http://www.oles.com/ en keith@keithrusselldesign.com Copyright 2013 2013-03-29T22:05:52+00:00 http://www.oles.com/blog/entries/introduction-to-domestic-preference-acts http://www.oles.com/blog/entries/introduction-to-domestic-preference-acts#When:22:05:52Z It comes as a surprise to no one that Congress has wide-ranging ability to place conditions on the federal government’s ability to spend federal dollars.  What may surprise some contractors is the effect that Congress’s power via “domestic preference acts” has to limit how the contractor builds a project and what materials it procures to do so.    What do we mean when we say “domestic preference acts”?  These refer to the Acts that establish the long-standing inclination of the United States government to ensure federal dollars are spent on domestic products.  For example: Buy American Act of 1933 (41 U.S.C. §10a-d) Trade Agreements Act (19 U.S.C. §§ 2511-2518, implements WTO GPA) Berry Amendment (applicable to DoD) Surface Transportation Assistance Act of 1982 (“Buy America” – which notably is not exactly the same as “Buy American”) The BAA requires “substantially all” of an acquisition be attributable to American-made components. This has come to mean that at least 50 percent of the costs must be attributable American content.  The BAA applies to “construction materials” and “end products,” depending on whether a supply contract or construction contract is involved.  A two-part test has developed to determine whether the BAA applies and the GAO applies a case-by-case standard to determine applicability of whether something is “manufactured” in the United States sufficient to meet the requirements of BAA. This principle is applicable to those involved with heavy civil construction via the Surface Transportation Assistance Act of 1982, with its separate policy known as “Buy America.”  This version governs procurements funded through the Department of Transportation, such as highway, bridge, rail, and transit construction. A product is defined as American–made under “Buy America” if all of its manufacturing processes, constituent parts and/or materials originated in the United States.  The Federal Highway Administration (FHWA) applies the Buy America standards through 23 U.S.C. § 313, and 23 CFR § 635.410. To further confuse matters, the 2009 American Recovery and Investment Act added its own amendments and requirements applicable to all projects funded with Recovery Act funds - both direct federal and federal-aid. (AARA Section 1605).  In addition, there are agency specific interpretations in the Act and there are also special restrictions attached to federal funds given to states for mass transit and highway projects.    The Moving Ahead for Progress in the 21st Century Act (MAP-21), signed by President Obama on July 6, 2012, contains a provision that substantially broadened the application of Buy America to any contract eligible for Federal highway funding, regardless of the funding source of such contracts, if at least one contract for the project is funded with Federal-aid highway funds.  In response, FHWA the just issued its own clarification procedures in December 2012.  The FHWA concluded that for a manufactured product to be subject to Buy America, it had to be manufactured “predominantly” of steel or iron, meaning it consists of at least 90 percent steel or iron content when delivered to the job site (including the sites where any precast concrete products are manufactured) for installation.  For example, steel or iron products included fabricated structural steel, piling, sheet piling etc. are subject to Buy America.  The miscellaneous steel or iron components, subcomponents and hardware necessary to encase, assemble and construct the above components (or manufactured products not predominantly steel or iron) are not subject to Buy America coverage.  Products such as, clamps, fittings, sleeves, washers, bolts, nuts, screws, tie wire, spacers, lifting hooks etc. are not subject to the Act. FHWA also clarified that under MAP-21, the Buy America provisions extend downward to include the utility work, if the project is funded with federal-aid highway funds. (See, i.e. http://www.fhwa.dot.gov/construction/contracts/121220.cfm). For another wrench in a contractor’s analysis, the Trade Agreements Act in effect modifies BAA and opens procurement to products from “designated countries”, for certain specified product categories, above certain specified thresholds, the amount of which is determined by the specific country.  It requires a very detailed analysis to ensure compliances with the TAA in relation to the other domestic preference acts.  Unfortunately, for contractors, knowing which requirements apply and when they are subject to exemption or waiver can be difficult to ascertain and running afoul of these acts could involve audits, investigations, monetary sanctions, suspension or debarment and/or civil or criminal liabilities under the False Claims Act.  Should you have questions about the applicability of and compliance with these Domestic Preference Acts, please contact us.   2013-03-29T22:05:52+00:00 http://www.oles.com/blog/entries/when-a-false-certification-may-not-be-false-under-the-false-claims-act http://www.oles.com/blog/entries/when-a-false-certification-may-not-be-false-under-the-false-claims-act#When:23:08:56Z Government contractors routinely provide certifications during the contracting process.  For example, these certifications ask the contractor to verify that the cost or pricing data or claims submitted are true and honest.  Submitting a false claim can create liability under the Federal False Claims Act (“FCA”).  See 31 U.S.C. § 3729.  Lawsuits against contractors for potential violations of the FCA may come directly from the Government or through qui tam suits.  The central question in these cases is whether the contractor presented a false or fraudulent claim to the Government. In some jurisdictions, not every failure to comply with a federal statute, regulation, or contract provision automatically creates liability.  Courts may distinguish between “express” and “implied” certification theories of liability.  Under an “express” certification theory, courts look to whether payment from the Government is contingent on an express requirement to certify compliance with an applicable statute or regulation.  Absent an express requirement, a contractor may not be liable for a false certification. Under an “implied” certification theory, the very act of seeking payment implies that the contractor complied with applicable rules and regulations.  If a contractor does not comply with applicable rules and regulations, the absence of an express requirement may not bar a court from holding a contractor liable. A recent decision from a U.S. District Court in Texas provides an example of how courts deal with “express” and “implied” certification theories of liability.   In U.S. ex rel. Long v. GSD & M Idea City LLC, Civil Action No. 3:11–cv–1154–O (Jan. 18, 2013), a contracts manager brought a qui tam suit against a contractor alleging that certified overhead costs and profit numbers provided to the Government during contract negotiations were false.  The contractor argued that the contracts manager failed to show an FCA violation because the certifications at issue were not connected to a claim for payment.  The court agreed, and held that for a certification to be “false” under the FCA, the certification must be a “prerequisite” or “condition” necessary to payment.  The court dismissed the FCA claim because the contracts manager failed to demonstrate how any allegedly false certifications led to a false claim for payment. The outcome in U.S. ex rel. Long may have been different in a jurisdiction applying an “implied” certification theory of liability.  In such a jurisdiction, the mere fact that the contractor did not act in compliance with federal statutes, regulations, or contract provisions by providing allegedly false overhead costs and profit numbers during a contract negotiation may have been sufficient to impose liability.  The distinction between false certifications made during contract negotiations and a claim for payment would not likely be dispositive.  Liability attaches as a result of the underlying fraudulent activity, not to a claim for payment.  This shows that depending on how a court treats a false certification, contractors can expect potentially inconsistent results. 2013-03-26T23:08:56+00:00 http://www.oles.com/blog/entries/more-on-ndaa-2013-impact-on-the-small-business-administration http://www.oles.com/blog/entries/more-on-ndaa-2013-impact-on-the-small-business-administration#When:17:23:56Z As noted in our earlier blog entry, the National Defense Authorization Act of 2013 (“NDAA”), signed by President Obama on January 3, 2013 included significant changes affecting small business contracting. The changes largely came as a result of the House Armed Services Committee special “Panel on Business Challenges in the Defense Industry.” Under Section 1641, the NDAA is expanding the mentor-protégé program for “all small business concerns,” from its present application that only applies to 8(a) disadvantaged businesses. The NDAA directs the Small Business Administration (“SBA”) to create mentor-protégé programs for each type of small business concern, for example HUBZone businesses, Service Disabled and Veteran Owned businesses, and Women-Owned small businesses, among others. The NDAA requires the SBA to issue regulations establishing these mentor-protégé programs within 270 days. The mentor-protégé program as it presently exists, applies to 8(a) disadvantaged businesses, and allows large businesses to act as mentors to small businesses.  This permits the two companies to form a joint venture and bid on small business contracts without violating size or affiliation rules. Section 1641 should expand the number of potential protégés and create greater opportunities for large companies to serve as mentors. The NDAA also changed the regulations on subcontracting calculations.  Previously, a small business was required to incur to incur at least 50 percent of the labor costs for service or supply contracts and 25 to 15 percent of the labor cost for general or specialty construction contracts. Sections 1651 and 1652 of the NDAA, change the calculations from “price” to “cost”, requiring a comparison of prime contract price to subcontract prices. The NDAA also creates penalties (of $500,000 or the dollar amount expended in excess of the permitted level, whichever is greater) for violating limits. The changes apply to the following contracts: For service contracts, not more than 50 percent of the amount paid to the contractor with a small business set aside for a services contract can be spent on subcontractors. For supply contracts, the small business may not expend more than 50 percent of the prime contract price on subcontractors, less the cost of materials. For construction contracts, the SBA will determine the percentage after obtaining public comments. Section 1681 creates a “safe harbor” for a firm that mistakenly represented itself as a “small business.”   However, this very narrowly construed provision only provides a safe harbor if the company can show (1) it relied on an opinion provided by a Small Business Development Center or an entity participating in the Procurement Technical Assistance Program; and (2) the written opinion must have been submitted for review to the General Counsel of the Small Business Administration beforehand. Section 1695 expands the bonding capacity of the SBA. The SBA now has the ability to guaranty surety bonds for small business contracts up to $6.5 million, an increase from the prior $2 million limit. Additionally, if the CO certifies that a guarantee is necessary for the small business to obtain bonding and that it is in the government’s best interests, Section 1695 permits the SBA to guarantee a bond for up to $10 million. The hope is that the increased bonding opportunities through the SBA will now allow small business to actively compete for the larger construction and/or service contracts. Changes were also made to the Women-Owned small business program ceilings on set-aside contracts.  Under Section 1697, the dollar limits for set-asides for women-owned small businesses agencies have been removed in their entirety.  We will continue to apprise you of any updates as these changes are implemented by the SBA over the course of 2013. 2013-03-22T17:23:56+00:00 http://www.oles.com/blog/entries/gov-steps-up-efforts-to-track-contractor-performance-and-integrity-data http://www.oles.com/blog/entries/gov-steps-up-efforts-to-track-contractor-performance-and-integrity-data#When:21:18:00Z Over the last several years, the Office of Federal Procurement Policy (“OFPP”) has tried to get federal agencies to use its Past Performance Information Retrieval System (“PPIRS”). PPIRS is a database used to help a contracting officer make source selection and award decisions based on a prospective contractor’s prior performance on Government contracts. Since its advent, agencies have complied with the mandate to provide information to PPIRS, but underreporting is a recurrent problem. According to OFPP, underreporting limits the value of contractor performance assessments and the transparency of data about contractor integrity.    In light of these problems, on March 6, 2013, OFPP released a memorandum to agency officials setting specific PPIRS reporting targets for agencies to meet over the next three years.  These reporting requirements are dependent on how a particular agency is currently entering data into PPIRS.  The Government’s updated compliance efforts will increase the microscope on contractor work performance. OFPP is also asking agencies to improve contractor integrity data.  Along with PPIRS, OFPP wants to improve data collection for the Federal Awardee Performance and Integrity Information System (“FAPIIS”).  The FAPIIS was designed to enhance the Government’s ability to evaluate the business ethics and quality of perspective contractors competing for Federal contracts.  The system collects information from Government personnel such as nonresponsibility determinations, terminations for default or cause, defective pricing determinations, suspensions and debarments, etc.  Contractors also provide integrity information to FAPIIS  such as criminal convictions or adverse civil judgments or administrative proceedings.  The OFPP memorandum asks agencies to take a more aggressive approach in vetting contractor-provided information such as sampling and/or conducting routine data quality reviews to ensure that the required integrity information is being reported. Given Federal spending limitations and the Government’s renewed focus to cut waste, efforts to collect more information on contractors is unsurprising.  All this highlights the need for contractors to make sure their data reporting obligations are met, and more importantly, that contractors remain vigilant in complying with Federal laws and regulations concerning certifications, claim submissions, and general contract performance.   2013-03-21T21:18:00+00:00 http://www.oles.com/blog/entries/national-defense-authorization-act-2013 http://www.oles.com/blog/entries/national-defense-authorization-act-2013#When:04:41:07Z Three months into the fiscal year, on January 2, 2013, the President signed the National Defense Authorization Act (NDAA) for fiscal year 2013.  Title VIII of NDAA contains many procurement and construction contract related provisions. This post briefly highlights some of the key provisions of the NDAA applicable to those seeking to contract with the federal government.  The impact of these provisions on contractors will depend on the results of some of the “reviews”  “guidelines” and “analyses” required by various agencies and their officials over the course of the next 180-270 days, although some of the provisions take immediate effect.  The 44 provisions in Title VIII addressing procurement reform can be found in their entirety at Pub. L. No. 112-239.  A follow up post discussing those sections of the NDAA, outside of Title VIII, that apply only to small businesses can be found here. Section 802 addresses Pass-Through Contracts.   Since 2009, the FAR required an offeror intending to subcontract more than 70 percent of the total cost of work to be performed under the contract to:  (i) identify the “amount of the offeror’s indirect costs and profit/fee applicable to the work to be performed by the subcontractor(s),” and (ii) provide a “description of the added value provided by the offeror as related to the work to be performed by the subcontractor(s).”  If the Contracting Officer deemed the pass through excessive, the costs could be declared unallowable.  However, under the new Act, Contracting Officers within DoD, the State Department and the Agency for International Development will now have the authority to contract directly with a prime contractor’s proposed subcontractor(s) when a prime contractor proposes to have its subcontractor(s) perform more than 70 percent of the work.  The Agency CO’s will have to document that this approach is in the Agency’s best interest.  Section 804 addresses DFARs Profit Guidelines.  The Act requires DoD to review its profit guidelines “in order to identify any modifications to such guidelines that are necessary to ensure an appropriate link between contractor profit and contractor performance.” This review, which must obtain the views of private sector, the Government experts and interested parties, must consider (1) “[a]ppropriate levels of profit needed to sustain competition in the defense industry,” (2) “[a]ppropriate adjustments to address contract and performance risk assumed by the contractor,” and (3) “[a]ppropriate incentives for superior performance in delivering quality products and services in a timely and cost-effective manner[.]” Based on the findings in that review, DoD is then required to “modify” the DFARs profit guidelines and make appropriate changes. Section 811 addresses cost-type contracts.  DoD is now required within 120 days of NDAA’s passage to modify its regulations “to prohibit [DoD] from entering into cost-type contracts for the production of major defense acquisition programs” entered into after October 2014.  However, it will not apply in the case of a particular cost-type contract if the Under Secretary of Defense provides a written certification to the congressional defense committees that a cost-type contract is needed to provide a required capability in a timely and cost-effective manner. In theory, this seems more restrictive than it really is.  Although Section 811 will limit the use of cost-type contracts for production of major defense acquisition programs, it only applies to production phases of a program. It does not apply to development phases, or other earlier phases which is where cost-type contracts have typically been viewed as more appropriate. See DFARS 235.006(b); See also, e.g., DoD Instruction 5000.02 (Milestone C). Section 822 addresses the commercial test program.  It extends the authority for the FAR Subpart 13.5 commercial items test program from January 2012 to January 1, 2015. FAR Subpart 13.5 authorizes the use of simplified procedures for the acquisition of supplies and services in amounts greater than the simplified acquisition threshold (i.e., $150,000) but generally not exceeding $6.5 million, including options. The Comptroller General is directed to report, by October 1, 2013, on the use of this authority. The Comptroller General’s report is required to address: “(1) the extent of use of the authority; (2) the cited rationales for use of the authority; (3) the acquisition outcomes that have resulted; and (4) any waste, fraud, or abuse that have resulted from the use of the authority.” Sections 827 and 828 expand the whistle-blower protections. Section 827 amends the whistleblower protections presently available to employees of DoD contractors (outside the intelligence community) by: (i) covering NASA contractors and their employees, and DOD and NASA subcontractor and grantee employees; (ii) expanding the protection to cover grand jury, court, or management official or other contractor/subcontractor employee with responsibility to discover, investigate or address misconduct; and (iii) providing for attorneys’ fees and costs when the Government (and possibly the whistleblower) successfully files a law suit to enforce such protections.  In theory, the hope is that by including company management officials on the list of permitted recipients of protected disclosures, it will now encourage employees to raise concerns internally.  This in turn may provide contractors an opportunity to remedy a problem without external investigations being conducted. Section 828 creates a program analogous to whistleblower protections now available to DoD contractor and subcontractor employees.  Under Section 828, after July 1, 2012, the protections are now extended for the employees of contractors, subcontractors and grantees of executive agencies – with the exception of DoD, NASA and the intelligence community – and affords such employees protection from reprisals as long as they “reasonably believe” they are disclosing “evidence of gross mismanagement of a Federal contract or grant, a gross waste of Federal funds, an abuse of authority relating to a Federal contract or grant, a substantial and specific danger to public health or safety, or a violation of law, rule, or regulation related to a Federal contract (including the competition for or negotiation of a contract) or grant.” As a result of Sections 827 and 828, Government contractors should be quite careful when considering employment actions concerning whistleblowers. In addition to contractor employees, these new whistleblower protections now may cover subcontractor and grantee employees. “Reprisals” against the reporting individuals are also prohibited, even when requested by a DoD official.  As a practical concern, contractors and subcontractors should update their compliance programs, conduct appropriate whistleblower training, and update their internal whistleblower protection policies.  Contractors should also be aware of the permissive attorney’s fees provisions for whistleblower actions. Section 829 addresses the potential for modification to personal conflicts of interest rules to DoD contractor employees.  Currently personal conflict of interest rules apply only to employees carrying out procurement functions that are associated with inherently governmental functions (i.e. such as drafting specifications, advising the Government about acquisitions, approving contractual requirements, or otherwise administering, assessing or awarding contracts.).  Section 829 now requires DoD to examine whether these rules should apply to “[f]unctions other than acquisition functions that are closely associated with inherently governmental functions,” “[p]ersonal service contracts” and/or “[c]ontracts for staff augmentation services.”  The Act now permits modification of the DFARs to accommodate this analysis, but no specific time frame is set forth for the modification. Section 830 addresses Task & Delivery Order protests.  This section makes permanent GAO’s exclusive authority to review protests of DoD, NASA and Coast Guard task and delivery orders in excess of $10 million, as long as the protests do not involve increases in the scope, period, or maximum value of the contract under which the order is issued. (This authority was originally set to expire in September 2016). Section 832 addresses DCAA access to Contactor’s Internal Audits.  DCAA is now required revise its guidance on access to internal contractor audit reports.  DCAA is also required to document all requests for defense contractor internal audit reports.  This “documentation” must include: (i) analysis that access to the internal reports are necessary to complete evaluation of the contractor business systems; (ii) a copy of the correspondence requesting such access; and (iii) the contractor’s response to DCAA.   This final version that ended up in the Act is much more contractor-friendly than the proposed senate version, which would have required DoD contractors to provide their internal audits as a condition of approval of the contractor’s business system.  Section 852 addresses the expansion of FAPIIS.  The Federal Awardee Performance and Integrity Systems (FAPIIS) was established in 2010 with the goal of it being the sole resource for information about the business ethics of those competing for federal contracts. It includes determinations of responsibility, debarment/suspensions, defaults etc.  Section 852 now requires offerors to include information in FAPIIS about parent companies, subsidiaries or successor entities so that the integrity of the entire corporation can be considered.  As written, it is seemingly unclear whether this applies to all parent and subsidiary entities at all levels, or whether it is only those direct affiliated companies that will have to be reported.  If it is the former, this will be a problematic requirement for large corporations with many subsidiaries, some of which may have minor infractions that may be considered in unrelated evaluations of the offeror. Section 864 addresses the allowable costs of contractor compensation.  The compensation cap of $763,000 remains in place, for now.  However, by May of this year the Comptroller General is required to submit a report to Congress on the impact of reducing the allowable costs of contractor compensations to either the salary of the President of the United States, or the Vice President.  This also requires that the Comptroller General undertake an analysis to determine how many contractor employees have compensation above those of the President and Vice President. Section 867 addresses bid protest statistics.  The Comptroller General must now provide in its annual report to Congress “a summary of the most prevalent grounds for sustaining protests in the preceding year.” 2013-03-19T04:41:07+00:00 http://www.oles.com/blog/entries/proposed-debarment-regulations-impacts-on-state-public-works-contractors http://www.oles.com/blog/entries/proposed-debarment-regulations-impacts-on-state-public-works-contractors#When:05:22:22Z Recently, the Washington State Department of Enterprise Services (DES) published a set of proposed regulations (Proposed WAC Ch. 200-305) intended to establish the process for contractors who may be subject to contract debarment under the recently enacted procurement reform legislation (Chapter 39.26 RCW, which took effect on January 1, 2013).  The new procurement reform legislation (specifically RCW 39.26.200) gave the Director of DES authority to debar a contractor from consideration for award of state contracts based upon a number of different causes.  DES’s proposed regulations attempt to define the procedures for debarment, as well as the authority, extent and impact of contractor debarment.  While a number of the proposed regulations are equitable and consistent with RCW 39.26, some of the proposed regulations should be of serious concern to not only goods and services contractors, but also public works contractors.  Of greatest concern should be those regulations dealing with the impact of a DES debarment.  First, the proposed regulations attempt to expand the effect of debarment to both state contracting and subcontracting.  Despite the fact that RCW 39.26 limits DES’s debarment authority to preventing a debarred contractor from consideration for award of state contracts as a prime contractor, DES’s proposed regulations would also prevent a debarred contractor from acting as a subcontractor on a state contract.  While the proposed regulations preventing subcontracting could be challenged in court as beyond the scope of DES’s regulatory authority, it would be far more preferable for this provision to be eliminated from the regulations now so as to prevent any confusion or disputes that may result.  This provision would not only cause problems to debarred contractors, but also could be problematic for non-debarred contractors, as the latter would need to take care they were not subcontracting any work on a state contract to a debarred contractor.  In fact, if a non-debarred prime contractor included a debarred subcontractor in its bid for a state contract, the prime contractor might have its bid rejected, or be at risk of a bid protest if awarded the contract, on the basis that the prime contractor’s bid was non-responsive for including a debarred contractor ineligible to act as a subcontractor on the state contract. A second major problem is that, even though the state legislature intended that DES’s debarment authority be limited to good and services contracts, the proposed regulations might also be interpreted to prevent a debarred contractor from bidding on state public works contracts.  This problem has arisen because the proposed regulations prevent debarred contractors from entering into “state contracts,” but provide no clear definition of what constitutes a “state contract.”  Public works contractors should be concerned that state agencies may attempt to apply the proposed regulations in a far more expansive manner than the legislature intended, namely state agencies may assert that a DES debarment results in contractor exclusion from all state contracts, including public works.  To avoid this overly expansive application, which also could be challenged in the courts, it is important that the proposed regulations be amended to clearly define “state contracts” as goods and services contracts only, and not public works.  These are not the only issues in the proposed regulations that should be of concern to contractors. Contractors would be advised to review the proposed regulations (available online at http://des.wa.gov/SiteCollectionDocuments/About/rules/WSR_13-02-102_attachment.pdf) and submit comments during the public comment period (which runs through March 25, 2013).  A public hearing on the proposed regulations is scheduled for March 18, 2013.    2013-03-13T05:22:22+00:00 http://www.oles.com/blog/entries/legislative-watch-congress-introduces-the-hubzone-expansion-act-of-2013 http://www.oles.com/blog/entries/legislative-watch-congress-introduces-the-hubzone-expansion-act-of-2013#When:05:20:42Z The House of Representatives and Senate both recently introduced the HUBZone Expansion Act of 2013, H.R. 489 and S. 206 respectively.  The bill is designed to expand the HUBZone (Historically Underutilized Business Zone) program for communities affected by military base realignment and closure.  The bill would amend the Small Business Act to include as a base closure area for purposes of the HUBZone program of the Small Business Administration a military installation's municipality, county, census tract, or contiguous census tract having a total population of no more than 50,000, as determined by the most recent census. Both the House and Senate have referred the bills to their respective committees on small business matters.   The HUBZone Program was established by Congress in the Small Business Reauthorization Act of 1997. The program is intended to provide federal contracting assistance for qualified small businesses located in “historically underutilized business zones,” as a means to increase employment opportunities, investment, and economic development in those areas.  Locations currently classified as HUBZones can be found on the SBA’s website.  To qualify for certification by the SBA as a HUBZone small business concern (SBC), a small business (as determined by the size standards in 13 CFR § 121.201) must be wholly owned by an Indian Tribal Government, a Indian Tribal Government-owned Corporation, Alaska Native Corporation, Community Development Corporation, Small Agricultural Cooperative, or 51% unconditionally owned and controlled by one or more U.S. Citizens.  The wholly-owned requirement is not necessary where the remaining ownership interest(s) are by U.S. Citizens or SBCs. The small business must also have its principal place of business in the HUBZone and have at least 35% of its employees residing in the HUBZone.  Pursuant to the HUBZone Program, Contracting Officers may set-aside contracts for competition restricted to HUBZone SBCs where there is a reasonable expectation that at least two responsible HUBZone SBCs will submit offers and an award can be made at a fair market price.  A sole-source contract can be awarded to a HUBZone SBC where only one HUBZone contractor can satisfy a requirement and the anticipated contract price will not exceed $5 million for manufacturing contracts or $3 million for other contracts.  Alternatively, a HUBZone SBC is eligible for a 10% evaluation preference in procurements using full and open competition.  The regulations also require that HUBZone SBCs receiving a HUBZone contract allocate at least 50% of the contract funds incurred for personnel on its own employees or the employees of other qualified HUBZone SBCs.  HUBZone construction contracts also have specific subcontracting requirements that vary depending on whether the contract is for general or specialty construction. The HUBZone Expansion Act of 2013 attempts to broaden the communities that are considered historically underutilized business zones.  I will be following the status of the bill and will post any pertinent updates on this blog.    2013-03-13T05:20:42+00:00 http://www.oles.com/blog/entries/tips-on-navigating-the-system-for-award-management-for-federal-contractors http://www.oles.com/blog/entries/tips-on-navigating-the-system-for-award-management-for-federal-contractors#When:22:47:04Z The General Services Administration’s (GSA) launch of the System for Award Management (SAM) in late July 2012 has forced many federal contractors to adjust to a completely new system for reporting and tracking compliance issues.  SAM (www.SAM.gov) was designed to integrate three federal acquisition data systems – Central Contractor Registration (CCR), Online Representations and Certifications Application (ORCA) and Excluded Parties List System (EPLS).  Since its inception, SAM has been plagued with numerous problems.  Users have reported that the system is slow to respond to requests, missing data fields and that the help desks are overwhelmed with inquiries from frustrated users.  Because SAM is here to stay, at least for the near future, here are some tips for navigating SAM that all federal contractors should be aware of: 1)     If currently not registered in CCR, create an account on SAM so that you have an active record to be eligible for contract award and contract payments. Also, try to create your account during non-peak hours if possible;2)     If already registered for CCR or ORCA, SAM registration is not necessary until it is time to update your registration. SAM should notify users when it is time to renew their registration via email 60, 30, and 15 days prior to the expiration of the record.  Because delays have been widely reported, contractors should update their information in advance of their expiration date to avoid being unable to correct inaccurate information at the time of impending award; and3)     Continue to monitor your business information on SAM and take measures to address any errors that occurred in the migration of your records. It is also good practice to follow up with your requests to SAM to correct errors in your SAM entry because of the various delays users have experienced thus far. 2013-02-28T22:47:04+00:00 http://www.oles.com/blog/entries/owner-operator-of-construction-company-sentenced-for-false-representations http://www.oles.com/blog/entries/owner-operator-of-construction-company-sentenced-for-false-representations#When:00:21:26Z On January 31, 2013, U.S. District Court Judge Mossman sentenced John Witty to pay a $206,844 fine, serve five years on probation, and perform 100 hours of community service at a veteran’s organization for knowingly making false representations to the Department of Veteran Affairs (“VA”) about being a service-disabled veteran in order to obtain SDVOSB set aside contracts. Witty, the former owner and operator of Gray Bear Construction pleaded guilty to one count of false statements and representations under 18 U.S.C. § 1001—also known as the False Statements Accountability Act.  Witty, a veteran, admitted that despite knowing the VA had denied his application for a service-connected disability (a prerequisite to being able to claim Service Disabled Veteran status), as owner and operator of Gray Bear Construction he falsely represented to the VA that his company was a SDVOSB.  As a result of Witty’s false representations, the VA had awarded Gray Bear Construction approximately $5,849,372 in SDVOSB set-aside contracts, all of which the company was ineligible to receive. The False Statements Accountability Act provides a broad and frequently used mechanism to penalize contractors for dishonesty in their dealings with the federal government.  A party runs afoul of the Act by knowingly or willfully making a materially false oral or written statement, representation, or omission (i.e. concealing information) to the federal government in any matter within the jurisdiction of an agency of the federal government.  Individuals convicted under the Act can face potential prison sentences of up to five years and fines of up to $250,000, while convicted corporations can face fines of up to $500,000. Witty’s conviction stemmed from a blatant offense of the False Statements Accountability Act, and thus provides a clear example for contractors of what not to do.  However, the False Statements Accountability Act may also be used to penalize contractors that simply fail to require their employees to take reasonable steps to confirm the accuracy of information submitted to the government. The Department of Justice’s (“DOJ”) prosecution of Witty also serves as a reminder of the current trend of the VA and DOJ vigorously investigating and prosecuting actual or perceived federal procurement fraud.  According to a press release issued by the DOJ, Witty is the 15th individual prosecuted during the past year for defrauding a VA program intended to provide preference to service-disabled veterans for federal set-aside contracts, and the VA is “diligently investigating others elsewhere who have similarly defrauded this program and expect additional prosecutions.” Accordingly, government contractors should ensure they are verifying the veracity of statements or submissions made to the federal government. 2013-02-23T00:21:26+00:00 http://www.oles.com/blog/entries/wa-supreme-court-heightens-burden-for-parties-appealing-arbitration-award http://www.oles.com/blog/entries/wa-supreme-court-heightens-burden-for-parties-appealing-arbitration-award#When:06:59:18Z On January 17, 2013, the Washington State Supreme Court issued a decision in Saleemi v. Doctor's Associates, Inc., addressing whether a party who does not seek discretionary interlocutory review of a ruling ordering arbitration in Washington and invalidating a contractual choice of venue clause must demonstrate prejudice arising from the trial court’s order compelling arbitration in order to challenge the ruling on appeal from a judgment confirming the arbitration award.  The Court held that if a party waits to seek discretionary review of an order compelling arbitration on grounds of venue, damage limitations, or choice of law until after the arbitrator’s award, the party must show prejudice in order for an appellate court to address the merits of the party’s challenge.  The effect of the decision may be to cause further delay and costs to litigants by encouraging parties to seek interlocutory appellate review of orders compelling arbitration to avoid being faced with the higher burden of establishing prejudice that would accompany a subsequent challenge to an arbitration award.  On the other hand, Saleemi may also encourage parties to resolve important procedural issues at the outset of the arbitration, and thereby avoid the lost time and resources that inevitably are incurred when an arbitration award is vacated. In Saleemi, plaintiffs entered into three franchise agreements with the defendant to own and operate three franchises in Washington.  The franchise agreements provided that any disputes would be arbitrated in Bridgeport, Connecticut, under Connecticut law, but stated Connecticut Franchise Law would not apply to franchises located outside of Connecticut.  After a dispute arose, the plaintiffs filed suit in Pierce County Superior Court.  A superior court judge found the choice of law and forum selection clause unenforceable and entered an order compelling arbitration in Washington, under Washington law, and with no limitations on damages—contrary to a provision in the franchise agreements.  The defendant did not seek discretionary review of the Superior Court’s ruling and plaintiffs ultimately prevailed at the arbitration.  The defendant then sought to vacate the award, primarily on the grounds that the trial court’s initial order compelling arbitration was in error.  The trial court denied the motion to vacate and the defendant appealed.  The Court of Appeals concluded that even if the trial judge's order was incorrect, the defendant had not shown prejudice and was not entitled to relief. The Washington Supreme Court concurred with the Court of Appeals and held that where a party fails to seek discretionary review of an order compelling arbitration, the party challenging the order must show prejudice as a condition of relief from the arbitration award.  The Court reasoned that this approach promotes the prime purposes of arbitration, speed and convenience, while allowing a truly aggrieved party to obtain relief.  Thus, the Court analyzed whether the Defendants had been prejudiced by: (i) the application of Washington law to the dispute, (ii) the arbitrator’s ruling that there would be no limit on damages, and (iii) the fact that the arbitration was conducted in Washington rather than Connecticut.  Finding the defendants failed to prove any prejudice, the Court affirmed.  Justice Madsen issued a concurring opinion, agreeing with the result, but disagreeing with the majority’s new prejudice standard.  Justice Madsen opined that the majority’s prejudice standard encourages motions for interlocutory discretionary review, which in turn causes delay, contravening the goal of arbitration as providing an efficient, swift form of dispute resolution.  Justice Madsen went on to note that it should be rare to permit discretionary review of such orders as it causes unnecessary delay to the arbitral process.  Thus, parties should not be penalized for failing to seek review that generally should not be granted.  Instead, Justice Madsen argued de novo review of a court’s order to compel arbitration is the proper standard of review and in accord with both Washington precedent and case law in other jurisdictions. While it remains to be seen whether the Saleemi decision will affect litigants’ behavior, there is a possibility that the decision may increase the frequency of interlocutory appeals, resulting in delays and increased costs associated with arbitrating a dispute.  As Justice Madsen’s concurring opinion points out, the majority decision incentivizes parties to seek interlocutory review of a court order to compel arbitration.  While parties may not always be inclined to do so, the prospect of facing a burden of establishing prejudice for failing to request discretionary review should be considered before acquiescing to a trial court’s order compelling arbitration.  Though Saleemi may have the effect of increasing costs and delays due to more frequent interlocutory appeals, the majority’s analysis also discussed the potential time and cost savings associated with avoiding the need to vacate decisions based on procedural grounds that should have been addressed at the outset.  Thus, by heightening the burden for vacating an arbitration award on initial procedural grounds such as venue, the Court placed a barrier to litigants wasting significant amounts of time and money by throwing out an entire arbitration proceeding and award based on procedural issues that were likely known when the court issued the initial order compelling arbitration.  Accordingly, while the Washington Supreme Court’s decision may have the effect of increasing time and costs in the early stages of an arbitral matter, the overall effect may be to lower the amount of arbitration awards that courts will vacate based on procedural grounds and/or deter litigants from attempting to take a second bite at the apple post-arbitration.   2013-01-31T06:59:18+00:00