Federal Construction Contracting Blog

Federal Construction Contracting Blog

Legal Information and Resources for Federal Construction Contractors

Construction Opportunities for American Prime Contractors in Israel

Posted in Contractor Information Sources, Procurement Information

My partner, Ed DeLisle, and I recently attended two Industry Days sponsored by the Army Corps of Engineers (“USACE”).  The first one was held in New York City on October 20th, and the second one was held in Tel Aviv on November 5, 2014. The purpose of the programs was to introduce American and Israeli construction contractors and A/E firms to the upcoming opportunities in Israel. Information was provided on the general scope of USACE design build and design bid build projects within Israel; typical infrastructure and facilities being procured; potential repair, maintenance and construction opportunities to support Israeli Ministry of Defense (“MoD”) facilities in Israel; as well as information on the solicitation and proposal process. The projects are funded by the Foreign Military Finance program and it is projected that  hundreds of millions of dollars in military construction will be undertaken by the Corps in the near future, with significant expenditures in the next year.Israel Construction Site

The contracts, for the most part, will be solicited as Multiple Award Task Order Contracts (“MATOC”), but there will also be some stand-alone projects that will be solicited through individual Requests for Proposals. An important requirement of the program is that all of the contracts must be awarded to American companies, and those companies will generally be expected to perform at least 25% of the work with their own forces. That 25% does not necessarily involve field labor, and may be made up of activities associated with construction management. The idea is to assure that American companies benefit financially from the program and that they remain responsible for project completion. The Corps is understandably wary of companies that serve only as “brokers,” and expects the American contractors to be fully engaged in the performance of the projects.

Since most American companies will not want to incur the expense of sending their own labor forces to Israel, teaming arrangements with Israeli subcontractors will be vital.  Fortunately, there are a number of very capable Israeli construction contractors interested in the work and many of them attended the Industry Day in Tel Aviv. At this point, however, there are more available Israeli subcontractors than there are American companies participating as primes, so the Corps is interested in generating more participation by American firms.

Given recent events, the first thing that many people will think about is whether it is safe to work in Israel. The answer is “yes,” not only because the extent of the turmoil is often exaggerated by the media, but because all of these projects will be performed on Israeli military bases. Even the recent rocket attacks from Gaza did virtually no damage because of the overwhelming success of the Iron Dome missile defense system. I can tell you that Ed and I were not concerned at all about our safety while in Israel and the daily life of Israeli citizens was entirely normal. That being said, American sureties are inherently risk averse and some contractors are having difficulty obtaining bonding. Although the Corps is currently requiring payment and performance bonds, there is also a possibility that some solicitations may permit Bank Letter Guarantees as the Corps has done in the past.

If you are interested in learning more about this program and the opportunities for American construction contractors, please contact us. We can put you in touch with both American and Israeli companies, as well as the knowledgeable people in the Corps of Engineers.  The program is administered by the Europe District of the Corps located in Wiesbaden, Germany.

Michael H. Payne is the Chairman of the firm’s Federal Practice Group and, together with other experienced members of the group, frequently advises contractors on federal contracting matters including bid protests, claims and appeals, procurement issues, small business issues, and dispute resolution…

Jennifer M. Horn and Maria L. Panichelli To Begin Core Construction Curriculum Series for WIPP and Give Me 5%

Posted in Contractor Information Sources, Federal Procurement Policy, Small Business Contracting

Please join Jennifer M. Horn and Maria L. Panichelli as they begin their “Core Construction Curriculum” series for Women Impacting Public Policy’s Give Me 5% program.

WIPP is a national nonpartisan public policy organization advocating on behalf of its coalition of 4.7 million businesswomen including 75 business organizations. WIPP identifies important trends and opportunities and provides a collaborative model for the public and private sectors to increase the economic power of women-owned businesses.  Give Me 5%, named after the 5% federal contracting goal for women-owned businesses, was created to educate women business owners on how to apply for and secure federal procurement opportunities. GiveMe5 is working to improve the WOSB Procurement Program to increase access to contracts for women entrepreneurs.

Give me 5

Jennifer and Maria will begin the Core Construction Curriculum series with two webinars.  On November 12th at 2:00pm they will be presenting Give Me 5: Construction Unit FAR 101 – Part 1, The Fundamentals of the Federal Acquisition Regulations and Federal Procurement: The Bidding Process.  The Federal Acquisition Regulations or “FAR” can be confusing whether you are new to federal contracting or have been contracting with the government for years. This webinar will focus on improving participants’ understanding of FAR and its application in the construction context. The presentation will cover the bidding process for both sealed bidding and negotiated procurement. You can find a description of the presentation and registration information, here.

On December 3rd at 2:00pm Jennifer and Maria will be presenting Best Practices in Federal Construction. Whether you a contractor working on federal, state or private projects, certain construction practices should be followed to ensure that you and your company are protected on the project. Observing best business practices can mean the difference between a profitable construction project and one that exposes your company to financial risk. This Webinar will focus on best construction practices before, during and at the conclusion of a construction project.  Read more and register, here.

We will keep you posted on additional webinar topics and times. If you have suggested topics, feel free to contact Jennifer or Maria.

Jennifer M. Horn is a Partner at Cohen Seglias and a member of the Construction Group. She concentrates her practice in the areas of construction litigation and real estate.

Maria L. Panichelli is an Associate in the firm’s Federal Practice Group.

Contemporaneous Documentation is Not Always a Good Thing

Posted in Contractor Information Sources, Protection of Contractor Rights

There is no question that documentation is an important part in the resolution of any construction dispute. Particularly contemporaneous documents – documents that are created at the time that events occur. Quality control reports, daily logs, and timely letters all fall into the “contemporaneous” category. Another type, however, has an instantaneous characteristic that not only makes it contemporaneous, but so current as to be potentially dangerous – e-mail. This form of documentation cannot only be useful to record events virtually as soon as they occur, but it also has become a vehicle for the expression of emotions without the benefit of reflection.

Sending sms

Every contractor, for example, has had the occasion to be angered by something that another contractor, vendor, or owner has done during the performance of a construction project. If the subject of that anger, or disagreement, could lead to a request for additional compensation, there is often a knee-jerk reaction to put something in writing. Many of us have hurriedly drafted a letter and then, feeling better for having written it, crumpled the paper and tossed it into the nearest wastebasket. It has a therapeutic value and no harm is done. In our Information Age, however, with the ability to compose e-mail messages on our computers, iPads, and smartphones, the opportunity for reflection is gone as soon as we hit the “Send” button.

As an attorney, this often creates a serious problem when those messages are sent by a prime contractor to a sub, or by a sub to the prime. What both parties seem to fail to recognize is that these instantaneously transmitted messages not only record past events and express current thoughts, they may also have a dramatic effect on the future outcome of a dispute. What happens when the prime accuses the sub of poor workmanship and later seeks to blame the owner for providing a defective specification that actually caused the problem? That e-mail message, sent hastily to the subcontractor before all the facts were known, may become a useful document to the owner during litigation. The question, on cross-examination, will be “Isn’t is true that you believed that the problem was poor workmanship by your subcontractor, and not any defect in the specifications?” If the problem really is a defective specification, the ill-advised e-mail message has provided a potential defense to the owner and has introduced uncertainty into the dispute where none may have otherwise existed.

The lesson in all of this is that all parties should think about the possible consequences of the emotions and feelings they are expressing. There is no question that the facts, such as the working conditions, equipment, and manpower at the site must be recorded promptly and accurately. If the accurate recording of events affects the outcome of a dispute, it probably means that justice has been done. Expressions of emotions and opinions that are not well thought-out are in a different category, however and, when conveyed in e-mail messages, they are an unwelcome byproduct of the Information Age. E-mail messages, and all forms of Electronically Stored Information (“ESI”), are just as discoverable by the other side as paper documents. My advice is to be careful and think about the possible future impact of writing, and instantaneously transmitting, things that do not need to be said. Not every form of contemporaneous documentation is a good idea.

Michael H. Payne is the Chairman of the firm’s Federal Practice Group and, together with other experienced members of the group, frequently advises contractors on federal contracting matters including bid protests, claims and appeals, procurement issues, small business issues, and dispute resolution.

Déjà Vu All Over Again?

Posted in Contractor Information Sources, Small Business Contracting

As a child growing up just outside of New York City, I was a big New York Yankees fan. My grandfather used to love telling me stories about how far Mickey Mantle could hit a ball and what a tremendous pitcher Whitey Ford was, not just for his time, but for all time. And then there was Yogi Berra. My grandfather loved Yogi Berra. He loved Yogi as much for his colorful nature, as he did for his catching prowess. His absolute favorite Berra quote was “It’s like déjà vu all over again.” It happens to be my favorite as well (although “The future ain’t what it used to be” is a very close second) and it immediately came to mind as I recently reviewed the initial pleadings in Ambuild Company, LLC v. The United States Department of Veteran’s Affairs, Court of Federal Claims, Civil Action No. 14-786C.

Yogi Berra

Back in February of 2013, the Court of Federal Claims issued its ruling in Miles Construction, LLC v. United States, No. 12-597C (February 14, 2013). Miles was a case that I litigated on behalf of a service-disabled veteran-owned company that nearly lost a contractual opportunity, along with its SDVOSB status, following a protest. The facts were as follows: Miles Construction was a SDVOSB that had been previously verified by the VA. A few months after being verified, Miles submitted a bid on a solicitation set-aside for SDVOSB concerns. A disappointed bidder filed an agency protest with the VA, challenging Miles’ eligibility. Specifically, the protestor alleged that Miles’ service-disabled veteran owner did not “unconditionally control” the company, as required by 38 C.F.R. § 74.4. OSDBU notified Miles of the protest, asking it to “respond directly to the allegations made in the status protest.” Miles promptly responded and addressed each of the allegations. OSDBU accepted Miles’ position regarding each of the allegations lodged by the protesting party, yet sustained the protest anyway. Why? Not because of issues relating to “unconditional control,” but, rather, based upon an alleged failure of the service-disabled veteran to exhibit “unconditional ownership” over Miles, something never brought to Miles’ attention. Miles lost both the contract and its verified status based upon this decision.

We challenged OSDBU’s decision in a proceeding before the Court of Federal Claims and ultimately prevailed. Miles was reinstated as a verified SDVOSB and was later awarded the contract at issue in the case. One of the more important aspects of that decision pertained to due process. Citing to the Administrative Procedures Act, the court stated that where an agency performs an investigatory function, as OSDBU did in Miles, an interested party (like Miles) must be given notice of what’s happening so that it can meaningfully participate in that process. That did not happen. Miles was not given an opportunity to address the “unconditional ownership” issues that led to its immediate dismissal from the VA’s SDVOSB program. The court concluded that an agency cannot proceed in such a manner. It cannot issue what amounts to a death sentence without first allowing the accused a chance to defend itself. The court said it best: “an interpretation of 48 C.F.R. § 819.307(c) [the regulation pertaining to SDVOSB/VOSB eligibility protests] that does not allow this basic procedural due process is plainly erroneous and cannot be upheld.” That sounds about as straight forward as it gets, but not so fast. Let’s consider Ambuild, which was filed last month.

Ambuild Company, LLC was the apparent low bidder on a construction project at a VA Medical Center in Syracuse, New York. The second lowest bidder protested, challenging Ambuild’s SDVOSB eligibility. It alleged that Ambuild was affiliated with another company from which it was obtaining impermissible financial assistance. Both the SBA (strictly on issues relating to size) and the VA investigated the allegations and Ambuild was given the opportunity to respond. Ambuild did respond. Shortly thereafter, the SBA issued its decision. It found that there was no affiliation between Ambuild and the other company identified in the protest, meaning that Ambuild was, in fact, small. About a month later, the VA issued its decision. While it rejected each of the allegations lodged by the protesting party, it upheld the protest anyway. It did so based upon an independent review of Ambuild’s Operating Agreement and an ownership issue that it found as part of that review. Ambuild was unaware of this issue and, as such, did not address issues of ownership as part of its response to the protest. The VA’s finding left Ambuild ineligible for award and resulted in its removal from the CVE database as a verified SDVOSB company. Sound familiar?

Despite the Miles decision, the VA believes that its position in Ambuild is justified. You see, following Miles, the VA revised its regulations. Ambuild has characterized that change as follows:

“They VA [] relies on an amendment to 48 C.F.R. § 819.307, which went into effect September 30, 2013, apparently in direct response to this Court’s decision in Miles I. In an effort to circumvent the due-process protections mandated in Miles I, this amendment gives the CVE the ability to ‘determine the SDVOSB or VOSB status of the protested concern based upon a totality of the circumstances…’ 48 C.F.R. § 819.307(e). According to the VA, this language permits the CVE to ‘consider facts or issues not specifically raised by the protesting party that impact the SDVOSB/VOSB status…’ 78 FR 59861-01, Rules and Regulations of the Department of Veteran’s Affairs, by Robert C. McFetridge, September 25, 2013. Under this interpretation, and as evidenced by the OSDBU Decision, a protest against a SDVOSB for any reason permits the VA to conduct a full-blown compliance review examining every potential status issue, each and every time a protest is filed.”

In other words, the VA attempted to address some of the issues raised in Miles by revising the regulations governing eligibility protests. In this regard, it seems clear that the VA would like to conduct a “full-blown compliance review” in each case where such a protest is filed. While this, in and of itself, may not be objectionable, it is unclear how the VA will address the issue of due process. The Miles case was quite clear that procedural due process, that is, the right to meaningfully respond to an agency inquiry that could result in the loss of something legally tangible, must be afforded. Based upon an initial review of the facts in Ambuild, the protested party was not given the process to which it was entitled. Moreover, it appears that if due process was, in fact, given to Ambuild, it could have allayed the VA’s concerns. It’s still early and more facts could emerge, but this certainly does appear to be déjà vu all over again.

Edward T. DeLisle is a Partner in the firm and a member of the Federal Contracting Practice Group. Ed frequently advises contractors on federal contracting matters including bid protests, claims and appeals, procurement issues, small business issues and dispute resolution.

Previously published in VetLikeMe.

 

Court Upholds Rights of Small Business Dredging Contractors

Posted in Bid Protests, Dredging, Small Business Contracting

In a bid protest argued by our firm before the United States Court of Federal Claims on September 23, 2014, the Court ruled in favor of our client, RLB Contracting, Inc., (RLB) in a matter involving the designation of the dredging exception to NAICS code 237990, which is for “Other Heavy and Civil Engineering Construction.” 13 C.F.R. § 121.201 (2014). The solicitation for the “South Lake Lery Shoreline Protection and Marsh Creation Project” was set aside for small business concerns by the Natural Resource Conservation Service, but the exception to NAICS code 237990 that applies when a project is considered to be dredging was not invoked. At the time, the exception lowered the small business size standard from $33.5 million to $25.5 million for dredging and required that the successful contractor “must perform at least 40 percent of the volume dredged with its own equipment or equipment owned by another small dredging concern.” 13 C.F.R. § 121.201, Footnote 2. (Currently, the applicable small business size standards are $36.5 million and $27.5 million respectively).

Dredging

The small business regulation found at 13 C.F.R. 121.402(b)(2) states that “[a] procurement is usually classified according to the component which accounts for the greatest percentage of contract value.” In this case, RLB presented evidence that the agency had internally estimated that over 50% of the work involved dredging and that the agency had made its NAICS code designation based on an erroneous calculation that only 10% of the work involved dredging. RLB first appealed the NAICS code designation to SBA’s Office of Hearings and Appeals (“OHA”), arguing that the agency applied the incorrect NAICS code size standard. OHA denied the appeal on the basis that the project included other items of work in addition to dredging. However, OHA did no analysis as to the contract value or relative importance of those “other items.” RLB then brought its protest to the United States Court of Federal Claims, again arguing that the agency violated the regulations by failing to apply the dredging exception. RLB also argued that the agency had failed to provide correct information to OHA, and that OHA had refused to consider supplemental information furnished by counsel for RLB. The Court ruled that OHA’s decision was incorrect as a matter of law because OHA’s “decision does not give primary consideration” to “the relative value and importance of the components of the procurement” and did not concern itself with whether the agency classified the procurement “according to the component [of work] which accounts for the greatest percentage of contract value.” 13 C.F.R. § 121.402(b)(1)-(b)(2) (2014).

The Court was critical of the agency for not including pertinent documents in the Administrative Record which demonstrated that the agency knew that the dredging work accounted for the greatest percentage of contract value, and was further critical of OHA for concluding that other, relatively minor, elements of the work supported the agency’s contention that the project did not predominantly involve dredging. As a result, the Court entered a permanent injunction and remanded the matter to the Contracting Officer with instructions “to make a new determination of whether the dredging exception applies based on all available current information.” The Court further stated that “If item 7, Excavation Marsh Creation Dredging, is the most valuable item of work, the contracting officer must give primary consideration to it.”

This decision is an important victory for the small business dredging industry because it makes it clear that federal agencies are not free to circumvent the protection afforded to small business dredging contractors, under the exception to NAICS code 237990, by characterizing work generally as civil construction even though the dominant item of work is dredging. The exception is designed to prevent brokering by non-dredging small business concerns who, after receiving an award, could subcontract virtually all of the dredging work to a large business dredging concern.

Michael H. Payne is the Chairman of the firm’s Federal Practice Group and, together with other experienced members of the group, frequently advises contractors on federal contracting matters including bid protests, claims and appeals, procurement issues, small business issues, and dispute resolution.

Robert Ruggieri is a Senior Associate in the firm’s Federal Practice Group.

Common Pitfalls in Federal Contracting Teaming Arrangements and How to Avoid Them: Tips for Safeguarding your Small-Business Program Eligibility

Posted in Small Business Contracting

Last month, Ed DeLisle and Maria Panichelli’s guest article on federal teaming agreements “Common Pitfalls in Federal Contracting” appeared on Onvia’s website. The article is based on Maria’s very successful webinar series on Teaming Arrangements.  The article and webinars address the benefits and drawbacks of teaming arrangements with a focus on how improper teaming can adversely impact a small business’ size status or eligibility for small business programs. The article also provides tips on avoiding teaming pitfalls and outlines best practices in teaming on federal projects.  You can see the full article below:

It’s no surprise that in today’s market, with a growing number of Federal government contracts set-aside for various types of small businesses, teaming relationships are increasingly popular. Large contractors like teaming because it provides them access to contracts for which they would otherwise be ineligible. Small businesses know that teaming is a good way to break into the federal contracting arena, an arena in which experience and past performance can prove critical to securing a contract. By teaming with a more experienced, larger contractor, a small company can acquire the experience needed to secure future federal contracts on its own. However, teaming is not without its downsides.

For small businesses in particular, teaming can pose significant risks. If done improperly, teaming can destroy a concern’s “small” business status, or otherwise render it ineligible to participate in the various Small Business Administration (“SBA”) programs. Small businesses most often lose their status in one of two ways: (1) a finding of “affiliation” pursuant to 13 C.F.R. § 121.103; or (2) violation of the percentage of work requirements set forth at 13 C.F.R. § 125.6. Small businesses need to be educated about these common pitfalls, and how to avoid them. This article seeks to do just that.

Affiliation

“Affiliation” can alter a small business’ size and render it ineligible to compete for small business set-aside contracts. When two companies are found to be “affiliated,” their respective sizes (determined by either revenue or number of employees) are added together; the total is what is evaluated when determining whether the company is actually “small” based upon the SBA’s “Small Business Size Standards.” If the sizes of the two businesses, added together, exceed the applicable size standard, neither can be considered “small.” Accordingly, a finding of “affiliation” is something small businesses want to avoid.

Affiliation is governed by 13 C.F.R. § 121.103, which explains that “concerns and entities are affiliates of each other when one controls or has the power to control the other, or a third party or parties controls or has the power to control both. It does not matter whether control is exercised, so long as the power to control exists.” (13 C.F.R. 121 § 121.103(1)). In assessing whether or not two businesses are affiliated, the SBA considers factors such as ownership, management, previous relationships with or ties to another concern, and contractual relationships; the SBA may find affiliation even though no single factor is sufficient to constitute affiliation. (13 C.F.R. 121 § 121.103(2, 5)). In the teaming context, affiliation generally occurs in one of two ways.

Teaming Partners

First, a teaming relationship on a single project can result in a finding of affiliation under the “Ostensible Subcontractor” rule. The Ostensible Subcontractor rule holds that a small business that “is unusually reliant” on a subcontractor will be deemed affiliated with that subcontractor for size determination purposes. In other words, a small businesses can run afoul of the SBA’s affiliation rules if the small business teams with a subcontractor on a particular project, but then allows that subcontractor to control that project. In order to determine whether the subcontractor is, in fact, in control of a given project, the SBA will look to a variety of factors, including, but not limited to: whether it is the small business prime contractor or the subcontractor that is performing the vital components of the project; whether the small business prime contractor is financially reliant on the subcontractor; whether the small business has the requisite experience or managerial capability to control the project; and whether it is the small business prime contractor or the subcontractor who is, in reality, controlling the means and methods necessary to successfully complete the project. If the subcontractor appears to be the party in control, the SBA is likely to find that the small business prime contractor and subcontractor are affiliated.

Affiliation can also occur when there is an ongoing relationship between two companies, where one business appears to control the other, or where the two companies appear too closely related or intertwined. In the teaming context, this type of general affiliation can occur if a small business repeatedly teams with the same subcontractor/teaming partner, is financially reliant on its teaming partner, shares employees, office space, equipment or other resources with the teaming partner, or if the small business and its teaming partner have common ownership. Familial relationships, or previous employee/employer relationships are also considered to be signs of affiliation.

By now you should be asking, “How do I avoid affiliation?” The advice we give our clients is simple: maintain control over your company and every project on which you are the prime contractor. If you are going to team with a subcontractor, make sure you do not have other ties to that company. If possible, avoid teaming with companies owned by family members, or companies at which you were previously employed. If you must team with such a company, be very careful that you do not appear reliant on, or intertwined with, that business. Hire your own employees, rent your own office space, and secure your own equipment. Do not allow your company to rely too heavily or regularly on a teaming partner for financial support, and avoid having another business serve as a guarantor of your credit line. Team with different concerns, rather than repeatedly teaming with the same company, especially if you have other ties (financial, familial, or work-related) to that company. Overall, maintain corporate formalities, and ensure that all transactions with other companies are made at arms-length. These tips should help you avoid a finding of general affiliation.

To avoid the perils of the “Ostensible Subcontractor” rule, the same type of principals apply. You may enter into subcontracts, but make sure that you retain control over how the subcontract is performed. Do not rely on subcontractors for financial assistance, or expect them to supply the managerial experience needed to complete the project. Perhaps most importantly, do not allow subcontractors to take over or perform the most vital aspects of the contract. Also, make sure your company performs the requisite percentage of work, as discussed below.

Percentage of Work Requirements

The SBA regulations are very specific about the percentage of work a small business prime contractor must perform on a project to remain eligible for that project, and future small-business set-asides. 13 C.F.R. § 125.6 sets forth these “Prime Contractor Performance Requirements” (aka limitations on subcontracting). Each type of small business has its own requirements, and the percentages further vary depending upon the nature of the contract (services, supplies/products, general construction or specialty construction) being performed. For example, an 8(a) business performing a general construction contract is governed by different self-performance requirements than a SDVOSB performing a supply contract. It is critically important to pay attention to how these percentages are calculated for your particular type of business, and the nature of your contract. In some cases, the required percentage of work is calculated using the total cost of the contract; in others it is calculated using the cost of the contract incurred for personnel. The applicable work percentage requirements for each type of small business can be found as follows:

• 8(a) – 13 C.F.R. § 125.6(a)
• WOSB/EDWOSB – 13 C.F.R. § 125.6(a)
• VOSB/SDVOSB – 13 C.F.R. § 125.6(b)
• HUBZone – 13 C.F.R. § 125.6(c) and § 121.600

If a small business fails to self-perform the amount of work required by these regulations it may have to surrender its small-business status and could thereby lose its ability to compete for future set-aside contracts. It is, therefore, vital to demonstrate to the SBA your compliance with these regulations. To that end, small business prime contractors should include in every teaming agreement (and resulting subcontract) the percentages (by number) and the specific scopes of work (by description) that will be performed by the small business prime contractor.

In summary, it is important for small business contractors to remain cognizant of the rules pertaining to affiliation and self-performance when entering into teaming agreements. Failure to pay attention to these issues could result in the loss of a concern’s eligibility to participate in small business programs. In contrast, if a small business is aware of the issues above, is careful to avoid such pitfalls, and properly structures its teaming relationship, teaming can be a rewarding, and very profitable experience. If you have any questions about how to properly team, contact a legal professional.

Edward T. DeLisle is a Partner in the firm and a member of the Federal Contracting Practice Group.

Maria L. Panichelli is an Associate in the firm’s Federal Practice Group.

Is the End Near for Race-Conscious Contracting Programs? Federal Contractor Challenges the 8(a) Minority Business Development Program

Posted in Procurement Information, Protection of Contractor Rights, Small Business Contracting

By: Edward T. DeLisle, Kayleen Egan & Maria L. Panichelli

Is the Small Business Administration’s (“SBA”) minority business development program, also known as the “8(a) Program”  unconstitutional?   The legality of the program has been a hot topic of debate over the year, most recently due to a significant DC District Court case.  That case, Rothe Development Inc. v. U.S. Department of Defense et al., C.A. 1:12-cv-00744, began in 2012 when Rothe Development, Inc. (“Rothe” or “the Company”) filed suit against the Department of Defense (“DOD”) and the SBA, claiming that the 8(a) program violates the Fifth Amendment due process clause.

Scale & Book

The Company argued that race-based laws are constitutional only when they’re narrowly tailored to address a historic wrong.  Claiming that there was not sufficient evidence of historic discrimination in federal contracting, Rothe argued that the DOD and the SBA did not have a compelling government interest justifying the racial classification of businesses.  Rothe further argued that the remedial effect of the 8(a) program was speculative, and that the 8(a) program was not narrowly tailored to remediate discrimination.   According to the company, the government was increasingly setting aside contracts for minority-owned or minority-controlled businesses, and the 8(a) program unfairly prevented it from competing for those contracts by giving companies owned by members of disadvantaged racial groups an unconstitutional advantage.

In May of this year, two conservative interest groups, the Pacific Legal Foundation (“PLF”) and the Mountain States Legal Foundation (“MSLF”),  joined in, filing amicus briefs. These groups argued that the 8(a) program unconstitutionally deprived Rothe (and similarly situated companies) equal protection under the law, in violation of the Due Process Clause of the Fifth Amendment.  Therefore, the NAACP Legal Defense and Educational Fund, Asian Americans Advancing Justice and the Leadership Conference on Civil and Human Rights fired back, filing their own amicus briefs and arguing that Congress was justified in enacting the 8(a) Program because discriminatory policies and practices have prevented the business development of minority entrepreneurs throughout our nation’s history.

The case now sits before the DC District Court on cross-motions for summary judgment, prompting small business insiders to wonder if Rothe will successfully lodge yet another challenge to minority owned businesses. That’s right, Rothe has filed numerous suits challenging the constitutionality of  small business programs over the past few years, most recently Rothe Development Corp. v. U.S. Department of Defense, where Rothe successfully challenged a practice employed by DOD, NASA and U.S. Coast Guard to adjust prices by up to 10 percent to assist “small disadvantaged businesses” and to help the agencies meet the small, disadvantaged contractor goal.  Rothe also previously intervened in a case filed by DynaLantic Corp., which protested the DOD’s decision to set aside a contract for military simulation and training services for minority-owned businesses.  In that case, a D.C. District judge ruled that the 8(a) program was generally constitutional, but found that the DOD couldn’t use the program in the context of military simulation contracts because there was no evidence of discrimination in that industry.

Indeed, over the past few years, the federal courts have dealt two significant blows to government programs designed to increase the amount of contracts awarded to minority businesses.  If the latest Rothe challenge is successful, it would be a huge blow to such programs.  Considering almost 16 billion dollars in federal contracts were awarded to 8(a) contractors in 2012, this ruling could significantly change the way government contracts are awarded.   We will keep you posted as this case progresses.  Stay tuned for more updates.

Edward T. DeLisle is a Partner in the firm and a member of the Federal Contracting Practice Group.

Maria L. Panichelli is an Associate in the firm’s Federal Practice Group.

Kayleen Egan is a Summer Associate at Cohen Seglias.

Big Changes for Small Business: Revisions to Protest and Appellate Procedure

Posted in Contractor Information Sources, Procurement Information, Small Business Contracting

By: Edward T. DeLisle, Gary J. Repke, Jr. & Maria Panichelli

Attention all small business owners!  As a result of a final rule issued by the FAR Council on July 25, requirements for protesting small businesses size and eligibility status are changing effective August 25, 2014.  This rule, which finalizes an interim rule issued on March 7, 2013, updates size and eligibility status protests and appeal procedures governing small businesses, and provides uniformity for protests involving HUBZones, service-disabled veteran-owned small businesses(“SDVOSBs”), economically disadvantaged women-owned small businesses (“EDWOSBs”) and women-owned small businesses (“WOSBs”).  The biggest changes are outlined below.

Businessman, vectors work

Size Protests

First, with regard to small business size protests, the rule revises FAR § 19.302 to require additional information from a protesting party.  The amended regulation provides that each small business size protest must be accompanied by a written referral letter from the contracting officer, which contains pertinent information regarding the solicitation.  The required  information includes a copy of the concern’s self-certification for size; identification of the applicable size standard; a copy or link to the solicitation; identification of the bid opening date or the date of notification provided to unsuccessful offerors; the date the contracting officer received the protest; and contact information for both the contracting officer and the protesting party.  In addition, the protesting party may now deliver its protest via facsimile or email, in addition to delivering it by hand, telegram, or letter.  To be timely, the protest must be filed within five business days from either the date of bid opening (sealed bids) or the date notification is provided to a successful offeror (negotiated procurement).  A protest filed before the applicable triggering event will be dismissed by the SBA as premature.

The new rule also increases the time for the SBA to make a determination of a protested businesses size from 10 to 15 days.  Under the new rule, the contracting officer may, at the end of 15 days, further extend the amount of time to respond, if necessary.  Most importantly, should the SBA fail to make a size determination, the new rule provides the contracting officer with the discretion to award the contract anyway.

If a protested concern disagrees with the SBA’s size determination, the new rule provides that it is within the discretion  of the SBA’s Office of Hearing and Appeals (“OHA”) to accept an appeal.  The rule further provides that the SBA may, at its sole discretion, reopen a formal size determination to correct an error or mistake if it is within the appeal period, even if no appeal has been filed with OHA.

In addition to these modifications, the rule makes one rather troubling change.  It eliminates the portion of FAR 19.302(f)which allows the protested concern to file SBA Form 355 and a statement responding to the allegations contained in the protest, along with evidence to support that statement.  While the SBA regulations provide for such a response, the deletion of this provision from the FAR is nonetheless an unwelcome change.

Status Protests

The rule also provides for certain changes to status (e.g. HUBZone, EDWOSB, etc.) protests.  First, all status protests and appeals must be made in accordance with the new procedures outlined above for size protests.  If an interested party is protesting both the size and status of the projected successful bidder, that party must file two separate protests.

In the case of VOSB/SDVOSB status protests, or WOSB/EDWOSB protests, the protestor must establish either that the owner(s) cannot provide documentation to show that they meet the appropriate definitional standards, or that the protested concern is not unconditionally owned or controlled by one or more individuals that meet that standard.  Finally, for a HUBZone concern, the SBA will entertain a protest of the business’s status if evidence is presented showing that the business’s principal office is not located in a HUBZone or that less than 35% of the business’s employees reside in a HUBZone.  Absent these specific supporting facts, the SBA must reject the status protest.

If you need any additional assistance in protesting a concern’s size or eligibility status, or appealing your own adverse determination, please do not hesitate to contact us.  Additional information regarding small business size and status protests is also accessible via the SBA’s website.

Edward T. DeLisle is a Partner in the firm and a member of the Federal Contracting Practice Group.

Maria L. Panichelli is an Associate in the firm’s Federal Practice Group.

Gary J. Repke, Jr. is a Summer Associate at Cohen Seglias.

SBA Increases Small Business Size Standards for Businesses in Numerous Industries, Including Construction

Posted in Contractor Information Sources, Procurement Information, Small Business Contracting

If you participate in federal government procurement programs, either as a prime contractor or as a subcontractor, listen up!  Your small business size status may have changed on July 14, 2014 as a result of an interim rule issued by the SBA. The rule increased revenue-based size standards for numerous industries, including general and specialty construction. The SBA has estimated that approximately 480 additional firms will now be considered “small” under the new size standards. Federal contractors and subcontractors should visit the System for Award Management (SAM) and verify that all profile and certification information are up to date based upon the revised size standards. A summary of the changes to the construction NAICS codes is set forth below.

The SBA cited inflation as the reason for the change; the last time the size standards were adjusted for inflation was back in 2008.  These adjustments are in addition to the recent size standard revisions that were implemented following passage of the Small Business Jobs Act of 2010 (Jobs Act).

The rule made other changes as well, most notably:

  • An adjustment to program-based size standards, with the exception of the new alternative size standard for SBA’s 7(a) and 504 loan programs that was established under the Jobs Act.  The new alternative size standard will remain in effect until SBA establishes a permanent alternative size standard for the 7(a) and 504 loan programs.
  • Deletion of references to surety bond guarantee size standards for contracts awarded in Presidentially declared disaster areas following Hurricanes Katrina, Rita, and Wilma in 2005.
  • Deletion of the determination date for eligibility under the SBA’s Economic Injury Disaster Loan (EIDL) Program in connection with Hurricanes Katrina, Rita, and Wilma.

The SBA encourages contractors to review the new rule and provide feedback.  The comment period closes on August 11, 2014.  Additional information about small business size standards is available on the SBA’s website.

If you need assistance in determining whether you are a “small” business under these newly established NAICS codes, or in general, please do not hesitate to contact us.  Here are the new standards for general and specialty construction:

SECTOR 23—CONSTRUCTION
Subsector 236—Construction of Buildings

NAICS Code

NAICS U.S. Industry Title

New Standard

236115 New Single-family Housing Construction (Except For-Sale Builders) $36.5 million
236116 New Multi-family Housing Construction (Except For-Sale Builders). $36.5 million
236117 New Housing For-Sale-Builders $36.5 million
236118 Residential Remodelers $36.5 million
236210 Industrial Building Construction $36.5 million
236220 Commercial and Institutional Building Construction $36.5 million

Subsector 237 Heavy and Civil Engineering Construction

NAICS Code

NAICS U.S. Industry Title

New Standard

237110 Water and Sewer Line and Related Structures Construction $36.5 million
237120 Oil and Gas Pipeline and Related Structures Construction $36.5 million
237130 Power and Communication Line and Related Structures Construction $36.5 million
237210 Land Subdivision $27.5 million
237310 Highway, Street, and Bridge Construction $36.5 million
237990but Other Heavy and Civil Engineering Construction $36.5 million
237990 Dredging and Surface Cleanup Activities $27.5 million

 Subsector 238 Specialty Trade Contractors

NAICS Code

NAICS U.S. Industry Title

New Standard

238110 Poured Concrete Foundation and Structure Contractors $15 million
238120 Structural Steel and Precast Concrete Contractors $15 million
238130 Framing Contractors $15 million
238140 Masonry Contractors $15 million
238150 Glass and Glazing Contractors $15 million
238160 Roofing Contractors $15 million
238170 Siding Contractors $15 million
238190 Other Foundation, Structure and Building Exterior Contractors $15 million
238210 Electrical Contractors and Other Wiring Installation Contractors $15 million
238220 Plumbing, Heating and Air-Conditioning Contractors $15 million
238290 Other Building Equipment Contractors $15 million
238310 Drywall and Insulation Contractors $15 million
238320 Painting and Wall Covering Contractors $15 million
238330 Flooring Contractors $15 million
238340 Tile and Terrazzo Contractors $15 million
238350 Finish Carpentry Contractors $15 million
238390 Other Building Finishing Contractors $15 million
238910 Site Preparation Contractors $15 million
238990 All Other Specialty Trade Contractors $15 million
238990 Building and Property Specialty Trade Services $15 million

SECTOR 22—UTILITIES
Subsector 221 Utilities

NAICS Code

NAICS U.S. Industry Title

New Standard

221310 Water Supply and Irrigation Systems $27.5 million
221320 Sewage Treatment Facilities $20.5 million
221330 Steam and Air Conditioning Supply $15 million

Edward T. DeLisle is a Partner in the firm and a member of the Federal Contracting Practice Group.

Maria L. Panichelli is an Associate in the firm’s Federal Practice Group.

Understanding How to Effectively Team on a Federal Project Webinar

Posted in Small Business Contracting

Teaming is a concept much discussed in the world of federal contracting, yet it is often misunderstood.  

On May 7, 2014 Maria L. Panichelli hosted a webinar for Women Impacting Public Policy (“WIPP”) and Give Me 5 (“GM5″) entitled “There’s No “I” In Team – Understanding How to Effectively Team on a Federal Project.” In it, she discussed the benefits of teaming (from both a small business/prime contractor perspective, and a large business/subcontractor perspective), the proper procedures for forming a teaming agreement, important clauses, common pitfalls, and recent developments in the applicable regulations and case law. You can watch and listen to the hour- long presentation here.

Please visit the GM5 website for information about Maria’s additional upcoming WOSB/EDWOSB webinars.

Edward T. DeLisle is a Partner in the firm and a member of the Federal Contracting Practice Group. Maria L. Panichelli is an Associate in the firm’s Federal Practice Group.