Novation Disaster: SBIR Phase III Award Stripped by GAO

Contractors interested in acquiring participants in the SBA’s Small Business Innovation Research (SBIR) program beware: successfully novating SBIR contracts has been made significantly harder by a recent GAO decision. Worse still, SBIR novation mistakes can jeopardize future awards under the SBIR contract vehicles. Tread lightly.

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Agency Should Have Investigated Proposal Contradictions, Says GAO

Preparing a proposal for a federal procurement is an involved process. On top of the extensive drafting and estimating work, proposals often require supporting documentation like licenses or certifications. But what happens when a proposal and its supporting documentation contradict one another? As one contractor learned the hard way, this contradiction can have disastrous consequences.

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Complicated Business Structures Contribute to Set-Aside Fraud, GAO Finds

Fraud is an ever pressing concern in federal contracts, and the federal government goes to great lengths to minimize the risks to introduce fraud into the procurement system. Unfortunately, a recent GAO report highlighted how complex ownership structures can be leveraged to obscure fraudulent contracting activities. Worse still, complex ownership structures are most frequently leveraged to perpetrate small business set-aside fraud.

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GAO: Trade Agreements Act Inapplicable to Small Business Set-Asides

It’s no secret that federal government contracting has the reputation of being a seemingly endless morass of regulations. In fact, the confusion frequently associated with federal contracting was on full display in a recent GAO protest that implicated the SBA’s nonmanufacturer rule, the Buy American Act, and the Trade Agreements Act. In a procurement that invited bids from both large and small businesses, a large business contractor argued that the application of certain small business contracting regulations would unfairly advantage the small business participants. GAO disagreed, and dismissed the protest because any advantage was the result of the regulations operating as intended. Sometimes it pays to be a small business.

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Subcontractor Experience Irrelevant Where Subcontractor Won’t Perform Similar Tasks, Says GAO

Prime and subcontractor teaming is a common way for contractors to leverage the experience of the team’s anticipated subcontractors to make proposals more attractive to federal clients, particularly when past performance is a substantial evaluation consideration. This approach, however, recently ran into a snag when the proposed subcontractor was not going to perform the discrete work areas that its past performance experience supported, which lowered the past performance score of the bid. In the resulting protest, GAO concluded the agency got the evaluation right, and was not required to credit all of the subcontractor’s experience.

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Negotiation Impasse Results in Cancelled Solicitation

In any negotiation, either party may walk away from the deal at any time for any reason. While this is typically viewed as a negotiation “nuclear option,” it does happen. Unlike the private commercial space, doing business with Uncle Sam typically goes through a progression ultimately resulting in an awarded contract. As one contractor recently discovered, however, agencies still retain the nuclear option–cancelling the solicitation–if they cannot obtain value for the government.

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“We Couldn’t View the Solicitation,” Argues Protester

The first step in competing for a federal contract is knowing that an opportunity exists in the first place. In a recent protest, a contractor argued it was not able to find an opportunity despite routinely searching the appropriate federal procurement opportunity system, e-Buy. Thus, according to the protesting company, the procurement was not properly publicized and the award was improper. GAO did not agree.

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