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Small Business

There’s more to a Small Business Affiliation than meets the eye

Small business contracting has been gaining momentum through the Small Business Administration’s (SBA) “all small” mentor-protege program. This program allows a large business to form a joint venture with a small business to compete for set-aside contracts. The SBA has several ways to determine if a company is actually small. And just because you meet the size standard for a procurement does not necessarily mean you are eligible for an award. (Federal News Network January 14, 2022)

Every procurement has a size standard assigned. Size standards set the largest size that a business (including its subsidiaries and affiliates) may be. Therefore, it is crucial to note whether the small business has any affiliates. Size standards are based on the number of employees or average annual receipts of a company. An affiliate’s number of employees and annual receipts are included in business size determination. (ibid)

Many award protests arise when offerors allege the winning company is ineligible, based on size. A protestor will argue that a company is not a small business due to its affiliation with a large company. The affiliation thereby exceeds the size standard. Should the SBA find that a bidding company exceeds the size standard due to an affiliation, the result can be the loss of a contract. (ibid)

Affiliation is when one company controls another company, or a third party controls both businesses. It doesn’t matter if the control is exercised. It only matters that it exists. (ibid)

Common ownership can give rise to affiliation. Common ownership happens when an owner of a firm holds an ownership interest in one or more other firms. This gets complicated if a company is owned by multiple shareholders. (ibid)

Affiliation can occur due to the relationship between the firms themselves, such as an affiliation based on the ostensible subcontractor rule. This rule provides that a prime contractor and subcontractor are affiliated if the subcontractor is performing the primary requirements of a contract and the prime contractor is reliant upon the subcontractor. If the SBA dins an affiliation under the ostensible contractor rule, it is limited to the procurement in question. Both companies may be eligible for award of other small business contracts. (ibid)

The rules around affiliation are subtle and often complicated. Many times a company finds out about an affiliation only after a protest is filed. An unfavorable size determination will result in the loss of a contract. This can affect a vendor’s ability to compete for future set-aside contracts. If this happens, a firm must be recertified as small. It is the same if a protested frim is a protege in a mentor-protege joint venture. The protege must be recertified. (ibid)

Affiliations are preventable. All agreements should include representations concerning the prime contractor’s small business status. All parties should be knowledgeable of the circumstances that may result in affiliation. (ibid)

Do you have affiliation questions? Give us a call.

Federal contractors minimum wage reset

Federal contractors enjoyed a minimum wage raise on January 1, 2021. This was the first increase since President Obama was in office. Even so, on April 27, 2021, President Biden signed EO 14026, raising the hourly minimum wage to $15 ($10.50 for tipped workers.) The United States Department of Labor published Field Assistance Bulletin (FAB) No. 2022-1 clarifying the requirements of EO 14026. (JD Supra January 17, 2022)

The four categories of contracts covered are:

  • Procurement contracts for construction covered by the Davis-Bacon Act (DBA).
  • Service Contracts covered by the Service Contract Act (SCA).
  • Concessions contracts.
  • Contracts entered into with the Federal Government in connection with Federal property or lands and related to offering services for Federal employees, their dependents, or the general public. (ibid)

The FAB includes all 50 states, Washington DC, Puerto Rico, and the Virgin Islands. It also includes the Outer Continental Shelf Lands as defined in the Outer Continental Shelf Lands Act, American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, Wake Island, and Johnston Island. (ibid)

EO 14026 covers workers whose wages are governed by the FLSA, SCA, or DBA and are employed on or in connection with a covered contract. (ibid)

In addition to the increase in minimum wages, the FAB supplies information on worker notice requirements, subcontractor requirements, recordkeeping requirements, and anti-retaliation provisions and remedies. The FAB also requires contracting agencies to incorporate all applicable EO contract clauses into covered prime contracts and flow down to subcontractors’ contracts. (ibid)

Questions about the Field Assistance Bulletin (FAB) and its requirements? Give us a call.

How to find the perfect partner – in government contracting

The government contracting arena is not only tough to navigate but also highly competitive. Many businesses turn to business partnerships to better align their products and services to meet the requirements of the government. While there are many forms of business partnerships, the most common are subcontracting, joint ventures, and contractor team arrangements.

Subcontracting is the most popular form of partnership in government contracting. Generally, a prime contractor (possibly with an established government presence) looks for a small business entity to assist with a government contract. This type of partnership works particularly well for a small business trying to “break” into government contracting. Govconwire December 20, 2021

Another form of partnership is a joint venture. This is when a small business especially those under the Small Business Administration’s mentor-protege program form a partnership to execute specific tasks within a government contract. Small businesses will integrate their specific skills to perform under contract guidelines. (ibid)

The third type of partnership is the contractor team arrangement (CTS). This is when two or more businesses, all with GSA Schedule contracts, come together to work on very specific government contracts. (ibid)

There are several ways to meet prospective partners. There are government contracting events, sponsored by businesses and on occasion, the government. Government websites, also publish various subcontracting opportunities, such as eLibrary, SubNet, the SBA Directory of Federal Government Prime Contractors with a Subcontracting Plan, and the Department of Defense’s Subcontracting Opportunity Directory. (ibid)

Being prepared when pitching a potential business partner is the most effective way to learn whether or not the partnership will work for both parties. Knowledge of your potential partner is key, company background, products and services offered, benefits to both parties, and a product demonstration all help to determine if the businesses are the right fit to work together. (ibid)

It can be hard to know if two companies are right for each other. One way to determine a good fit is to work on a project together before heading into the government arena. Look at their performance under pressure. Did they handle expectations well? Did the pressure cause hiccups in performance? Did communication take place or were there bottlenecks? These are just a few questions to be answered when determining whether a business relationship will be positive as well as productive. (ibid)

Finally, is there a commitment from both parties? Like any lasting, strong relationship, there must be dedication on both sides to make the partnership work.

Struggling to get your first government contract? Looking for a business to partner with? Give us a call.

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Biden’s Management Agenda Vision includes Acquisition Priorities

The Biden Management Agenda was released last week. The Agenda includes the critical areas of strengthening the federal workforce, upgrading the customer experience, and administering the business of government. Government CIO Media and Research, November 19, 2021

The goal of the Agenda is to restore Americans’ faith in the government. The Agenda has three main objectives:

  • Strengthen/empower the federal workforce.
  • Deliver secure, equitable, and outstanding federal services as well as customer experiences.
  • Manage the business of government to “build back better.”

To achieve this, cybersecurity and IT modernization will be foundational tools for government management and mission delivery. (ibid)

According to the Agenda vision statement, “Agencies will continue to work together to enhance and secure government information technology as vital support and a catalyst for mission delivery. The COVID-19 pandemic showed us how critical IT investments are to supporting mission delivery and the essential work of government.” (ibid)

The vision statement reads, “OPM and OMB also will continue to build out tools to support agency human resources professionals in data-driven strategic workforce planning and decision-making related to employee engagement, inclusion, and organizational performance.” The focus will be to ” make every federal job a good job.” The plan is to accomplish this through competitive compensation, enhanced engagement, and mission delivery, and union opportunities. (ibid)

The second objective is to make the delivery of improved customer service, a priority. The Biden administration wants to meet people where they are rather than ask the public to navigate through the many, and often hidden, government services areas. (ibid)

The vision statement reads, “Human-centered design research will drive the management of federal programs to develop a comprehensive understanding of how individuals interact with federal services. Through this process, agencies will identify barriers to service delivery and how those barriers create undue burdens on those the government serves, in particular for underserviced communities.” (ibid)

The third objective is improving federal acquisition and financial management systems. The Biden administration plans to prioritize US manufacturing as a way to stop future supply chain disruptions. The Administration plans for upcoming major acquisitions to support a reduction in carbon output. (ibid)

The agenda vision statement reads, “accomplishing these collective and activities will also require continuous improvements in our procurement, financial assistance, and financial management ecosystems. This shift will require new measures and processes, new training for the federal workforce, and new tradeoffs that agencies will need to address going forward.” (ibid)

The “next steps” within the Management Agenda are set to be released in early 2022. (ibid)

 

Questions about how this will affect future procurements? Give us a call.

 

 

 

The Navy is looking to end Small Business subcontractor baiting

The Department of the Navy (DoN) has exceeded all of its small business goals for fiscal year 2021, spending more than $17 billion with small business prime contractors. The Navy is, however, wrestling with small business subcontractors getting their fair share. (Federal News Network October 21, 2021)

An updated effort to enforce small business contracting plans is in the works, according to Jimmy Smith, the director of the Office of Small Business Programs for the Department of the Navy. (ibid)

According to Smith, “the Navy executed a Navy audit, service audit on subcontracting on our 10 major buying commands. The Naval Sea Systems Command was the first of those 10 audits. The audit has concluded. We’ve already seen the results of that and now we’re sharing that information across the entire enterprise to go off and correct problems. We don’t think we’re going to learn anything more from going over the same information in the other audits, so now is the time to get into corrective actions and the steps that we need in order to execute solutions to problems instead of continuing to admire problems.” (ibid)

The first audit has provided some changes to be made Navy-wide, according to Smith. “First is reporting back to our industry partners. We have to make that something that’s pretty standard, maybe use a machine learning technology to help contracting officers identify problems that are in contractor performance assessment reporting (CPARs) when it comes to how well our industry partners are doing meeting their own subcontract and goals, that they can communicate it to us. We would love to have a system that flashed bright red lights when an industry partner wasn’t living up to the plan in the document that they provide to us about the health of their effort. Right now, it’s all hand-over-hand reading to see if you find that someone is off and then go do the analysis. I think we have to come up with a mechanism that brings the importance level of subcontract and compliance up to a higher level to raise it to the attention that it’s deserved.” (ibid)

Government agencies and prime contractors, need to hold up their side of the bargain and be held accountable. In 2018, the Inspector General for the Defense Department found it to be a challenge for five contracting commands to monitor prime contractors’ compliance with individual subcontracting plans. He told the House Small Business Committee the individual contractors who held subcontracting plans, did not meet their small business subcontracting goals. (ibid)

The Federal Acquisition Regulations Council issued a final rule in August. The rule requires large businesses to make “good faith efforts” to meet subcontracting goals. A few examples of actions that are a failure to make a good-faith effort can be found in the SBA’s guidance list. (ibid)

The final rule spells out what encompasses not making a “good faith effort”. The rule includes turning in subcontracting plan reports late, not designating an employee to monitor the subcontracting plan, and not completing market research. (ibid)

Smith said the Navy has met all of its small business goals for the past four years. He added, the Navy’s goals are not just the numbers, but providing the correct capability to the warfighter at the best value. (ibid)

Smith noted that the Navy is finding small businesses that meet their needs by an extended outreach effort. The move to virtual events has also extended their outreach. Virtual events are more cost-effective and reach more people. Smith plans to continue to do some live events, however, webinars will complement these and hopefully reach even more small business contractors. (ibid)

Questions about your small business subcontract plan? Give us a call.