Morrison Foerster’s Government Contracts Insights provides our in-depth analysis of developments and trends impacting government contracting. Through Insights, our attorneys offer a real-time assessment of the statutory, regulatory, legal, and business-related developments and trends that are shaping the industry. We also examine a full array of non-U.S. public procurement issues, mindful that our clients compete in a global marketplace.Morrison Foerster’s nationally recognized Government Contracts and Public Procurement practice represents the world’s leading companies in the aerospace and defense, intelligence, cybersecurity, information technology, financial and professional services, education, healthcare, infrastructure, and logistics support sectors. We are enlisted to address our clients’ most complex and important legal issues. Our work includes contract and subcontract negotiation and other transactional matters, business and regulatory compliance counseling, internal investigations, bid protests, and a wide array of enforcement and litigation matters. Our clients range from Fortune 50 companies to small and medium-sized companies just entering the public sector. We advise both U.S. and non-U.S. companies involved in municipal, state, federal, and non-U.S. procurement matters.<h2>ABOUT MORRISON FOERSTER</h2>Morrison Foerster is a leading global law firm that transforms complexity into advantage for its clients. Our clients include some of the largest financial institutions, banks, consulting and accounting firms, and Fortune 100, technology, and life sciences companies. Highlighting the firm’s commitment to client service, leadership in market-changing deals and impact litigation, and values-based culture, Morrison Foerster has been repeatedly recognized as one of the top 10 firms on The American Lawyer’s A-List. Year after year, the firm receives significant recognition from Chambers and The Legal 500 across their various guides, including Global, USA, Asia‑Pacific, Europe, UK, Latin America, and FinTech Legal. Our lawyers passionately care about delivering legal excellence while living our values. Morrison Foerster has a long-standing commitment to creating a culture that respects and celebrates differences, while providing an inclusive environment. The firm has achieved Mansfield Certification Plus since 2018 as a result of successfully reaching at least 30 percent women, communities of color, and LGBTQ+ lawyer representation in a notable number of current leadership roles and committees. The firm also has a long history of commitment to the community and society through providing pro bono legal services, including litigating for civil rights and civil liberties, improving public education and fostering the wellbeing of children, advocating for veterans, promoting international human rights, enforcing the right to asylum, and safeguarding the environment.

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Tina is Co-chair of Morrison Foerster’s Government Contracts & Public Procurement practice. She represents a wide variety of government contractors including information technology, defense, biotechnology, and pharmaceutical companies, with a focus on general contract counseling and compliance, particularly concerning intellectual property, and cybersecurity matters and federal grant funding.Tina counsels contractors on compliance with federal, state and local acquisition and ethics regulations and with the evolving myriad of requirements pertaining to data security and cybersecurity. She has been involved with numerous internal investigations and compliance reviews, and with mandatory and voluntary disclosures to agencies, and litigation of False Claims Act matters.Tina routinely advises clients concerning:<ul><li>Prime-subcontractor relationships</li><li>Sources of supply and country of origin requirements</li><li>Price reductions and price reporting issues</li><li>Organizational conflicts of interest</li><li>Safeguarding of intellectual property and other proprietary interests</li><li>Licensing and data rights issues</li><li>Handling of classified materials and controlled unclassified information</li><li>Agency suspension and debarment proceedings</li></ul>She also assists clients with due diligence and other activities related to the acquisition of government contracting concerns, and with the drafting and negotiation of teaming agreements, subcontracts, licensing agreements, and cooperative research and development agreements. She also assists clients applying for federal grants (including SBIR and STTR agreements), and those who seek to obtain other transactional authority agreements, as well as those competing for state and local government work.Tina’s litigation experience includes government contracts claims litigation in federal courts and before boards of contract appeals, bid protests before the Government Accountability Office and the Court of Federal Claims, and complex disputes in federal courts, including civil fraud and False Claims Act litigation and reverse Freedom of Information Act litigation.Prior to joining Morrison Foerster, Tina worked at another large national firm and as a trial attorney in the Office of the General Counsel of the Navy, Navy Litigation Office.<h4>Representative Experience</h4><ul><li>Negotiation of largest CHIPS Act federal funding agreement between multinational semiconductor corporation and U.S. Department of Commerce.</li><li>Negotiated prime contract and major subcontracts related to the Department of Energy’s next generation supercomputer program, including extensive IP rights negotiations and negotiation of associated patent rights waivers.</li><li>Negotiated series of other transaction authority agreements with DARPA and associated subcontracts with more than a dozen research universities on behalf of a firm biotech client, including complex IP rights allocations and material transfer agreements.</li><li>Assist clients with FedRAMP authorization process and with development of license agreements for software products sold to federal, state and local government agencies.</li><li>Cyber incident response counseling to some of the largest companies and organizations impacted by security incidents.</li><li>Advises clients on Bayh-Dole reporting of inventions and IP strategies for contracts and grants.</li><li>Conducts due diligence for major government contract mergers and acquisitions.</li></ul>

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Tina is co-chair of Morrison Foerster’s Government Contracts & Public Procurement practice. She counsels a wide variety of government contractors on compliance with federal acquisition and ethics regulations. She drafts and negotiates contracts on their behalf and has been involved with numerous internal investigations and compliance reviews, and with bid protest, contract claims, and False Claims Act litigation. She also advises on M&A transactions involving government contractors.

Tina D. Reynolds

Jim Tucker is of counsel in Morrison Foerster’s Government Contracts and Public Procurement Practice Group and is based in the firm’s Washington, D.C. office.Jim’s practice runs the gamut of litigation and counseling in federal procurement matters, with an emphasis on bid protests, Cost Accounting Standards disputes, and small business matters. He has represented both protesters and awardees in scores of protests before the Government Accountability Office, the Court of Federal Claims, and procuring agencies, in acquisitions ranging from small business procurements to multibillion-dollar contracts of global significance. His representative protest matters span the aerospace sector, the Intelligence Community, base operations and logistics, healthcare, nuclear and environmental work, and information technology and software acquisitions. His protests have included both classified and unclassified programs. In addition to prevailing in published decisions, Jim has also secured favorable corrective action on behalf of clients in a wide variety of protests that were resolved without a published decision.Jim’s work also focuses on disputes over cost allowability and compliance with the Cost Accounting Standards, and he has appeared before the Armed Services and Civilian Boards of Contract Appeals, in size and status protests before Small Business Administration (SBA) area offices, and appeals before the SBA Office of Hearings and Appeals. Jim regularly counsels clients on contract interpretation, organizational conflicts of interest, and small business compliance.Jim graduated with high honors from the George Washington University Law School, where he focused his studies on federal procurement law, was a member of the Law Review, and interned with the General Services Administration’s suspension and debarment office. Jim also holds a degree in theology magna cum laude from the Pontifical Gregorian University in Rome and a bachelor’s degree in classical languages and literature summa cum laude from the University of Kentucky, where he graduated Phi Beta Kappa.

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Of Counsel

Jim maintains an active practice in bid protests before the Government Accountability Office and contracting agencies and counsels clients in contract disputes and compliance obligations.

Jim Tucker is of counsel in Morrison Foerster’s Government Contracts and Public Procurement Practice Group and is based in the firm’s Washington, D.C. office. Jim’s practice runs the gamut of litigation and counseling in federal procurement matters, with an emphasis on bid protests, Cost Accounting Standards disputes, and small business matters.

James Tucker

<div style="margin-bottom: 15px;" class="videoWrapper"><iframe class="sticky-video" title="Meet Alex Ward, Government Contracts Practice Co-Chair" src="https://www.youtube-nocookie.com/embed/TkliwdSlTaQ?rel=0" frameborder="0" allow="autoplay; encrypted-media" allowfullscreen="1" title="iframe"></iframe></div>J. Alex Ward is co-chair of Morrison Foerster’s Government Contracts and Public Procurement group. His practice covers a full range of government contracts matters, including investigations, bid protests, claims, general litigation, corporate transactions, and counseling. Alex strives in all matters is to provide his clients the highest level of efficient and effective representation.Alex represents contractors in internal and external investigations, disclosures to the government, and qui tam litigation, with great success in reducing or eliminating his clients’ exposure through active engagement with the government. His work in this area includes obtaining numerous declinations and dismissals of False Claims Act cases in their earliest stages, sparing his clients the cost, risk, and exposure of litigation.He has also served as lead counsel in dozens of bid protests involving military and civilian agency procurements of a wide range of products and services, including all manner of pre- and post-award protests in the GAO, the U.S. Court of Federal Claims, and state tribunals, as well as appeals to the U.S. Court of Appeals for the Federal Circuit and size protest appeals before the SBA’s Office of Hearings and Appeals.Alex handles all aspects of the claims process, from the initial assessment and drafting of requests for equitable adjustment through litigation in the Boards of Contract Appeals and the Court of Federal Claims. Alex’s practice also covers the full gamut of other controversies confronting government contractors, including prime-sub, teaming partner, employer-employee, competitor, and indemnification disputes. His litigation work also includes a wide variety of pro bono engagements, in which he has represented both individual and institutional clients in matters ranging from immigration and criminal defense to sustainable procurement and protection of the environment.Prior to joining the firm, Alex served in the U.S. Army as a commissioned officer and an Assistant to the General Counsel of the Army responsible for civil works and international matters, and as a clerk for judges on the U.S. Courts of Appeals for the Armed Forces and the D.C. Circuit. He is a member of the Boards of the Morrison & Foerster Foundation and the Chesapeake Bay Foundation and of Law360’s Government Contracts Editorial Board.

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Alex is co-chair of Morrison Foerster’s Government Contracts and Public Procurement practice. His practice covers a full range of government contracts matters, including bid protests, claims, investigations, corporate transactions, and counseling.

J. Alex Ward

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Morrison Foerster’s Government Contracts Insights blog provides an in-depth analysis of news, developments, and trends impacting government contracting and procurement. Through Insights, attorneys from our nationally recognized Government Contracts and Public Procurement practice will offer a real-time assessment of the statutory, regulatory, legal, and business-related developments that are shaping the industry. This blog will also examine a full array of U.S. and non-U.S. public procurement issues, mindful that our clients compete in a global marketplace.Read about our <a href="http://govcon.mofo.com/editors/">Authors</a>.Never miss a post. Subscribe to get real-time updates.

Brad is a partner in Morrison Foerster’s Litigation Department, Managing Partner of the Austin office, and Chair of the firm’s Israel practice. He is the former Co-Chair of the firm’s Global Litigation Practice and the Government Contracts + Public Procurement Practice.

Bradley Wine

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James A. Tucker

Less Oversight and Undefined Penalties: The NDAA’s Proposed Protest Reforms

The Tortured Regulations Department: SBA’s New Rule and Its Effect on Investments

Bid Protest Spotlight: Standing, Relationships, Responsibility

House’s Passage of the SAMOSA Act Signals Policy Shift Towards Government-Wide Enterprise Software Licensing

New DFARS Regulation on Small Business Affiliate Past Performance

In a win for remote contractors, the U.S. Department of Defense (DoD) expressed its continued preference for remote work under its contracts. In a <a target="_blank" href="https://www.acq.osd.mil/dpap/policy/policyvault/USA000809-22-DPC.pdf">memorandum</a> issued earlier this month, the Office of the Under Secretary of Defense (OUSD) asked contracting officers (COs) not to specify “unnecessarily restrictive contract places of performance” for contractors. Specifically, the memorandum directs COs to allow “place of performance flexibility,” including telework and remote work options, to the “maximum extent practicable.”Notably, OUSD grounds its preference for telework and remote work in the “unexpected benefits” that the DoD experienced after expanding remote work flexibilities for government employees and contractor personnel in March 2020 in response to the COVID-19 pandemic. These benefits include increased efficiencies and effectiveness in mission accomplishment. The DoD noted not only positive gains in mission accomplishment, but also improved access to “new candidate pools, especially in traditionally hard to recruit areas.”  Teleworking, the memo noted, also “afforded the workforce a greater quality of life.”  Therefore, in the perennial competition for talent, the DoD now looks to remote work flexibility “to attract and retain those with the necessary skills and abilities needed to accomplish current and future missions.”A necessary caveat is that off-site contract performance must proceed “without mission degradation.” Where agency needs, including security considerations, necessitate on-site contract performance, COs are authorized to require it.The memorandum directs COs to follow Federal Acquisition Regulation (FAR) guidance in drafting solicitation requirements or evaluating offers that involve telework flexibilities. Under FAR 7.108, agencies may not issue solicitations that prohibit “telecommuting” unless on-site performance is necessary to meet agency needs. Also, COs may not evaluate offers unfavorably because they include telecommuting options, unless the solicitation included the prohibition and documents the basis for necessary on-site performance. Finally, COs must also remain cognizant of any occupancy limits issued by the local installation commander before requiring the return of contractors to federal places of performance.In sum, during the pandemic-driven push for maximum telework capacity, the DoD took a liking to off-site contract performance. Remote work has not only increased mission efficiency and effectiveness, but it has also brought new reservoirs of contractor talent within the DoD’s reach. Now, as many federal civilian workers begin to return to their offices, the DoD is clearly in no rush to bring contractors back on base. Certainly, telework keeps lunch counter lines short.

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Markus Speidel is an associate in Morrison & Foerster’s Government Contracts & Public Procurement group, in Washington, D.C. Markus assists clients across a wide range of contract matters, including contract claims and disputes, bid protests, compliance counseling, and investigations.

Markus Gerhard Speidel

Markus Speidel

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DoD Calls for Continued Flexibility in Contract Place of Performance

GAO Finds CIO-SP4 Solicitation Is Unduly Restrictive of Competition

In a win for remote contractors, the U.S. Department of Defense (DoD) expressed its continued preference for remote work under its contracts. In a memorandum is

DoD Calls for Continued Flexibility in Contract Place of Performance

This month's bid protest spotlight focuses on one recent U.S. Court of Federal Claims decision and two U.S. Government Accountability Office decisions. While all three protests were unsuccessful, each serves as a different helpful reminder for contractors. The Court of Federal Claims decision is a reminder for those submitting proposals, while the two GAO decisions serve as reminders for unsuccessful offerors hoping to protest terms of a solicitation and award decisions.The Bionetics Corp.In The Bionetics Corp. v. U.S., the Court of Federal Claims denied Bionetics' protest that the U.S. Air Force impermissibly excluded Bionetics from competing for a multimillion-dollar contract award due to an error in Bionetics' price proposal.[1]The request for proposals, or RFP, required employee wages to comply with the collective bargaining agreement and the McNamara-O'Hara Service Contract Act.The SCA requires contractors to pay service employees prevailing wages set by the U.S. Department of Labor or a collective bargaining agreement. For all proposed labor categories included in the collective bargaining agreement, the RFP required offerors to propose rates that, at a minimum, met the collective bargaining agreement requirements and were escalated throughout all years.The RFP also warned that if an offeror did not entirely fill out all required portions of the pricing proposal. as required in Section L of the RFP, the Air Force could reject the proposal and eliminate the offeror from competition.Bionetics, the incumbent, submitted a proposal indicating it would comply with the collective bargaining agreements in effect at both performance locations. However, although it included proposed wages for all required labor categories, for two of the collective bargaining agreement labor categories, Bionetics price proposal mistakenly proposed wages lower than the collective bargaining agreement rates.Despite being able to evaluate Bionetics' total evaluated price and determine it was both reasonable and balanced, the Air Force found Bionetics' price proposal incomplete due to the mistakes. Rather than conduct discussions or provide Bionetics with the opportunity to clarify the errors, the Air Force rejected Bionetics' proposal.Bionetics tried arguing that, notwithstanding the errors, its price proposal was indeed complete because it proposed wages for all labor categories.The Court of Federal Claims rejected this argument, however, pointing out that the RFP also explicitly required that pricing submissions comply with Section L requirements to be considered complete. Because two of the wages were lower than the collective bargaining agreement rates in violation of the Section L requirements, the submission was therefore incomplete,The Court of Federal Claims also rejected Bionetics' claims that the Air Force should have either sought clarification from Bionetics, or assumed that Bionetics intended to propose wages at the minimum rate, because Bionetics' proposal stated it intended to comply with the SCA and the collective bargaining agreement.Clarifications are not to be used to correct material errors, and compliance with the collective bargaining agreement wages, according to the court, was a material term of the RFP.Furthermore, the RFP stated that the Air Force reserved its discretion to conduct discussions as well as consider the so-called correction potential of proposals. Therefore, it was entirely within the Air Force's discretion not to seek clarifications or conduct discussions with Bionetics regarding the errors in the two wages.Moreover, it is the offerors' burden to submit compliant and well-written proposals. Thus, the Air Force need not have assumed Bionetics would propose wages at the minimum rate when its proposal clearly did not.TakeawaysBionetics Corporation serves as the latest reminder — in a long list of reminders — of how costly clerical errors in proposals can be for contractors. It is incumbent upon offerors to quadruple check proposals for compliance with solicitation instructions to ensure that the business development costs they incurred putting forth a proposal are not all for naught.MartinFederal Consulting LLCIn Matter of: MartinFederal Consulting LLC, the GAO dismissed an incumbent's protest of the U.S. Department of the Army's award of a small business set-aside contract to Altus Engineering LLC for failure to state a valid basis for protest. [2]MartinFederal, the protester, raised three protest grounds, two of which are discussed here. These two grounds involve similar themes regarding whether the awardee had the adequate amount of experience to be considered for award.MartinFederal first argued that, unlike itself, the awardee had no experience providing lubricant analysis services within the past five years, and therefore had to rely on a subcontractor to meet the solicitation's past performance requirements.The solicitation, however, explicitly allowed the offeror to "demonstrate clearly that it can self-perform, or perform through its teaming or subcontractor arrangements" The GAO found that this language permitted offerors to rely on proposed subcontractors' experience to meet the past performance requirements.Thus, even if the awardee relied entirely on a proposed subcontractor's past performance, it would have been consistent with the solicitation's requirements.MartinFederal alternatively argued that, because the awardee allegedly did not have enough experience, its proposal indicated it would impermissibly rely on its subcontractor, MRG Laboratories, to perform more than 50% of the work.MartinFederal argued that this would violate Federal Acquisition Regulation 52.219-14, which provides that, for small business set-aside contracts for services, the small business prime contractor will not pay similarly situated subcontractors more than 50% of what it is paid by the government.A similarly situated entity is one that has the same small business program status as that which qualified the prime contractor for the contract award, and is small for the North American Industry Classification System, or NAICS, code assigned to the prime contract.In other words, a small business prime contractor may subcontract more than 50% of a small business set-aside contract to an entity that is also small for the NAICS code assigned to the contract.Normally, the GAO views protests alleging noncompliance with FAR 52.219-14 as matters of responsibility or contract performance, both of which the GAO will not review. However, if a protester can show that a proposal, on its face, indicated an offeror has not agreed to comply with the limitation on subcontracting, then the GAO will review whether the agency should have found the offeror unacceptable.Here the protester attempted to meet this burden by arguing that the awardee's alleged lack of experience, coupled with its proposed use of MRG Laboratories as its subcontractor, was facially noncompliant with FAR 52.219-14. The protester, however, made a critical error in failing to appreciate the similarly situated entity language of the provision.The Army pointed out, and the GAO agreed, that because MRG Laboratories represented in its System for Award Management profile that it was a small business for the NAICS code assigned to the solicitation, it was a similarly situated entity.Therefore, any proposed use of MRG Laboratories could never violate FAR 52.219-24. Thus, the GAO dismissed similarly dismissed this protest ground.TakeawaysAn incumbent losing a follow-on contract to an entity it perceives to be less experienced is often a hard pill to swallow.Before raising protest grounds attacking an awardee's lack in experience, however, disappointed offerors must carefully review the terms of the solicitation to determine whether the awardee may have permissibly relied on its proposed subcontractors' experience.Furthermore, when alleging protest grounds regarding the limitations on subcontracting, it is important to double-check the System for Award Management profile to verify that a suspected proposed subcontractor is not a similarly situated entity.Logmet LLCMatter of: Logmet LLC was a pre-award protest of an Air Force RFP for flight operations training and F-15 aircraft maintenance to support the Republic of Singapore Air Force at Mountain Home Air Force Base in Idaho.[3] The Air Force provides training support to the Singaporean Air Force through a foreign military sales program known as Peace Carvin.This RFP was for the fourth iteration of the contract for aircraft maintenance and operation support, the first being awarded in 2008.Despite the RFP being for the fourth iteration of the contract, Logmett claimed that the Air Force had improperly bundled maintenance and operations-training support requirements in the RFP, in violation of the Small Business Act.The Small Business Act provides that agencies must, to the extent practicable, "avoid unnecessary and unjustified bundling of contract requirements that precludes small business participation in procurements as prime contractors."[4]The act defines bundling as "consolidating two or more procurement requirements for goods or services previously provided or performed under separate smaller contracts into a solicitation of offers for a single contract that is likely to be unsuitable for award to a small business concern."[5]The act further defines "separate smaller contract" as "a contract that has been performed by one or more small business concerns or was suitable for award to one or more small business concerns."[6]Undercutting Logmet's argument, however, is the Air Force's inclusion of both operations training and maintenance services under the same solicitation from the beginning of the Peace Carvin program. The GAO held that the requirements, therefore, did not meet the definition of bundling under the act because they were not previously performed under separate, smaller contracts.The protester also raised several challenges to the RFP's terms, claiming they were unduly restrictive. Specifically, Logmet argued that requiring instructor personnel to have a certain level of experience with F-15 fighter jets would essentially require offerors to propose Air Force, Air Force Reserve and Air National Guard personnel for these positions.Somewhat dodging the allegation that only former government officials could meet the qualification requirements, the GAO sided with the Air Force's contention that the requirements were reasonably necessary to meet its needs, because it was allegedly unlikely that personnel's experience on other platforms would be sufficient for them to operate and train others to operate the F-15 aircraft.Similarly, Logmet also challenged the RFP's requirement that offerors must establish that they contacted these same proposed personnel two months prior to proposal submission.The GAO, however, pointed out that the RFP required proposal submission less than two months after the RFP was issued. Therefore, claims that the two-month turnaround requirement was too tight rang hollow.Moreover, the GAO agreed with the Air Force's explanation that the two‑month contact requirement was reasonable to minimize risk that the awardee would be unable to fill the hard-to-fill positions.TakeawaysLogmet serves as a reminder to potential small business offerors that violations of the Small Business Act's bundling prohibitions might be a pre-award protest ground where an agency impermissibly bundles requirements. While the argument was ultimately unsuccessful in the instant protest, small businesses should nonetheless keep this argument in mind when reviewing solicitations for potential issues to raise in a pre-award protest.[1] Bionetics Corp. v. U.S. , --- Fed. Cl. ---, 2022 WL 1537176 (2022).[2] Matter of: MartinFederal Consulting LLC , B-420626, May 11, 2022.[3] Matter of: Logmet LLC , B-420507, May 6, 2022.[4] 15 U.S.C. § 631(j)(3[5] 15 U.S.C. § 632(o)(2).[6] Id. at § 632(o)(3).

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Ali Young is an associate in the Government Contracts practice in Morrison Foerster’s Washington, D.C. office.

Alissandra Young McCann

Ali Young is an associate in the Government Contracts practice in Morrison Foerster’s Washington, D.C. office.

Alissandra McCann

May 2022 Bid Protest Roundup: Errors, Subcontractors, Bundling

This month's bid protest spotlight focuses on one recent U.S. Court of Federal Claims decision and two U.S. Government Accountability Office decisions. While al

May 2022 Bid Protest Roundup:  Errors, Subcontractors, Bundling

Earlier this week, the U.S. Small Business Administration (SBA) issued a <a target="_blank" href="https://www.govinfo.gov/content/pkg/FR-2022-06-06/pdf/2022-12131.pdf">Final Rule</a> adopting changes to how a concern calculates its number of employees for eligibility purposes in all of SBA’s programs, as well as how a concern calculates average annual receipts for SBA’s Business Loan, Disaster Loan, Small Business Investment Company (SBIC), and Surety Bond Guarantee (SBG) Programs.Previously, SBA’s regulations required concerns, when calculating their size in terms of employees, to average the number of employees in each of their pay periods for the preceding completed 12 calendar months. Effective January 1, 2022, the 2021 National Defense Authorization Act (NDAA) changed the calculation period to an average over the previous 24 calendar months, but only for employee size standards associated with manufacturing North American Industry Classification System (NAICS) codes. SBA’s Final Rule, however, provides that the 24-month period shall be used for all employee-based size standards, not just those relating to manufacturing NAICS codes. This change will be effective July 6, 2022, with no transition period to allow concerns to choose between 12 or 24 months to ease into the new calculation. In other words, starting next month, concerns must calculate employee-based size using the average number of employees over the preceding 24 months. SBA explained that, given the drop in employees during COVID-19 pandemic, most concerns would see lower employee counts over the previous 24 months than the previous 12 months, anyway, and therefore, no transition period is necessary.The Final Rule also changes the period for calculating average annual receipts for purposes of determining size associated with receipts-based size standards for eligibility in the Business Loan, Disaster Loan, Small Business Investment Company (SBIC), and SBG Programs. Currently, the Business Loan, Disaster Loan, and SBIC Programs require concerns to use an average over the previous three fiscal years, whereas, as of January 2022, the SBG Program required concerns to use an average over the previous five fiscal years. The Final Rule, however, provides that concerns may now use either a three or a five-year average for these programs. Many may recall that when SBA implemented the change to use a five-year average instead of three for eligibility purposes in the Government Contracting Program in January 2020, it allowed concerns to choose between three or five years until January 2022, at which time all concerns were required to use only the five-year average. SBA is not providing a similar transition for the Business Loan, Disaster Loan, SBIC, and SBG Programs, though. Instead, SBA intends to make the choice to use three or five years a permanent option for concerns in these programs. Thus, a difference in how to calculate size for receipts-based size standards between SBA’s Government Contracts Program and its other programs will remain.Companies participating in any of these programs should be aware of this change, which will be effective in just a few short weeks, to ensure they are calculating their size correctly.

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ARKA

Arlington Capital

Battle Investment Group

Behrman Capital

Cadmus

Chainalysis

CollabraLink

Definitive Logic

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Enlightenment Capital

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Griffon Corporation

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Damien is a partner in the firm’s Government Contracts & Public Procurement practice. He represents clients in all facets of government contracts transactions, as well as regulatory counseling, subcon

Damien Specht

Damien C. Specht

Jim Tucker is of counsel in Morrison & Foerster’s Government Contracts and Public Procurement Practice Group and is based in the firm’s Washington, D.C. office.
Jim’s practice runs the gamut of litiga

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SBA Finalizes Changes in How to Calculate Size for Various Programs

SBA Issues Final Rule on Appeals Process for PPP Loan Review Decisions

Earlier this week, the U.S. Small Business Administration (SBA) issued a Final Rule adopting changes to how a concern calculates its number of employees for eli

SBA Finalizes Changes in How to Calculate Size for Various Programs

Due diligence is an important preliminary step before one company acquires another or an investor puts millions behind an existing firm. When a target company performs government contracts or subcontracts, it is critical that experienced government contracts attorneys be part of the due diligence team—ideally for both the buyer and seller, but certainly for the buyer. A recent <a href="https://www.justice.gov/usao-ct/pr/connecticut-companies-pay-52-million-resolve-allegations-false-claims-act-violations">Justice Department press release</a> announcing a $5.2 million settlement illustrates the potential consequences of not heeding that advice. Based on the Justice Department’s likely one-sided recitation of the alleged facts, a large business acquired a small business in 2011. The small business of concern manufactured aerospace engine components for commercial and military use.  According to the press release, the 2011 acquisition created affiliation between the small manufacturer and the companies owned and controlled by its new corporate family and the individuals who owned those companies. As a result of this new affiliation, the Justice Department alleged that the manufacturer lost its small business status under the governing Small Business Administration regulations and should have recertified itself as other than small in 2011. Instead, in what may well have been an oversight, the company never updated its size status and continued bidding on (and winning) new small business set-aside contracts for the next five years, apparently without anyone in the company or its new corporate family sounding the alarm bells.   The press release states that this problem finally came to light eight years too late in 2019, when it was uncovered during due diligence in connection with a contemplated new transaction to sell the company to a third party. This unfortunate timing for sellers is fairly common and all the more reason for companies in a sale process to do self-diligence and for buyers to make sure they have sophisticated regulatory counsel. The company then properly disclosed the issue to the government and eventually entered negotiations to avoid allegations that the company violated the False Claims Act by fraudulently obtaining small business set‑aside government contracts. The settlement cost the company $5,227,355.28. There are a number of morals to this story:<ol><li>Experienced government contracts attorneys should participate in due diligence when one company contemplates purchasing a company that does business with the government. Government contractors (including companies whose primary business may not be directly with the government) are subject to a host of complicated and often poorly understood compliance obligations. Buyers need to understand how well sellers have complied with those obligations, and sellers are well-advised to identify and rectify potential problems before putting themselves on the market. It is very difficult to do either task well without specialized government contracts attorneys.  </li><li>Potential sellers should take a similar lesson, as there are few worse developments for a company than discovering a significant noncompliance in the middle of a sale process. Instead, if this issue had been discovered in advance of that process, it could have been resolved without putting the sale in jeopardy. </li><li>After a deal closes, there may be a number of post-closing activities that one or both parties must undertake to remain (or become) compliant with contractual and regulatory obligations. These may include notice requirements and changes in status representations for small business programs (as in the press release), updating SAM.gov profiles, providing accurate disclosures under pending proposals, and rectifying problems discovered in due diligence. Government contracts attorneys can help ensure full compliance with these requirements. </li><li>Whether or not specialized counsel was involved in a transaction, companies can still benefit from post-closing guidance around the sort of work the combined enterprise can bid. This includes small business status considerations, but also the rules for relying on an affiliate’s capabilities or past performance, or in harmonizing (or instituting) the companies’ procurement-related policies.  </li></ol>

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Five Million Reasons for Government Contracts Lawyers to Assist with the Acquisition of Companies That Perform Government Contracts

MoForecast Podcast: Predictions on the False Claims Act (FCA)

Due diligence is an important preliminary step before one company acquires another or an investor puts millions behind an existing firm. When a target company p

Five Million Reasons for Government Contracts Lawyers to Assist with the Acquisition of Companies That Perform Government Contracts

In the seminal decision Blue & Gold Fleet, L.P. v. United States, the U.S. Court of Appeals for the Federal Circuit held that “a party who has the opportunity to object to the terms of a government solicitation containing a patent error and fails to do so prior to the close of the bidding process waives its ability to raise the same objection subsequently in a bid protest action in the Court of Federal Claims.” 492 F.3d 1308, 1313 (Fed. Cir. 2007). The Blue & Gold waiver doctrine prevents an offeror from submitting a proposal against a plainly defective solicitation, waiting quietly while the government and other offerors rely upon the defective language to their detriment, and subsequently filing a protest of that defect—generally after the government awards the contract to a different offeror. Under Blue & Gold, if a party disagrees with the terms of a solicitation, it ordinarily must protest those terms before the date set for receipt of proposals or forever hold its peace. But what amount of “objection” to a solicitation term prior to proposal submission is sufficient to preserve one’s ability to challenge that same term at a later date?  We <a href="https://govcon.mofo.com/topics/harmonia-holdings-denied-pre-award-protest-rises-from-the-dead-five-months-later-as-a-post-award-protest.html" target="_blank">recently discussed</a> the U.S. Court of Appeals for the Federal Circuit’s decision in Harmonia Holdings Group, LLC v. United States, where an apparently abandoned pre-award agency-level protest from months earlier was deemed sufficient to allow the protester to rehash the failed solicitation challenge in a later post-award protest. We wondered at the time whether sending an agency a simple email or even a question during the pre-proposal question-and-answer period would be sufficient notice to avoid a dismissal under Blue & Gold if a company later wanted to protest the terms after contract award. The Federal Circuit’s new decision in <a href="https://cafc.uscourts.gov/opinions-orders/21-1936.OPINION.5-13-2022_1951483.pdf" target="_blank">SEKRI, Inc. v. United States</a> suggests an emailed question may indeed be enough, at least in some procurements, to preserve an objection to the terms of a solicitation. Indeed, the new decision suggests that, in some circumstances, an objection by another party may be enough. BackgroundSEKRI involved the procurement of Advanced Tactical Assault Panels (ATAPs) by the Defense Logistics Agency (DLA) for use by the U.S. Army.  SEKRI was the officially designated “mandatory source” for the Army’s ATAPs, in accordance with the Javits-Wagner-O’Day Act, 41 U.S.C. §§ 8501-06, and its implementing regulations. Under this statute, the government ordinarily must procure specified items only from a designated qualified nonprofit agency (like SEKRI) that employs blind or severely disabled people. SourceAmerica is the officially designated nonprofit agency through which participating mandatory sources may interact with procuring agencies, at least for some purposes. On April 21, 2020, DLA issued Amendment 6 to an existing solicitation, seeking the provision of ATAPs for the Army’s use.  The solicitation was subject to full and open competition, and DLA gave public notice of the amendment on SAM.gov. In June 2020, prior to the date set for receipt of proposals, SourceAmerica emailed DLA that SEKRI was the mandatory source authorized to supply the Army with ATAPs and inquired whether DLA would be willing to acquire ATAPs from SEKRI through SourceAmerica. DLA said no, and responded that it would proceed as planned with full and open competition, but SEKRI was free to submit a competitive proposal.By the date for receipt of proposals, SEKRI neither filed a pre-award protest challenging DLA’s competitive solicitation of items it contended had to be purchased only from it, nor did it submit a proposal to compete for the work. Nearly four months later (but prior to contract award), SEKRI eventually filed a bid protest with the Court of Federal Claims, challenging the competitive procurement of items for which SEKRI stated it was the mandatory source.The government moved to dismiss the complaint for lack of standing (because the plaintiff was not an actual or prospective offeror as of the date it filed the protest), and for untimely objection to an alleged patent solicitation error under Blue & Gold. It is the latter basis for dismissal that interests us: SEKRI had the opportunity to object to the alleged solicitation error (i.e., the omission of SEKRI as the mandatory source of supply), but it failed to protest “before the close of the bidding process.” The Court of Federal Claims granted the government’s motion and dismissed the protest.  The AppealSEKRI appealed the dismissal to the Federal Circuit, which reversed the decision of the Court of Federal Claims. First, the appeals court strongly suggested that the Blue & Gold waiver rule simply does not apply to protests filed by mandatory sources, such as non-profit companies designated as such under the Javits-Wagner-O’Day Act: “The government cites no case in which we have extended the requirements of Blue & Gold to mandatory sources of supply in the AbilityOne Program.” Second, and of potentially wider impact, the court suggested that SEKRI’s protest would have been timely even if it had been subject to the standards of Blue & Gold. In the court’s analysis, SEKRI satisfied Blue & Gold, as interpreted by Harmonia, because SourceAmerica posed a question on SEKRI’s behalf that put DLA on notice of the alleged solicitation defect prior to the date set for receipt of proposals:<blockquote>Here, SEKRI, through SourceAmerica—early in the bidding period and shortly after SEKRI learned of the solicitation—gave notice to DLA that it was a mandatory source of ATAP participating in the AbilityOne Program. DLA confirmed its receipt of the SourceAmerica contact, and it responded with its determination that it would proceed with a competitive bid. Based on these facts, SEKRI satisfied its obligation under Harmonia to submit a “timely, formal challenge” of the solicitation.</blockquote>The court’s determination that SEKRI “satisfied its obligation under Harmonia” appears to mean that, to the extent an offeror is subject to Harmonia (and Blue & Gold), doing what SEKRI did is enough to preserve a solicitation challenge for a subsequent protest at the Court of Federal Claims. The factual findings in <a href="https://ecf.cofc.uscourts.gov/cgi-bin/show_public_doc?2021cv0778-25-0" target="_blank">the Court of Federal Claims’ decision</a> make it clear just how little action is actually necessary. What the Federal Circuit characterized as SEKRI’s “timely, formal challenge” was actually an exchange of emails between SourceAmerica (not SEKRI itself) and DLA, in which SourceAmerica asked DLA a question: whether DLA would consider procuring the ATAPs from SEKRI, which was the mandatory source.  The Court of Federal Claims found: “At most the emails were an inquiry, not a complaint and certainly not a protest.” The Claims Court cited the Federal Circuit’s precedent in Bannum, Inc. v. United States, 779 F.3d 1376 (Fed. Cir. 2015), for the principle that “mere notice of dissatisfaction or objection is insufficient to preserve [the protester’s] defective-solicitation challenge.” 779 F.3d at 1380. Relying on the controlling precedent of Bannum, the Claims Court held that SourceAmerica’s email exchange with DLA did not preserve SEKRI’s right to file the subsequent protest with the Court of Federal Claims.  The court also noted that, even if SourceAmerica’s email exchange had constituted a sufficient complaint, that at best would have preserved a challenge by SourceAmerica, not SEKRI. The Federal Circuit’s decision does not explain how SourceAmerica’s email exchange constituted a “formal challenge” to the solicitation, sufficient to satisfy the rule in Harmonia. Nor does it explain how the email exchange passed muster under Bannum’s requirement for more than “mere notice of dissatisfaction or objection,” or why emails from SourceAmerica were sufficient to preserve a subsequent protest from SEKRI. Potential AnswersPerhaps one can resolve these apparent contradictions because the appeals court intended SEKRI to be confined to its unusual facts: These are different timeliness rules applicable only to protests filed by mandatory sources under the Javits-Wagner-O’Day Act. But, if that is what the court intended, why cite Harmonia at all? And, more to the point, why hold that SEKRI “satisfied its obligation under Harmonia” if SEKRI had no obligation to satisfy? On the other hand, to avoid making the appeals court’s entire Harmonia discussion a nullity, perhaps one should read SEKRI as re-focusing the Blue & Gold analysis to be almost exclusively an exercise in ensuring an agency is “on notice” of objections to specific solicitation terms prior to proposal submission. That concern appears to have been the main determining factor in Harmonia, and also appears to be of primary importance in SEKRI. If the Federal Circuit intends SEKRI to apply to ordinary pre-award protests filed by ordinary protesters, and notice really is the key, it is hard to see how run-of-the-mill industry questions submitted as part of typical question-and-answer exchanges in most procurements would be any less effective (or any less “formal”) than the email exchange in SEKRI. That potentially opens the floodgates for otherwise untimely solicitation challenges. To avoid such an outcome, the Bannum court held that even strenuous and clearly articulated objections to solicitation terms were insufficient to avoid a subsequent waiver if they fell short of a formal protest to the procuring agency or the U.S.Government Accountability Office. It is difficult to square SEKRI’s outcome with Bannum’s strictures, unless the answer is that SEKRI’s more lenient rule applies only to mandatory sources under the Javits-Wagner-O’Day Act.    Whatever the answer is, SEKRI is another potentially important data point in understanding the evolving scope of the Blue & Gold waiver rule.

Sekri, Inc. V. United States: Are Pre-proposal-submission Email Exchanges Now Enough to Avoid Blue & Gold Waiver?

In the seminal decision Blue & Gold Fleet, L.P. v. United States, the U.S. Court of Appeals for the Federal Circuit held that “a party who has the opportunity t

Sekri, Inc. V. United States: Are Pre-proposal-submission Email Exchanges Now Enough to Avoid Blue & Gold Waiver?