General Federal Government Contracts News & Updates

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One of the primary benefits offered by the Small Business Administration’s (SBA) mentor-protégé programs is the ability to operate outside the normal rules governing affiliation.  Generally speaking, SBA allows mentors to provide assistance (including technical, management, and financial assistance) to their protégé firms without fear of creating affiliation.  That is, so long as the assistance provided is consistent with the mentor-protégé agreement, it cannot be used as the basis for a finding of affiliation.

However, some time ago, we wrote on this blog that participation in an SBA-approved joint venture does not necessarily guarantee an automatic exemption from affiliation.  Contractors still must abide by particular SBA rules and regulations — or risk an adverse size determination.

We previously examined SBA’s decision in Kisan-Pike, A Joint Venture, SBA No. SIZ-5618 (2014).  In that case, SBA’s Office of Hearings and Appeals (OHA) found affiliation between SBA-approved 8(a) joint venture partners based on the conclusion that the joint venture agreement failed to adequately:

  • Itemize all major equipment, facilities, and other resources to be furnished by each party to the joint venture, with a detailed schedule of cost or value of each, and/or
  • Specify the responsibilities of parties with regard to negotiation of the contract, source of labor, and contract performance, including ways that the parties to a joint venture will ensure that the joint venture and the 8(a) partner(s) to the joint venture will meet the performance of work requirements.

Because the joint venture agreement did not rise to the level required by the regulations, the 8(a) member was not shielded from a finding of affiliation.

Now, in a recent decision, SBA reiterates and seemingly expands on this proposition.  In reviewing a joint venture between an SBA-approved mentor and protégé under the All Small program, SBA determined that the joint venture was not small for purposes of the procurement.

As in Kisan-Pike, the decision turns on the inadequacy of the written joint venture agreement.  Specifically, SBA determined that the joint venture agreement:

  • Did not specifically address the applicable procurement.
  • Did not sufficiently describe the work to be performed by each member of the joint venture, and
  • Did not sufficiently indicate that the joint venture partners would adhere to the requirements concerning the division or work and performance of work requirements.

Absent this information, SBA (once again) refused apply the exception to affiliation arising out of the previously approved mentor-protégé relationship.

These decisions offer two major takeaways for contractors when it comes to mentor-protégé joint venture agreements:

First, tailor your joint venture agreement specifically for each procurement.  A key element missing from the agreement in this SBA OHA decision was any mention of the specific procurement at issue.  By revising the agreement or adding an addendum to address the work being sought, it is harder to overlook the details required by the regulations.

Second, add as much detail as possible – and then add some more.  A common thread in both of the protests detailed in this post is the idea that it is often difficult to provide details concerning the equipment, facilities, and other work that will go into the project so far in advance.  The SBA hears you – but it does not seem to care.  The bottom line is that contractors cannot ignore these requirements or rely on generic statements indicating that the joint venture partners will do the work and comply with the law. Details are expected and required.

It may be difficult, but contractors must take care to drill down into the details as much as possible.  Based on what is now a pattern of case law, anything less runs the risk of an adverse size determination.

Traditionally, disputes that rise to the level of an appeal before the Armed Services Board of Contract Appeals (ASBCA) (or other board of contract appeals) follow a similar path:

·       The contractor and the Government enter into a written contract

·       The contractor performs the contract, but believes that it is entitled to recover additional costs or damages in connection with its performance and files a claim

·       The Government denies the claim in a formal Contracting Officer’s Final Decision (COFD).

The appeal before the Board is the contractor’s appeal of the COFD.

However, in a recent decision, the ASBCA held that contractors have the right to bring an appeal — even if the government claims a contract does not exist: no COFD is required.

The case at issue concerns training services.  The contractor alleged the existence of an “implied-in-fact” contract between the contractor and the Navy. An implied-in-fact contract is one where there has been a meeting of the minds between the parties, but there is no written agreement and the contract must be inferred from the conduct of the parties.  Here, the contractor alleged that the Navy made payments for certain training services performed by the contractor, but denied others based on the purported absence of a written agreement.

The Navy moved to dismiss the appeal for lack of jurisdiction based on the absence of a traditional written contractor and COFD.  In its decision denying the Navy’s motion, the Board held that it has the authority to hear disputes regarding the existence of a contract.  Further, the Board reviewed the facts and found that even though the Government was apparently “unable to locate” documentation for alleged unpaid training services, the claim, at minimum, was not frivolous.

Previous cases before the Board have found that an implied-in-fact contract will trigger its jurisdiction.

The absence of a COFD is a particularly noteworthy procedural quirk.  As noted above (and argued by the Navy in this case) a contractor typically must rely on a COFD as the basis for an appeal to the Board. However, where the fundamental question at the heart of the appeal is whether a contract exists, the Board can exercise jurisdiction to resolve the dispute without a final decision. Thus, even though the Navy purposefully fashioned its response to the contractor to avoid any indication that it was a “COFD,” the contractor still had a right to an appeal.

While a contractor in this situation bears the burden of establishing jurisdiction, the Board emphasized that the contractor only must make a “non-frivolous allegation that a contract existed.” This is good news for contractors, as it presents a relatively low hurdle.  Basic allegations regarding the parties’ course of conduct should suffice.

This case should serve as a reminder to contractors that – even without an express contract — they may still have the option to bring an appeal before the ASBCA. The absence of a written contract (or even a COFD) does not necessarily leave you without the right to appeal before the applicable Board.

For federal contractors, affirmative action plan (AAP) audits may be just around the corner.

The U.S. Department of Labor Office of Federal Contract Compliance Programs sent 750 courtesy scheduling announcement letters (CSAL’s) last week to federal contractors, notifying them that their affirmative action plans (AAP) may be audited.

This latest round of notifications, which supplements the 1,000 CSAL’s sent out earlier this year, alerts federal contractors that the Office of Management and Budget (OMB) will be sending scheduling letters in 45 days. The OMB-approved letters will then provide recipients the standard 30 days to submit their AAP.

Preparation is key. In our latest alert, Fox Rothschild’s Kenneth Rosenberg offers takeaways on how federal contractors can ready themselves for complying with this regulatory procedure and the potential audits that may follow.

Here we go again.  Back in March, I discussed the impact of the brief government shutdown and risks associated with what could have been (had the stand-off gone on much longer).

Today, news from the White House and Capitol Hill raised concerns over another possible shutdown in September (when the government will run out of money without action by Congress and the President).

In light of this uncertainty, I thought it made sense to again share practical steps that contractors can take to get prepared.  That includes creating a plan for how to address existing contractual obligations without assuming unnecessary risks in the event that the government does, in fact, shut down (again).  It is far better to think about and address these issues in advance, rather than face the real time pressure of a last minute budget deal (or failed deal).

Let’s start with the bad news:  your government contract (like almost every other procurement contract) will very likely be impacted by a shutdown.  The Anti-Deficiency Act prohibits Federal agencies from exceeding appropriation limits unless the contract falls into a narrow exception.  For contractors, that means a Stop Work Order.  Remember that the risk of continuing performance in the event that funding is not available may fall on your company.

Now, some good news.  By thinking ahead and planning in advance, you can mitigate that risk and place your business in better position to weather the storm.  Here are a few practical pointers aimed at doing just that:

  • Review Your Contract.  Understanding how the government funds your contract will shed light on how it likely will be treated by the agency in the event of a shutdown.  According to the Office of Management and Budget, most “routine ongoing activities” will not be authorized to continue during a lapse in appropriation.
  • Communicate with the Contracting Officer.  Just like your business, the agency is also likely working on a plan on how to administer on-going contracts during a shutdown.  A mutual understating with the CO will go a long way towards avoiding disputes when the work inevitably ramps back up.
  • Develop Contingency Plans.  Work internally to create a contract specific contingency plan to mitigate risk in the event of a funding issue.  These will vary greatly depending upon the specifics of each procurement, so bringing in outside consulting and expertise to set up an individualized plan may reap benefits, particularly for more complex work.

Of note:  these tips – and the last one in particular – are not limited to government shutdown concerns alone.  Any government contract can experience unanticipated delays or even a long-term suspension of work.  Thinking ahead and creating a plan is the best way for contractors to avoid assuming unnecessary performance risks.