service-Disabled Veteran-Owned Small Business Program (SDVOSB), and Historically Underutilized Business Zone Program (HUBZone).  This would increase certainty for Government officials relying on size representations and reduce the number of speculative size and status protests.  However, it may also create logistical and funding complications for the SBA due to the sheer volume of applications.
  • Increased Sole Source Authority.  To increase the use of sole source awards for small businesses, the legislation would increase the contract-value limit on sole-source awards for the HUBZone, WOSB, and SDVOSB programs – from $6.5 and $7 million to $10 million for manufacturing contracts, and $4 million to $8 million for all other contracts.
  • Increased Venture Capital Investment in WOSBs.  The legislation would allow women-owned and minority-owned firms to accept venture capital and equity investments that would exceed 50 percent ownership of the firm, so long as those venture capital and equity investment firms are themselves women-owned or minority-owned.  This would allow WOSB and 8(a) entities to accept needed investments and still maintain their program status.

Continue reading at:  Morrison & Foerster

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