The SBA has released its Small Business Procurement Scorecards for 2011, and for the second year in a row the results paint a grim picture. In 2011 [pdf], small businesses were awarded an even smaller share of federal contract dollars than they received in 2010—$6.4 billion smaller. Prime contract awards to small businesses in 2011 totaled $91.5 billion, or 21.65 percent of federal agency contract expenditures. The previous year [pdf], small businesses were awarded 22.66 percent of all federal prime contracts, or $97.9 billion. It’s official: federal agencies have failed once again to meet the 23 percent government-wide goal for prime contract awards to small business concerns set by the Small Business Act.
The Court of Federal Claims has issued an important decision establishing that offerors will be held accountable for making inaccurate representations in proposals. According to the Court’s decision in GTA Containers, Inc. v. United States, No. 11-606C (Fed. Cl. Feb. 22, 2012) [pdf], proof that an offeror made a misrepresentation in its proposal is sufficient to sustain a bait-and-switch protest if the agency relied on the misrepresentation.
As part of the SBA’s 8(a) Business Development Program, participants are permitted to form mentor-protégé relationships and to establish joint venture (JV) entities eligible for award of 8(a) set aside contracts. Before a mentor-protégé JV can be eligible for set-aside awards, its JV Agreement has to be approved by the SBA Office of Business Development. Approval is conditioned upon compliance with applicable regulations, including 13 C.F.R. § 124.513. After award of a set-aside contract, other offerors have the option of filing a size protest with the SBA challenging the awardee’s status as small.
In Size Appeal of Trident, LLC, SBA No. SIZ-5315 (Jan. 24, 2012) [pdf], the SBA Office of Hearings and Appeals (OHA) held that an SBA area office has no authority to review the substance of an 8(a) mentor-protégé JV agreement as part of a size appeal if it has already been approved by the SBA Office of Business Development and determined to be in compliance with applicable regulations. In that case, Trident appealed the area office’s determination that it was “other than small” and accordingly ineligible for award of an 8(a) set-aside for weather observation and forecasting services.
The FAR Councils have adopted a final rule [pdf] revising the categories of veterans protected by federal equal opportunity laws. The rule updates the FAR to reflect Department of Labor regulations addressing equal opportunity requirements for veterans. The FAR amendments identify four categories of veterans: disabled veterans, recently separated veterans, armed forces service medal veterans, and other protected veterans. The category of “Vietnam-era veteran” has been formally removed from the FAR. The revised FAR rule also formally adopts the VETS-100A form, which DOL regulations already require of federal contractors. The final rule makes only technical changes to the interim rule [pdf] published in September 2010. If you haven’t updated the veteran classifications in your policies and affirmative action plans, now is a good time to do so.
Contributed by Husch Blackwell Partner Bert Wolf, Esq.
Government contractors are relieved that they won’t immediately face having 3% of their invoices withheld as an advance against future tax liability. The IRS’s final rule implementing the 3% withholding tax won’t go into effect until 2013. Absent a material modification, contracts executed by December 31, 2012 will be exempt from the withholding tax entirely, at least until January 1, 2014. But that isn’t the end of the story. Here is a bit of the background on the source of the 3% withholding tax, why it has been delayed, and some thoughts on why it’s not a great solution to the problem at hand.
More legislation to address the recent high-profile abuses of the SBA contracting system is in the works. A bipartisan group led by Senator Olympia Snowe (R-ME) has introduced legislation called the Small Business Contracting Fraud Prevention Act of 2011 [pdf]. Among other things, the bill would amend the provisions of the Small Business Act relating to misrepresentations as to the status of companies as small business concerns, including HUBZone, 8(a), woman-owned, and service-disabled veteran-owned small businesses.
Do you think that small business contracts and subcontracts have been going to contractors that do not qualify as small businesses? If so, you may be interested in the new legislative changes intended to discourage and penalize fraud in small business contracting. The changes are in the Small Business Jobs Act of 2010, signed by the President on September 27, 2010.
A recent bid protest decision by the United States Court of Federal Claims is a reminder that HUBZone small business concerns must monitor their compliance with SBA rules. In Mission Critical Solutions v. United States, No. 10-810C (Fed. Cl. Feb 18, 2011) [pdf], the court held that a contractor was properly decertified as a HUBZone small business concern and ineligible for a contract set aside for HUBZone small businesses because fewer than 35 percent of its employees resided in HUBZones at the time of award.
Sweeping changes to Small Business Administration (“SBA”) regulations will go into effect on March 14, 2011. The new rules affect SBA’s 8(a) Business Development (“BD”) program, SBA’s mentor/protégé program, and its joint venture regulations. The final rule can be found here. As a whole, the amendments suggest that SBA intends to eliminate manipulation and abuse of the 8(a) BD and mentor/protégé programs by small and large businesses alike.
The Small Business Administration has launched an informational website addressing its new Women-Owned Small Business Federal Contract Program. The website includes a step-by-step guide on how to participate in the new set-aside program, as well as links to explanatory statements and SBA contact information. The final regulations implementing the program were published on October 7, 2010. 75 Fed. Reg. 25179 (Oct. 7, 2010). We offer some additional background on the program here.