Federal Construction Contracting Blog : Federal Construction Contracting Law Firm : Cohen Seglias Pallas Greenhall & Furman PC : Construction Law, Dredging and Claims

By: Edward T. DeLisle

On Thursday, January 12, 2012, the Small Business Administration issued an interim final rule, which alters the protest procedures pertaining to its Women-Owned Small Business (WOSB) Program. The changes serve two primary functions. First, when the SBA implemented the WOSB program by publishing a final rule in the Federal Register on October 7, 2010, it established set-aside thresholds of $5 million for contracts pertaining to manufacturing and $3 million for all other contracts. As part of the new interim rule, those thresholds have increased to $6.5 million and $4 million, respectively, to account for inflation.

Second, the changes ushered in as part of the interim rule, make the protest procedures for the WOSB Program consistent with the SBA’s other set-aside programs. For example, under the procedures that existed before issuance of the interim rule, if a contracting officer received a protest on a WOSB set-aside and, nonetheless wished to make an award, that contracting officer would have to issue a written determination concluding that doing so was required to prevent significant harm to the public interest. This requirement is inconsistent with the procedure outlined for other programs. Under the interim rule, a contracting officer may issue an award, despite a protest, if he or she makes the simple determination that doing so is necessary to protect the public interest.

As there have been few reported protests involving the WOSB Program, the new rules should not cause wide-spread confusion. If you are considering a protest, however, you are encouraged to read the changes and consult with a legal professional if you have any questions.

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

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By: Edward T. DeLisle

Over the last several years, the scrutiny over federal small business programs has grown. That scrutiny has led to changes in policy and legislation designed to curb potential fraud in the procurement process. Because these changes have been implemented in such a short period of time, however, it is not unusual for the government to issue solicitations for small business set-aside contracts that are confusing, or even contradictory. In Commandeer Construction Company, Inc., B-405771, December 29, 2011, that is precisely what occurred resulting in a successful protest.

Commandeer Construction involved a solicitation that was set aside for Service-Disabled, Veteran-Owned Small Businesses (SDVOSBs), a program that has experienced much change in recent years. In 2006, the VA was given the authority to restrict competition to SDVOSBs as part of the Veterans Benefits, Health Care, and Information Act (the "Act"). 38 U.S.C. 8127(d). As the GAO explained in Commandeer Construction, pursuant to the Act, an SDVOSB set-aside contract may only be issued to entities listed in a database of veteran-owned small businesses maintained by the VA. The VA has chosen to use what it has termed its "Vendor Information Pages" ("VIP"), which can be found at www.vetbiz.gov, as its official listing of veteran-owned and service-disabled, veteran-owned concerns.

Subsequent to issuance of the Act, the VA issued VAAR 804.1102, which states that all VOSB and SDVOSB entities must be listed in its VIP database by January 1, 2012 in order to be eligible for set-aside contracts for such entities. By December 31, 2011, all VOSB and SDVOSB entities must not only be listed, but must also be "verified," in order to receive new contract awards under the Veteran's First program, a program operated exclusively by the VA. While firms were once permitted to self-certify their status as VOSBs and SDVOSBs, as part of Veterans Benefits Act of 2010, the VA instituted a more rigorous qualification process. Consistent with this new review procedure, which was designed to weed out fraud, the VA's "Center for Veterans Enterprise" ("CVE") was given the authority to render eligibility determinations for these programs. If a firm wished to obtain a set-aside contract as a VOSB or a SDVOSB entity, it would have to be verified by CVE.

In an effort to assist in the transition from a self-certifying system to one requiring government approval, the VA issued what it called its "Memorandum from VA Acting Associate Deputy Assistant Secretary for Procurement Policy, Systems Oversight and Accompanying Class Deviation from VA Acquisition Regulation" (the "Memorandum"). The Memorandum referenced what the VA described as a "class deviation." Based upon this class deviation, any "apparently successful offeror" that had not already been verified by CVE, could become verified on an expedited basis, and obtain an award of a VOSB or SDVOSB set-aside contract, provided CVE approved its status. Later, the VA clarified its position regarding who may qualify for a “class deviation,” taking the position that a company was not eligible for “either award or Fast Track Verification," unless it was visible in the VA’s VIP database. Commandeer Construction addressed the interplay between the class deviation identified in the Memorandum and the VA’s attempt to subsequently clarify what it meant.

In Commandeer Construction, the VA issued an IFB for a construction contract that was set aside for eligible SDVOSB firms. The solicitation stated that the award would be made to an SDVOSB firm that had “been verified for ownership and control and [was] so listed in the [VIP] database.” The IFB also included the “class deviation” language referenced above. What was not included as part of the IFB, however, was the Memorandum (and accompanying deviation), or the clarification made to the deviation, which was issued after the fact.

On August 8, 2011, the protesting party, Commandeer Construction, submitted an application to the CVE for approval as an SDVOSB. Thereafter, on August 30, 2011, Commandeer submitted its bid. As its bid was the lowest of those submitted, Commandeer was in line for an award. As it was not listed in the VIP database, however, the contract specialist for the VA intended to contact Commandeer for purposes of explaining the process of obtaining expedited verification.

Prior to contacting Commandeer, the VA contract specialist apparently learned of the clarification for the first time and discussed its meaning and significance with other VA officials. Based upon these discussions, the VA contract specialist decided that Commandeer was ineligible for award and informed it of such by letter dated August 31, 2011. At the time, CVE had not rendered a final decision on Commandeer’s SDVOSB eligibility.

Commandeer protested VA’s decision, taking the position that rejecting its bid was improper based upon the expedited review procedures outlined in the solicitation. The VA countered that the deviation clause, upon which Commandeer relied for potential eligibility, was never meant to apply to entities that were absent from the VIP database. According to the VA, the deviation clause was merely an effort to provide assistance to those firms that had already self-certified, but had not yet been CVE verified under the new review procedures. Commandeer Construction at 4.

The GAO based its decision on a strict reading of the solicitation. The deviation clause in the solicitation specifically stated that “the apparent successful offeror” would be given an opportunity to have its SDVOSB status reviewed on an expedited basis, if it was not “currently listed as verified” in the VIP database. While the VA may not have intended for the deviation to apply to firms not already listed in its VIP database, the GAO concluded that the solicitation itself did not provide that qualification. As such, Commandeer’s understanding that it could qualify for award pursuant to the expedited review procedure was reasonable. Based upon this finding, the GAO recommended that the VA complete its review of Commandeer’s verification documents and, if found to be eligible for SDVOSB status, award it the contract.

As the government continues to alter its approach in exercising control over small business programs, mistakes, such as those in Commandeer Contracting, will happen. Contractors must exercise care in reviewing and responding to any solicitation. If, during the course of the review process, an ambiguity is discovered, bring it to the attention of the contract specialist, contracting officer, or source selection authority immediately. Doing so will benefit all bidders and quite possibly prevent a pre-bid protest. For those ambiguities that are not readily detectible, and are only revealed at the time of contract award, be prepared to discuss your concerns with an attorney familiar with such issues right away, as a protest is likely your only source of recourse. For those participating in the government’s various small business programs, the fast-paced nature of regulatory change has opened these programs up to issues such as those presented in Commandeer Contracting. Bid and beware.

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

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By: Michael H. Payne

A decision was issued by the United States Court of Federal Claims on December 20, 2011, in Martin Construction Co. v. United States, a case involving a Corps of Engineers construction project in North Dakota. Martin was represented by Michael Payne and Joseph Hackenbracht, of Cohen Seglias Pallas Greenhall & Furman, and the case involved a termination for default by the Omaha District of the Corps on a multi-million dollar project involving the construction of a marina. The termination occurred because the Contracting Officer concluded that Martin was at fault for failing to complete the project by the required contract completion date. Martin had argued that the Corps’ design of the cofferdam (temporary dam), which was critical to the construction of the marina, was defective and that the contractor was effectively prevented from completing the marina according to the original schedule. The Court agreed that there was a defective design and found that the Corps’ designer had grossly underestimated the amount of water that would flow through the cofferdam.

The decision is extremely critical of the Corps of Engineers and amounts to a complete vindication of Martin. The Court ruled that the termination for default was wrongful and ordered a conversion to a termination for convenience. This, of course, now exposes the Corps to the payment of damages amounting to millions of dollars to compensate Martin for the costs incurred in attempting to deal with the defective design. The Court aptly noted that “The most troubling aspect of this case is the Corps’ adamant refusal to accept any responsibility for the defective design, even while Martin made every effort to comply with it.” The Court was also very critical of the Contracting Officer and stated that “Competent procurement officials would have acknowledged the agency’s obvious design mistake, made the necessary corrections, and afforded the contractor the contractor the additional time and money to complete performance.”

The Court concluded that the “evidence is overwhelming” that Martin was entitled to a time extension and that the termination for default was improper. Judge Thomas Wheeler quoted Martin’s geotechnical and scheduling experts, and he also quoted the Plaintiff’s brief by stating that “As Plaintiff’s counsel aptly pointed out, the Defendant ‘ignored the elephant standing amongst the teacups in the living room.” The decision is an important verification to the federal contracting community that a termination for default is a “drastic action” that will not be sustained unless the government can meet its burden of proof that the termination was justified. It was unfortunate, however, that Martin was forced to suffer the consequences of the “black mark” associated with a default termination until, as in this case, justice was ultimately served.

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 teaming arrangements, negotiated procurements, bid protests, claims, and appeals.

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