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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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.

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The U.S. Small Business Administration (SBA) finalized a rule to modernize the Small Business Investment Company (SBIC) Program on July 17, 2023. Part of President Biden’s Investing in America agenda, the new SBIC Investment Diversification and Growth (IDG) rule seeks to “unlock unrealized potential and strengthen, diversify, and expand our network of SBIC licensed private funds to address capital deficiencies in underserved small businesses, start-ups, and critical U.S. industries impacting our nation’s security,” according to the SBA press release.  The final rule becomes effective on August 17, 2023.

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SBA Finalizes Rule to Modernize the SBIC Program | Government Contracts Insights

Damien C. Specht

Alissandra Young McCann

Markus Gerhard Speidel

The U.S. Small Business Administration (SBA) finalized a <a href="https://www.govinfo.gov/content/pkg/FR-2023-07-18/pdf/2023-13981.pdf" target="_blank">rule</a> to modernize the Small Business Investment Company (SBIC) Program on July 17, 2023. Part of President Biden’s Investing in America agenda, the new SBIC Investment Diversification and Growth (IDG) rule seeks to “unlock unrealized potential and strengthen, diversify, and expand our network of SBIC licensed private funds to address capital deficiencies in underserved small businesses, start-ups, and critical U.S. industries impacting our nation’s security,” according to the SBA <a href="https://www.sba.gov/article/2023/07/17/biden-harris-administration-establish-reforms-transform-public-private-investment-program" target="_blank">press release</a>.  The final rule becomes effective on August 17, 2023.BackgroundThe SBIC Program, established during the Eisenhower Administration, allows SBICs to invest or lend private capital, plus funds borrowed with an SBA guarantee, to make equity and/or debt investments in small businesses and start-ups. The primary benefits of the program for lenders are SBA guarantees and affiliation exemptions for the fund’s other investments. The effort to modernize the SBIC Program is part of President Biden’s <a href="https://www.whitehouse.gov/invest/#:~:text=%24299%20billionin%20public%20infrastructure,%2C%20EV%20charging%2C%20and%20more." target="_blank">Investing in America</a> agenda, which seeks to mobilize historic levels of private sector investment, bring manufacturing back to America, and create new, good-paying jobs. Historically, the SBIC public-private partnerships contributed to advances in semiconductors, personal computers, and electric vehicles by seeding and scaling “some of the most innovative and successful businesses in the world,” according to SBA Administrator Guzman.  The SBIC Program also helps small businesses bridge capital gaps to sustain operations and build resilient businesses. The new IDG rule addresses structural aspects of the SBIC Program that limited the flow of equity and growth-oriented debt investments from SBIC-licensed funds to small businesses and start-ups operating in underserved communities, capital-intensive industries, and technology areas critical to U.S. national security and economic development.Highlights of the IDG Rule<ul><li>Accrual SBICs. The IDG rule introduces a new debenture instrument to the program portfolio called an “Accrual Debenture.” This instrument permits cash flows of longer duration and/or equity-oriented investment funds, with funds licensed under this financial instrument called an “Accrual SBIC” and eligible for 1.25x tiers of leverage.  A typical traditional SBIC investment is made over a three-year period.  In contrast, Accrual SBICs accrue interest over a ten-year term. The SBA does not participate in the profits of Accrual SBICs, instead the SBA receives accrued interest and principal upon the distribution event. </li><li>Reinvestor SBICs. The new rule introduces a new type of SBIC called a “Reinvestor SBIC” based on a fund-of-funds model. These SBICs invest equity in underlying funds with an underserved focus (such as disadvantaged businesses, and rural, low-, and moderate-income areas) that, in turn, invest directly in small businesses and start-ups.  The rule leaves the term “underserved” intentionally broad to maintain flexibility and agility in aligning with evolving market conditions. Applicants are required to provide a justification in their business plan describing how a particular geographic, industry, or market segment is underserved.  Fund-of-funds Reinvestor SBICs will utilize the Accrual Debenture instrument and be eligible for 2x tiers of leverage. </li><li>Improved Program Access. The new rule reduces the financial burden for new program applicants by modifying licensing fees. The rule also permits a more diversified group of investment teams to participate, with a wider range of investment strategies, by broadening track record and eligibility requirements of the fund managers. For instance, the final rule creates an exception for Traditional Investment Companies to own more than 70% of a licensee’s Regulatory Capital and Leveragaeable Capital (generally, no affiliate may own more than 70%), as defined by the SBA. Non-profit entities may now serve as management companies of a licensee, but with the usual 70% limit on Regulatory and Leverageable Capital ownership imposed.</li><li>Affiliation Clarity. The rule clarifies that equity investment by an SBIC licensee does not establish affiliation with the SBIC or its other investments. This is significant particularly for firms that pursue set-aside government contracts. This final rule carves out an exception under 13 CFR 121.103(5)(vi) for Traditional Investment Companies and private funds exempt from registration under section 3(c)(1) or 3(c)(7) of the Investment Company Act of 1940. The rule clarifies that the exceptions apply to Accrual SBICs.  As a result, the portfolio companies of an SBIC licensee are considered “unaffiliated” under SBA regulations unless affiliation is triggered by another relationship.</li><li>Stronger Controls. The rule implements several changes to improve SBA risk management. The enhanced controls include: (1) a codified formal watchlist of potential performance or compliance risks; (2) improved monitoring of investment performance through enhanced reporting requirements; and (3) establishing sufficient SBA loss reserves by phasing in a 40-basis point annual charge floor. </li><li>Reducing Administrative Friction. The rule seeks to reduce friction for participants and investors by: (1) indicating at the time of conditional (“Green Light”) approval the extent of SBA’s intended financial commitment; (2) permitting non-leveraged licensees to submit Financial Accounting Standards Board GAAP compliant valuations; (3) removing the need for SBA pre-approval of a capital call line; and (4) granting a safe harbor for eligible follow-on funding of a portfolio company through a non-SBIC vehicle managed by the principals of the SBIC without prior SBA approval.</li><li>Expediting Subsequent Funds. The rule introduces a risk-controlled process to expedite licensing of subsequent funds to existing program participants.</li></ul>Implications for Investors and Small Business OwnersBoth investors and small business owners are likely to benefit from the new SBIC rule.  Investors looking to fund innovative small businesses through a public-private partnership are likely to find the new SBIC rule provides easier access and reduces administrative friction. Small business contractors looking to bridge funding gaps are likely to find the rule helps provide much needed access to private equity.

SBA Finalizes Rule to Modernize the SBIC Program

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