By: Edward T. DeLisle

We are frequently asked whether attorneys fees are recoverable as part of the federal claims procedure. The answer is sometimes. A case just decided by the Court of Appeals for the Federal Circuit assists in explaining when such a recovery is possible.

In Tip Top Construction v. Donahue, the United States Postal Service required a contractor to perform additional work to complete an air conditioning repair project in the Virgin Islands. While it approved a change order to perform the additional work, the contractor incurred other additional costs, including attorneys fees, to convince the USPS to accept its request for additional money. Those monies were submitted in the form of a claim and denied.

The U.S. Postal Service Board of Contract Appeals upheld the denial stating that the costs included in the claim “had nothing to do with the performance of the changed work or genuine contract administration.” The Federal Circuit disagreed.

The Federal Circuit took the position that the monies included in the claim reasonably flowed from negotiations associated with the change order process. This conclusion was important, for the Federal Circuit framed the issue as follows: “If a contractor incurred the cost for the genuine purpose of materially furthering the negotiating process, such cost should normally be a contract administration cost allowable under FAR 31.205-33, even if negotiation eventually fails and a CDA claim is later submitted.” Here, the facts revealed that the parties were, in fact, making attempts to negotiate an amicable resolution regarding price for a number of months prior to submission of the claim. Consultants and attorneys were used by the contractor to assist it in its presentation to the Postal Service. Because the evidence suggested that the contractor’s underlying purpose was to resolve the dispute, the Federal Circuit held that these costs were recoverable.

Tip Top illustrates the fine line one must walk when it comes to the collection of attorneys fees. Certainly, once an actual claim is submitted by a contractor, there can be no expectation to collect fees from that point forward. The dispute has traveled too far down the road of dispute resolution. Prior to that point, however, if a contractor can prove that the costs incurred for counsel stemmed from a desire to negotiate an amicable resolution to a change order dispute, recovery of fees is possible.

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

By: Joseph A. Hackenbracht 

On July 18, 2012, the Small Business Administration published a proposed increase in the small business size standard for “Dredging and Surface Cleanup Activities” from $20 million to $30 million in average annual receipts. 77 FR 42197. The average annual receipts are calculated by averaging a concern’s receipts for the last three fiscal years. 13 CFR 121.104(c). Receipts means “total income.” 13 CFR 121.104(a).

In order to qualify as small on a Federal procurement, a concern must also perform at least 40 percent of the volume dredged with its own equipment or equipment owned by another small dredging concern. 13 CFR 121.201; note 2. This requirement, sometimes referred to as the “40 percent rule,” has been in SBA’s size standards for small business since 1974. Before 1974, the Department of Defense’s Armed Services Procurement Regulations (ASPR’s) had contained such a requirement for many years. (ASPR 1-701.1(A)(2)). In 1974, it was determined that DoD was exceeding its authority because the obligation to set size standards for small business was within the jurisdiction of the SBA.

When the SBA proposed to increase the size standard for Dredging in July, 2012, it also sought comments regarding the requirement that in order to qualify as small that a concern must perform at least 40 percent of the dredging with its own equipment or equipment owned by another small dredging concern. SBA has heard from small dredging firms that believe they should be able to lease equipment from any size firm as long as employees from the small firm perform the work on the contract.

At this time, however, SBA has proposed to continue requiring small dredging concerns to comply with the “40 percent rule,” in order to ensure that these firms perform a significant and meaningful portion of a dredging project set aside for small business. SBA has asked for comments from the industry and the public concerning (1) whether there continues to be a need for the current 40 percent equipment requirement; (2) whether there is a rationale for a different percentage; and (3) whether a different and more verifiable requirement based on an alternative measure (such as value of contract or personnel involved) may achieve the same objective of ensuring that small businesses perform significant and meaningful work.

The following methods can be used for the submission of comments: (1) the Federal eRulemaking Portal: www.regulations.gov, by following the instructions for submitting comments; or (2) Mail/Hand Delivery/Courier to Khem R. Sharma, Ph.D., Chief, Size Standards Division, 409 Third Street SW., Mail Code 6530, Washington, DC 20416. Please note that SBA will not accept comments to this proposed rule submitted by email. Also, be sure to refer to “RIN 3245-AG37” when submitting comments, so that SBA correctly attributes your comments to the proposed rule in question.

Joseph A. Hackenbracht is a Partner in the firm and a member of the Federal Contracting Practice Group.

By: Edward T. DeLisle & Maria L. Panichelli

On August 27, 2012, FAR council issued a final rule entitled Reporting Executive Compensation and First-Tier Subcontract Awards (“the Rule”). Although this Final Rule was implemented just last month, it has been a topic of discussion on Capitol Hill for over six years.

In 2006, the Federal Funding Accountability & Transparency Act of 2006 (Pub. L. 109-282, 31 U.S.C. § 6101 note) (“FFATA”) was enacted, with a two-fold purpose: (1) to reduce “wasteful and unnecessary spending;” and (2) to ensure that the public can access financial information on entities and organizations receiving federal funds, which included federal government contractors and their subcontractors. FFATA required all federal contractors to divulge, through the use of a website set up by the Office of Management and Budget (“OMB”), contract and subcontract award information for all contracts over $25,000. Contractors’ reporting responsibilities were further expanded by the Government Funding Transparency Act of 2008 (“GFTA”). GFTA amended the FFATA to provide that contractors report, in addition to contract and subcontract award information, the names and total compensation of the five most highly compensated officers of those entitities. On July 8, 2010 an interim rule was put in place, requiring Federal contractors to comply with the new reporting requirements.

It was this interim rule (with a few minor modifications) that was ultimately implemented on August 27, 2012. Under the Final Rule, prime contractors must report contract and first-tier subcontract awards, and the names and executive compensation of the five most highly compensated officers of both the prime contractor, and its first-tier subcontractors. The information must be reported by the end of the month following the month of a contract award, and annually thereafter, in the Central Contactor Registration system (“CCR”)(now the “System of Award Management” or “SAM”). All of the information is to be made accessible to the public through www.usaspending.gov.

Compliance with the rule requires that contractors fully understand the reporting requirements, which can be rather complicated. Accordingly, some guidance concerning the reporting requirements is set forth below.

Subcontract Award Reporting

This requirement is applicable to all Contracts with a value of $25,000 or more, but there is no requirement to disclose classified information. This represents a change from the interim rule, which included language stating that it did not apply to classified contracts; the Final Rule expands this provision to state that nothing in the statute requires disclosure of “classified information.” The Final Rule deleted an additional exception that had been contained in the interim rule, namely that the rule did not apply to contracts with individuals. There is no such exemption in the Final Rule. There is also no exemption for COTS or commercial items.

A “First-Tier Subcontract” is defined as a subcontract “entered into by the [Prime] Contractor to furnish supplies or services for performance… It includes, but is not limited to, purchase orders and changes and modifications to purchase orders, but does not include contracts that provide supplies or services benefiting two or more contracts.” FAR 52.204-10(a). This too represents a change from the interim rule. The interim rule’s definition of “first-tier subcontracts” has been modified slightly, to clarify that the definition does not include long-term contracts for supplies and materials that are not solely related to a single, applicable contract. According to the preamble of the Final Rule, this change is meant to give contractors “greater flexibility” in determining what type of company qualifies as a “first-tier subcontractor.”

An extensive list of the information contractors must report regarding first-tier subcontract awards can be found at FAR 52.204-10(a).

Executive Compensation Reporting

Contractors and applicable Subcontractors must comply with this requirement only if that contractor or subcontractor, in the preceding fiscal year, received eighty percent (80%) or more of its annual gross revenues and twenty-five million or more in annual gross revenues from federal contract awards, AND if the public did not otherwise have access to this executive compensation information from other publically available sources (for example, through SEC or IRS filings).

The category of subcontractors required to report executive compensation is limited to “First-Tier Subcontractors,” which is defined in the same manner as set forth above. The Subcontractor is required to report to the prime contractor names and total compensation of each of the five most highly compensated executives for that subcontractor’s preceding completed fiscal year. The Prime Contractor, in turn, is required to report this information, along with its own executive compensation information to the extent that it falls within the parameters of the Rule.

For purposes of disclosure under the final Rule, both “executive” and “compensation” are defined broadly. Compensation includes not only salary, but also:

– (1) bonus;
– (2) awards of stock, stock options, and stock appreciation rights;
– (3) earnings for services under non-equity incentive plans;
– (4) change in pension value;
– (5) above-market earnings on deferred compensation which is not tax-qualified; and
– (6) other compensation, if the aggregate value of all such other compensation (e.g., severance, termination payments, value of life insurance paid on behalf of the employee, perquisites or property) for the executive exceeds $10,000.

“Executive” is defined as any officer, managing partner, or any employee in a management position.

The prime contractor must report executive compensation information in two different locations. For subcontractors, the information is entered into the FFATA Sub-award Reporting System (“FSRS”). For contractor information, primes must use the Federal Procurement Data System (“FPDS”), where certain required information will be pre-populated by the government. Prime Contractors must note two things here: First, as to first-tier subcontractors, the prime is responsible for notifying its subcontractors that the required information will be made public. Second, regarding its own information, under the Final Rule it is the prime’s responsibility to check and correct any inaccurate information pre-populated in FPDS.

This Rule places prime contractors in the precarious position of collecting and reporting not simply their own information, but information from others. How can a prime assure itself that it is collecting and reporting the full extent of the subcontractor information required? How can it ensure that the information it receives from its subcontractors is accurate? These are troubling issues and prime contractors will have to develop risk management systems to assist with compliance. Specifically, prime contractors should establish a mechanism, through their subcontracts, for example, to notify subcontractors of the reporting requirements and what information must be provided. However, since the reporting obligation applies to the prime contractor and not subcontractors, it will not be sufficient to merely “flow down” the actual reporting responsibilities. Having subcontractors certify the information provided may also assist prime contractors in protecting themselves from the risks associated with the Rule. And primes must not forget about reporting their own information. Systems for collecting, reporting and updating this information must be established to remain compliant. Oh, the joy of dealing with the federal government…

Edward T. DeLisle & Maria L. Panichelli has been closely following the development of this Rule since its inception and has advised many contractors with regards to compliance. 

By: Robert E. Little, Jr.

Several months ago, I was asked to present testimony before House Subcommittee on Courts, Commercial and Administrative Law on the subject of individual sureties. In that testimony, I warned that legal precedent had had little effect on policing individual sureties. Using the example in the Tip Top Construction case, I noted that despite being told by the Court of Appeals for the Federal Circuit that certain assets were unacceptable, the individual surety, in that case, proffered them again two years later to the Architect of the Capitol.

Now for the rest of the story. In that same transaction, the Architect of the Capitol had previously and properly rejected a proffered asset in the form of an Irrevocable Letter of Credit (ILOC). An ILOC (referred to in the Federal Acquisition Regulation (FAR) as an “ILC”) is a permissible asset for individual sureties provided it meets FAR-specified criteria. FAR 28.203-2(b)(5).

To provide some context, I first ran across the ILOC a few years ago as an advisor to the U.S. Special Trade Representative in connection with bilateral negotiations with Japan. I represented the U.S. side in explaining our federal bonding requirements to the Japanese. To prepare, I looked at the Japanese bonding system and discovered that they use the ILOC (ILC) almost exclusively for their public and private construction. In the Japanese system, the ILOC is typically 15% of the amount of the contract. By contrast, a bond for a U.S. project would be 100% of the contract price for each performance bond and payment bond. Consequently, your first due diligence step as a contractor would be to assure that you have two ILOCs at the face value of the contract price, each separately referencing the payment and performance bonds. In my experience, individual sureties seem to forget this point and provide only one ILOC in the amount of 100% the contract price.

If you surmount that hurdle, you must determine the validity of the ILOC for federal bonding purposes. In trying to figure this out, you will likely encounter circumstances characterized by Churchill’s description of the Soviet’s intentions in 1939. The ILOC will seem to be a “… riddle, wrapped in a mystery, inside an enigma.” In that regard, the ILOC is required to be issued by a federally-insured financial institution with the government as beneficiary and placed in a government-owned escrow account in a federally-insured financial institution. FAR 28.203-1. That essentially means that the individual named as the surety will at least have appeared to provide 200% of the contract price—essentially in cash—to secure a contractor’s performance and payments to suppliers. (This, as you may have guessed, is the enigma part. If you can get passed this enigmatic circumstance, you are ready to tackle the wrap of mystery.)

Unwrapping the mystery requires starting with the header of the document that you might receive. The name of the ILOC-issuing entity will be something like 2nd Trustee Assurance, LLC. (There are seemingly an infinite number of possible names based on roots, such as, “first,” “1st,” “trust,” “bank,” banc,” “assurance,” “fidelity,” and “surety.”) Were you to do an internet search of the issuer, you might find that such business name does not otherwise exist, or, if it does, it is not identified with the same location or phone number on the submitted document. You must confirm the entity’s existence in the database of the active legal entities in the state where the entity is located, but you might not be able to.

If you can remove the wrap of mystery by determining the entity issuing the ILOC exists, you might find that the entity is neither a financial institution nor federally insured. If you cannot determine that the issuing entity is on the Federal Deposit Insurance Corporation’s list of FDIC-insured banks, there is a very good chance that the entity is neither a financial institution nor federally insured. (All federal and some state credit unions are federally insured by National Credit Union Administration. I doubt you’ll see a credit union, however. All entities will appear to be banks or savings and loans.) On occasion, you might see an issuing entity that holds itself out as providing financial advice and/or investment services, but those firms are not necessarily financial institutions. Such firm may tout Securities Investment Protection CorporationTM (SIPC) protection, but that is not federal insurance. If you cannot establish that the ILOC-issuing entity is a financial institution and federally insured, you cannot submit the bonds if you are a bidder or accept them if you are the federal agency.

But wait, there’s more.

You, as the bidder, contractor, or agency, might be misled by the fact that the ILOC (although not issued by a federally-insured financial institution) was placed in an escrow account in an FDIC-insured financial institution. And you, as the agency, might be further fooled into thinking that the agency-as-beneficiary gives you the ability to cash out any escrowed funds (assuming there are any).

The misleading occurs because, while the federal government would be named as the “beneficiary” of the ILOC, the government might not have been given any right title and interest in—much less ownership of—the escrow account holding the ILOC. The escrow account could belong to a third party, perhaps an attorney. If so, that would violate FAR 28.301-1(b)(1) which requires the ILOC be in the name of the Government agency and placed in an escrow account in the name of (i.e., owned by) the federal agency whereby the agency has the sole and unrestricted access to and right to present sight drafts on the ILOC to the issuing financial institution. You couldn’t access the “fund” unless the owner agreed, and the owner might not—if you can find the owner.

One final note on “unrestricted.” Unrestricted means what it says: unconditional, no restrictions, e.g., no requirement that the contractor be in default. The requirement is cash on presentment of a draft to the issuing financial institution. Accordingly, if the ILOC has language, such as, “the draft must be accompanied by a certified statement that an event of default has occurred and is continuing,” the right to payment of the fund is impermissibly restricted. This becomes critical where the issuer of a one-year ILOC gives appropriate notice that it will not be extended. In such case, the owner must have the right to convert the ILOC—or any similarly limited instrument—to cash in order to protect itself and/or subcontractors, suppliers, and materialmen. Such right obviously cannot be conditioned on the contractor’s being in default.

Normally, a riddle is like a puzzle with all of the pieces present (or at least knowable) but misarranged or obscured. With ILOCs, you might find that most of the pieces are missing or not what they seem. Good luck.

Robert E. Little, Jr. is of counsel to the firm and is the former Senior Associate Counsel for the Naval Facilities Engineering Command. He is a member of the firm’s Federal Contracting Practice Group.

By: Edward T. DeLisle & Maria L. Panichelli

We’ve warned you before: the False Claims Act should be taken seriously. In recent years, the government has been increasingly willing to wield the provisions of the FCA as weapons, zealously punishing offending federal contractors.

A recent opinion United States ex rel. Hooper v. Lockheed Martin Corp., No. 11-55278 (9th. Cir. 2012) reminds us once again that the government almost seems to be searching for ways expand the FCA’s application, finding new categories of conduct that are covered by, and punishable pursuant to, the Act.

In Hooper, the Court found that the practice known as “buying in” – i.e. deliberate underbidding of a job – was covered under the FCA. Hooper, a former employee of Lockheed Martin, brought a “qui tam” action against Lockheed, alleging that the company deliberately underbid at least one Air Force contract. The contract was cost-reimbursable with an award fee. As one might imagine, intentionally underbidding this type of contract could be quite lucrative. In apparent recognition of this fact, Hooper alleged that Lockheed knowingly underestimated its costs when submitting its bid.

In response, Lockheed moved to dismiss. The company argued that a false estimate could not create liability under the False Claims Act. The Court disagreed. After noting that both the First and Fourth Circuits had previously found the FCA applicable to similar “underbidding” situations, the Ninth Circuit stated as follows: “we conclude that false estimates, defined to include fraudulent underbidding in which the bid is not what the defendant actually intends to charge, can be a source of liability under the FCA, assuming that the other elements of an FCA claim are met.”

In the wake of this decision, all contractors would be wise to take every possible precaution to avoid underbidding – intentional or otherwise.

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.

By: Edward T. DeLisle & Maria L. Panichelli

The federal government’s much-anticipated new contractor registration system, “SAM” was launched on July 30, 2012. SAM (short for System for Award Management) replaces the former Central Contractor Registration (CCR) system, and will ultimately integrate eight federal procurement systems (CCR, FedReg, ORCA, EPLS, CFDA, eSRS, FBO, FPDS-NG, FSRS, PPIRS, WDOL), along with the Catalog of Federal Domestic Assistance, into a new, streamlined system.

Eventually, contractors will be able to use one set of log in information to access everything that was once spread out over eight sites. Once SAM reaches that stage, there should be more consistency in the information found on-line, as contractors will no longer have to keep track of, or update, information on several different websites – one update on SAM, and you are set. Contractors will be able to register, file certifications, and search for contracting opportunities, in one place.

Steps for registering your business on SAM can be found in the User Guide posted on the SAM website. A quick start guide is also available. If you have further questions, or experience any difficulties, you can contact the Federal Service Desk’s Answer Center. We do understand that contractors have been having difficulty accessing the system, which is not entirely surprising at this point. If we receive any information addressing these accessibility problems, or any other issues of import regarding SAM, we will pass along that information to you.

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.

By: Edward T. DeLisle & Maria L. Panichelli

Yesterday, the U.S. Small Business Administration (“SBA”) proposed certain size standard changes, which could expand the number of contractors eligible for “small” business status in relation to construction contracts under NAICS Code 23.

Specifically, the SBA issued a proposed rule that would increase the size standard associated with NAICS Code 237210 (which relates to contracts dealing with Land Subdivision) from seven million dollars in average annual receipts over three years to twenty-five million dollars. Similarly, the SBA proposed an increase in the size standard for NAICS Code 237990, relating to contracts involving Dredging and Surface Cleanup Activities, from twenty million dollars to thirty million dollars.

The SBA explained that, if adopted, these size standard increases will expand the small business share of total receipts in all industries within NAICS Sector 23, dealing with the construction industry, from about 49.7 percent to 50 percent. The SBA further estimated that these changes would result in an additional 400 contractors being deemed eligible for “small” business set aside contacts under NAIC Codes 237210 and 237990. The SBA stated that these changes would benefit three primary groups: (1) Businesses that are above the current size standards, who may gain small business status under the proposed rule, enabling them to participate in federal small business assistance programs; (2) Growing small businesses that are close to exceeding the current size standards, who will be able to retain their small business status under the proposed higher size standards, thereby enabling them to continue their participation in the programs; and (3) Federal agencies will have a larger pool of small businesses from which to draw for their small business procurement programs.

Under the proposed rule, the remaining NAICS codes relating to the construction industry would retain their current size standards.

The SBA is accepting comments on the proposed rule through September 17, 2012.

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.

By: Michael H. Payne

The recession (which really is not over, despite what the economists have to say), has led to greater emphasis by the federal government on assuring prompt payment to government contractors. In fact, on September 14, 2011, the Office of Management and Budget (OMB) issued Memorandum 11-32, “Accelerating Payments to Small Business for Goods and Services.” That Memorandum established the Executive Branch policy “that, to the full extent permitted by law, agencies shall make their payments to small business contractors as soon as practicable, with the goal of making payments within 15 days” of receipt of relevant documents. In addition, a recent Memorandum (M 12-16) issued by the Office of Management and Budget, dated July 11, 2012, addresses the subject of “Providing Prompt Payment to Small Business Subcontractors,” and recognizes that accelerating payments to small business contractors would help those businesses by improving cash flow.

This 15-day payment policy is of no particular benefit to prime construction contractors who, pursuant to FAR 32.904(d)(i), are to receive payments in 14 days after the designated billing office receives a proper payment request, based on contracting officer approval of the estimated amount and value of work or services performed. Nor does it directly benefit construction subcontractors because the clause at FAR 52.232-27(c) obligates the prime contractor to pay the subcontractor for satisfactory performance under its subcontract not later than 7 days from receipt of payment from the government. The obvious prerequisite, of course, is that in order for subcontractors to receive prompt payment, the prime contractors they work for must also receive prompt payment from the government. In recognition of that fact, the Memorandum states “In particular, agencies should, to the full extent permitted by law, temporarily accelerate payments to all prime contractors, in order to allow them to provide prompt payments to small business subcontractors.”

Federal agencies should be reminded that the spirit and intent of this OMB “transitional” policy, which is only to be effective for one year, is that small businesses should receive payments as soon as possible. In reality, the most significant impediment to prompt payment is not the period between the approval of a proper invoice and the release of funds; it is the considerable time that often passes between the time that a contractor performs extra work, or requests payment, and the issuance of a change order or the approval of an invoice. Prompt payment requirements have often been thwarted by contracting officers who fail to negotiate change orders in a timely manner, fail to agree to reasonable prices in an attempt to strike a better bargain for the government, or who nitpick the contractor’s documentation and unreasonably declare that it is not “proper.” In order for OMB’s goal of accelerating payments to subcontractors to be achieved, contracting officers must also expedite the administrative approval process that precedes the approval of a proper invoice.

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.

By: Edward T. DeLisle & Maria L. Panichelli

When it comes to problem-solving, we are often encouraged to “think outside the box.” The idea is to be creative; to look beyond the norm. Well, when it comes to certifying a claim, you’re probably better off simply doing what the FAR tells you to do. The Civilian Board of Contract Appeals made this point clear in URS Energy & Construction v. Dept. of Energy.

As most contractors are aware, all claims over $100,000 must be accompanied by a certification. FAR § 33.207(a). FAR §33.207(c) sets forth the exact language that such a certification must contain. That language is as follows:

“I certify that the claim is made in good faith; that the supporting data are accurate and complete to the best of my knowledge and belief; that the amount requested accurately reflects the contract adjustment for which the Contractor believes the Government is liable; and that I am duly authorized to certify on behalf of the Contractor.”

In URS Energy & Construction, the contractor certified its claim to the Department of Energy using language that differed from the FAR:

“I certify that this invoice is correct and in accordance with the terms of the contract and that the costs incurred herein have been incurred, represent the payments made by the Contractor except as otherwise authorized in the payments provision of the contract, and properly reflect the work performed.”

The government asked the CBCA to dismiss the contractor’s claim on the basis that the certification used was defective, thereby depriving the CBCA of subject matter jurisdiction over the claim.

In ruling on the motion, the CBCA noted that “technical” defects in a certification can be cured; however, “[i]f the certification is made with intentional, reckless or negligent disregard for the applicable regulation, it is not correctable.” The CBCA found that the contractor’s claim was made with “intentional, reckless or negligent disregard” because the contractor wholly failed to include a certification that “the claim is made in good faith,” or that “the supporting data [was] accurate and complete to the best of [the contractor’s] knowledge and belief.” Moreover, the certification failed to include a statement that the person signing the certification was duly authorized to certify the claim on behalf of the contractor. Accordingly, the CBCA dismissed the case.

The lesson: certifying a claim is not the time to be creative. The language in FAR §33.207(c) must be reviewed carefully and, unless there is very good reason to diverge from what is identified therein, you are better off simply incorporating it verbatim into your claim. If you cannot attest to those issues required by the FAR, you should think twice about filing a claim at all, for submitting a defective certification, which is true, is far better than submitting a false certification. That is something you should avoid at all costs.

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.

By: Edward T. DeLisle & Maria L. Panichelli

Last year, after over a decade of discussion, the Small Business Administration (SBA) finally implemented a federal contracting program specifically designed to assist small businesses owned by women. This program authorizes contracting officers to set aside federal contracts for eligible WOSBs (woman-owned small businesses) and EDWOSBs (economically disadvantaged women-owned small businesses). As we previously discussed, this program became officially effective on February 4, 2011 and was scheduled for gradual implementation over a period of months. It was expected to assist federal agencies in achieving the previously existing statutory procurement goal of awarding five percent (5%) of federal contracting dollars to WOSBs.

A year after going into affect, it is clear that the program is off to a slow start. Only about 10,000 WOSBs have been self-certified via the WOSB Program Repository, though there are certainly many more businesses out there that meet the eligibility criteria. If you are one of those businesses, you could be missing out on huge opportunities. As such, it is important for you to determine whether you meet the eligibility criteria for participation in the program.

What are those criteria, you ask? As a threshold matter, the business must be considered “small” in its primary industry in accordance with SBA’s size standards for that industry. In addition, to be considered an eligible WOSB or EDWOSB, a firm must be at least 51% owned and controlled by one or more women, or economically disadvantaged women. 13 C.F.R. 127.200. “Ownership” must be direct; it cannot be through an affiliate or association with others. 13 C.F.R. 127.201. The SBA defines “control” as a situation where the business owner has long-term decision-making and the day-to-day, full-time management and administration responsibilities for business operations. 13 C.F.R. 127.202.

In order to avoid abuse of the program by companies not truly owned and controlled by women, the SBA has enacted additional safeguards. Specifically, the woman owners must have managerial experience of the extent and complexity needed to run the company. The woman manager need not have the technical expertise or possess a required license (if applicable), if she can demonstrate that she has ultimate managerial and supervisory control over those who possess the required licenses or technical expertise. However, the SBA has stated that if a man possesses the required license and has an equity interest in the firm, he may be found to control the concern. 13 C.F.R. 127.202.

For those businesses that meet the requirements above, the WOSB and EDWOSB programs offer huge advantages. Five percent of all federal spending is the procurement goal for WOSB/EDWOSBs, and there is also a five percent subcontracting goal to WOSBs. With only about 10,000 businesses out there registered to compete, your chances of securing a government contract are vastly improved if you and eligible and participate in the program. In addition, there is no term limit to the WOSB and EDWOSB programs, and mentor-protégé programs are available.

In short, if you meet the program requirements, you should get registered for participation in the program as soon as possible. In the alternative, if you are thinking of starting a business that might be eligible, don’t wait! The SBA has not set forth a minimum amount of time the firm must be in business; therefore, a woman may establish a business, meet the requirements, self-certify, and win a government contract under this program in a short period of time.

Once you have determined that your business is eligible, registration in the program is rather easy. First, in preparation for registration/certification, businesses should become familiar with the WOSB Program’s Compliance Guide. The next step is to register the business in the Central Contracting Registry (CCR) or in the System for Award Management (SAM) (the government’s new registration system previously discussed here), once it is implemented. Then, log onto the SBA’s General Login System (GLS), and access the WOSB Program repository. Upload/categorize all required documents (a complete list of required documents can be found in the WOSB Program’s Compliance Guide). Then, complete the applicable certification form(s) available on the SBA website and register the business’s status as either a WOSB or EDWOSB, through either the Online Representations and Certifications Application (ORCA), or SAM. Lastly, get out there and start bidding!

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.