Weekly Update Newsletter - September 2014 #2

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GOVERNMENT CONTRACTS 

DoD’s Implementation of Justification for 8(a) Sole-Source Contracts

The General Accountability Office (GAO) conducted a study to review how the Department of Defense (DoD) has implemented the requirement of a written justification of 8(a) sole-source awards over $20 million.  GAO found that the number and value of sole-source contracts over $20 million awarded by DoD through the Small Business Administration's 8(a) Business Development program remained low in fiscal year 2013 after a significant decrease from fiscal years 2009 through 2012. DOD awarded 27 such contracts, valued at over $2 billion, in fiscal year 2009 and 4 contracts, valued at about $221 million, in fiscal year 2013. Between April 1, 2012, the date of GAO’s last assessment of this contract type at DoD and June 19, 2014, DOD awarded five 8(a) sole-source contracts, each with a value of over $20 million. All five contained written justifications explaining why a sole-source contract was necessary, but not all fully met the requirements in the Federal Acquisition Regulation (FAR). The justification for an 8(a) sole-source contract over $20 million must address five specific elements and generally be approved by a high-level procurement official prior to contract award. The 8(a) justification differs from a justification for sole-source contracts awarded under one of the other exceptions to full and open competition, notably in that it must include a determination that the use of a sole-source contract is in the best interest of the government. Two of the 8(a) justifications met all of the requirements. Of the three that did not fully meet the requirements, one justification was signed by the approving official after the contract was awarded, while the other two justifications were the incorrect type. For three of the five contracts GAO reviewed, contracting officers cited limited time frames to award the contract as a primary factor for determining that an 8(a) sole- source contract award was in the best interest of the government. In the other two cases, one contracting officer stated that the 8(a) firm was uniquely qualified to provide the services, while the other told us that the 8(a) firm was capable of performing the work and awarding the contract on a sole-source basis was an available option; DoD's Implementation of Justification for 8(a) Sole-Source Contracts.

GSA Issues Proposed Rule to Amend GSAR Federal Supply Schedule Contracting  

The General Services Administration (GSA) issued a proposed rule to amend the General Services Administration Acquisition Regulation (GSAR) to clarify and update the contracting by negotiation GSAR section and incorporate existing Federal Supply Schedule Contracting policies and procedures, and corresponding provisions and clauses, 79 Fed. Reg. 175.  Comments on the proposed rule are due November 10, 2014 to be considered in the formulation of a final rule.  

CAPITOL HILL 

Pentagon, Congress Face Stark Budget Choices

The Center for Strategic and Budgetary Assessments (“CSBA”) has released a new analysis of President Obama’s fiscal 2015 defense budget. Todd Harrison, senior fellow at the CSBA, noted a significant gap between the Defense Department’s likely future budgets and its long-term strategy described in the Pentagon’s 2012 guidance and reaffirmed in the 2014 Quadrennial Defense Review. Neither of those documents took into account the 2011 Budget Control Act’s since modified spending caps.  Harrison also stated, of all the defense budget components, procurement is most at risk, noting that the Pentagon has never budgeted for cost overruns. Much of the procurement rise in the past several years was paid for through the overseas contingency operations budget ($59 billion and falling), pointing to declines in the coming years. The acquisition process was largely a hollow build-up, because weapons systems bought in the 1980s needed to be replaced, while newer investments have either failed (as in Army ground vehicles) or been cut back (as with the F-22 raptor stealth fighter). Harrison advised against putting hopes for savings on acquisition reform, stating, “We’ve been trying that for decades. It’s compensation reform that would free up funding, and it would not take effect for 10 years because it would apply only to new recruits”.  Pentagon, Congress Face Stark Budget Choices. 

VETERANS AFFAIRS 

VA Issues Proposed Rule to Implement a Loan Guaranty for Specially Adapted Housing Assistive Technology Grant Program

The Department of Veterans Affairs (VA) issued a proposed rule to implement, through regulation, statutory authority to provide grants for the development of new assistive technologies for use in specially adapted housing for eligible veterans or service members, as authorized by the Veterans' Benefits Act of 2010 (the Act), enacted on October 13, 2010, 79 Fed. Reg. 53146. The Act authorizes VA to provide grants of up to $200,000 per fiscal year to persons or entities to encourage the development of specially adapted housing assistive technologies. VA is amending its regulations to outline the process, the criteria, and the priorities relating to the award of these research and development grants.  Comments on the proposed rule are due November 7, 2014.  

SMALL BUSINESS 

SBA Issues a Proposed Rule Regarding Small Business Size Standards for Manufacturing

The U.S. Small Business Administration (SBA) issued a proposed rule to increase small business size standards for 209 industries in North American Industry Classification System (NAICS) Sector 31-33, Manufacturing, 79 Fed. Reg. 175. SBA also proposes to increase the refining capacity component of the Petroleum Refiners (NAICS 324110) size standard to 200,000 barrels per calendar day total capacity for businesses that are primarily engaged in petroleum refining. In addition, SBA proposes to eliminate the requirement that 90 percent of output being delivered is refined by the bidder. As part of its ongoing comprehensive size standards review, SBA evaluated employee based size standards for all 364 industries in NAICS Sector 31-33 to determine whether they should be retained or revised. Comments on the proposed rule are due November 10, 2014.  

SBA Issues Proposed Rule Regarding Small Business Size Standards: Industries with Employee Based Size Standards Not Part of Manufacturing, Wholesale Trade, or Retail Trade

The U.S. Small Business Administration (SBA) issued a proposed rule to increase employee based small business size standards for 30 industries and three sub- industries (i.e., exceptions in SBA's table of size standards) and decrease them for three industries that are not part of North American Industry Classification System (NAICS) Sector 31-33 (Manufacturing), Sector 42 (Wholesale Trade), or Sector 44-45 (Retail Trade), 79 Fed. Reg. 53646. SBA also proposes to eliminate the Information Technology Value Added Resellers sub-industry or “exception” under NAICS 541519 (Other Computer Related Services) and its 150-employee size standard. Similarly, SBA proposes to eliminate the Offshore Marine Air Transportation Services sub-industry or “exception” under NAICS 481211 and 481212 and Offshore Marine Services sub- industry or “exception” under NAICS Subsector 483 and their $28 million receipts based size standard. This proposed change includes removing Footnote 15 and Footnote 18 from the table of size standards. As part of its ongoing comprehensive size standards review, SBA evaluated employee based size standards for 57 industries and five sub- industries that are not in NAICS Sectors 31-33, 42, or 44-45 to determine whether they should be retained or revised.  Comments on the proposed rule are due November 10, 2014. 

 

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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