Large contractors could see both increased small business set-asides and
enhanced sub-contracting requirements if early indications from the incoming
Biden Administration are any guide. Contractors need to start looking at some of
the proposed policies and how they could impact the way in which federal
business gets done with less than two weeks to go before the new team comes
into power. One likelihood is a new
emphasis on small business participation in federal contracting, potentially
including a $400 billion plan “to support small businesses and tackle
inequities in the federal contracting system.”
The basic idea is to increase small business prime contract
opportunities, especially for small, disadvantaged businesses. The Biden campaign website called for
tripling the current 5% goal for prime contract awards to such firms by
2025. Large business
sub-contracting goals with disadvantaged businesses could also increase. Biden’s team has also been discussing
“contract bundling”. Despite existing
rules that limit bundling, contractors could see more regulations that further
direct federal agencies to break larger procurements into smaller pieces so
that more small primes can participate. The
bottom line for prime contractors is to expect more competition via set-asides
and potentially increased costs, depending on which proposals are actually
adopted. Remember, too, that
executive orders have become the favored way to implement a wide swath of
policy changes. These can be implemented
quickly, with minimal time for industry to challenge or shape their basic
structure. Be prepared.
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Us Out On Federal News Radio & Government Matters
“You can get it good, or you can get it cheap” is a well-known saying in
practically any market. It seems
like that message hasn’t reached some at GSA, though, after Federal News
Network (FNN) reported recently that the agency was demanding price reductions
from contract rates already approved by warranted contracting
officers. FNN stated that some companies
were “bullied” into accepting decreases of as much as 40%. Government buyers who use the Schedules
should actually be concerned about this. It means that they may end up with the “B” or
“C” teams from a company when they’re seeking solutions to complex, or even
mission critical, projects. If a company
can’t keep or attract good talent because its Schedule rates are too low,
they’ll do one of two things: Either
stop selling through their contract entirely; or find a way to bring less
expensive, less experienced workers on board specifically to work on
Schedules-based projects. Look, as
taxpayers we all want the government to work hard to get good values. No one wants to pay for a Porsche and get a
Ford. On the other hand, though, we do
want reliable solutions from trusted companies. Here’s a short memo to GSA: “You can’t have
your cake and eat it, too.”
Empower your CO’s to make good decisions and inject some common sense
back into the Multiple Award Schedules. As
we said recently, the canard that “Schedule prices are too high” is older than
the hills. Negotiate thoroughly,
but fairly, and realize that sometimes there just isn’t more to be squeezed.
Most of the discussion around the massive SolarWinds data breach scandal
has, appropriately, been focused on supply chain security. Failure to provide adequate security can seriously
jeopardize a host of potentially critical missions, something we’re still
learning about here. Selling the
government security compromised solutions, however, is also a contract
compliance issue. False Claims
Act cases are sure to follow. These
cases can cost companies millions in fines, legal fees, and lost
productivity. They typically take years
to unravel. Remember that the Act
allows the government to collect treble damages and that it also has a criminal
component should an investigation determine that a company’s action, or
lack thereof, rises to that level. The
“extra point” in this specific case is that it can also land you and your
company, sometimes separately, in front of a suspension or debarment official.
Debarment typically has the effect of banning a company from all types of
public sector business, not just federal, for three years. You can personally be on either the suspended
or debarred list. The exposure isn’t
limited to prime contractors and their personnel, either. The Department of Justice has consistently
pursued suppliers in FCA cases, some of which have had to pay 8-figure fines
and sever ties with key people.
The bottom line for contractors and suppliers: Make sure that the security solutions you’re
offering are legitimate, secure, and double-checked for problems before they
get to an agency customer. Also
consult with your legal team on indemnification language when even your best
processes aren’t enough. Remember,
though, that even the best defenses may mean little if a problem is large
enough and public enough. Make
sure your solutions are secure.
The “Rule of Two” in government contracting refers to the requirement
that the government set-aside a procurement for small businesses if they find
that two or more small firms are capable of doing the work. The timing on when the rule applies is a
consistent question for both small and large firms and can be equally
frustrating. A recent decision
from the US Court of Federal Claims (See Tolliver Grp., Inc. v. United
States, No. 20-1108C (Fed. Cl. Nov. 30, 2020) clarifies that the Rule
of Two analysis applies before an agency elects to procure a requirement from a
multiple-award contract (MAC) vehicle under FAR Part 16.5. It also reinforces that there is no
requirement for an agency to apply the Rule of Two prior to it electing to use
FAR Part 8 FSS contracts for acquisitions. Here, the Army wanted to use a specific MAC
vehicle to make a procurement. The MAC, already in place, did not have any
small businesses as prime contractors.
The Army believed that they did not have to conduct a Rule of Two
analysis prior to making the buy and could simply buy via the MAC, so long as
the acquisition was in-scope. The Claims
Court disagreed. All acquisitions,
except those made via GSA FSS contracts, must include a Rule of Two determination
according to the Court. The
determination must be made before selecting a contract method, unless that
contract method is a GSA FSS contract. This has potentially wider
implications for MAC or GWAC usage as any acquisition given to a large business
could be subject to scrutiny unless it was clear that a small business analysis
had been part of the acquisition planning process. This is similar in nature to the Government
Accountability Office’s decision in Delex (B-400403) where that body
found that IDIQ task orders must be set aside for small companies when two or
more small businesses hold prime contractor status on that IDIQ. Delex was the subject of considerable
federal agency legal analysis, most of it concluding that the decision did not
apply to those agencies’ IDIQ contracts.
The impact of the Claims Court ruling here, therefore, is also difficult
to determine. Smart contractors,
however, should make sure that their customers conduct a small business
analysis before deciding whether to use a non-Schedule IDIQ.