Category Archives: Statutes and Regulations

Federal Court Upholds Agency’s 40% Small Business Subcontracting Goal

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The United States Court of Federal Claims has denied a challenge to the Transportation Security Administration’s establishment of a 40% small business subcontracting goal–measured by total contract price, not total subcontracting dollars.

In Firstline Transportation Security v. The United States, No,. 12-601C (2012), Judge Thomas Wheeler  rejected arguments that the TSA’s 40% small business subcontracting goal was unreasonable, contrary to the FAR, and improperly established a partial small business set-aside.

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Teaming Agreements and Proprietary Information: A Cautionary Tale

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Are you taking adequate steps to protect your proprietary and confidential information from misuse by teammates?

If your teaming agreement or non-disclosure agreement requires you to mark proprietary information with a “protected” legend, the answer may be “no.”  Although many standard teaming agreements and non-disclosure agreements require protective legends in order to protect confidential information, contractors sometimes fail to apply the appropriate legend.  And when that happens, at least according to a recent decision of the U.S. Court of Federal Claims, the contractor may have no basis to complain that the teammate stole its confidential information.

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SBA Proposes Eliminating Megawatt Hours Size Standard

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Most government contractors determine their small business size based on average annual receipts or employee counts.  But for companies working in six NAICS codes in NAICS Sector 22, the firm is considered small if: (1) the firm, including its affiliates, is primarily engaged in the generation, transmission, and/or distribution of electric energy for sale; and (2) its total electric output for the preceding fiscal year did not exceed 4 million megawatt hours.  Today, the SBA proposed eliminating this megawatt hours size standard and replacing it with a 500 employee size standard.

In a proposed rule, the SBA stated that significant industry changes have occurred since the megawatt hour standard was adopted in 1974, that the “primarily engaged” requirement could result in some businesses being unfairly deemed large, and that an employee-based size standard is more in keeping with overall SBA size standard policy.  Accordingly, the SBA proposed changing the size standards for all six affected NAICS codes–221111, 221112, 221113, 221199, 221121, and 221122–from 4 million megawatt hours to 500 employees.

In today’s proposed rule, the SBA also proposed three significant size standard increases.  Under the SBA’s proposal, NAICS code 221310 (Water Supply and Irrigation Systems) would jump from $7 million to $25.5 million, NAICS code 221320 (Sewage Treatment Facilities) would increase from $7 million to $19 million and NAICS code 221330 (Steam and Air-Conditioning Supply) would increase from $12.5 million to $14 million.

Today’s proposed changes are part of the SBA’s ongoing review and overhaul of its size standards.  The SBA is accepting comments on today’s rule by September 17.

SBA: Most Construction Size Standards Should Remain As-Is

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The SBA has released its proposed size standard changes under NAICS Sector 23, which covers the construction industry.  The bottom line: if you were hoping for a SBA size standard increase, chances are, you’ll have to hope that the SBA changes its mind between now and the issuance of the final rule.

The SBA proposed only two increases in Sector 23: NAICS code 237210 (Land Subdivision) would jump from a $7 million size standard to a $25.5 million size standard, and NAICS code 237990 (Dredging and Surface Cleanup Activities) would increase from $20 million to $30 million.  The remaining NAICS codes under Sector 23 would retain their current size standards.

The SBA is accepting comments on the proposed Sector 23 size standard rule through September 17.

OMB Pushes Prompt Payment To Small Subcontractors

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Small subcontractors sometimes find themselves facing a cash flow crunch when they take on new work.  Under some subcontract payment clauses, a small subcontractor might not be entitled to payment until 30 days or more after the prime contractor receives payment from the government for the subcontractor’s work.  Even subcontracts with more generous payment terms often require small subcontractors to make significant up-front investments in terms of employee salaries, materials, and the like before receiving payment.

The Office of Management and Budget apparently recognizes that there is a problem, because yesterday OMB issued a memorandum entitled “Providing Prompt Payment to Small Business Subcontractors,” setting forth three steps the government is taking to address the matter.  One of these steps–if it comes to fruition–may even have some “teeth.”

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VA Replaces Annual SDVOSB Re-Verification With Two-Year System

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The VA has enacted an interim final rule changing the re-verification requirement for SDVOSBs.  Currently, SDVOSBs must be re-verified annually, a process some service-disabled veterans have complained is unnecessary and unduly burdensome.

In the preamble to the rule, the VA writes that although it initially believed annual re-verification would be necessary, “in administering this program since February 2010, VA has concluded that an annual examination is not necessary to adequately maintain the integrity of the program and proposes a 2-year eligibility period.”  The VA notes that although formal re-verification will only be required every two years, SDVOSBs must continue to maintain ongoing program eligibility throughout their terms.

The amendment to the VA’s system has been released as an “interim final rule,” meaning that it is effective immediately, but subject to change.  Comments on the rule (which I would expect will be overwhelmingly positive) are due by August 27, 2012.

FAA: SDVOSBs Must Be Verified in VetBiz to Receive Set-Aside Awards

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Want to receive a service-disabled veteran-owned small business set-aside contract from the Federal Aviation Administration?  Get listed in the VA’s VetBiz database.  The FAA has adopted a regulation requiring VA VetBiz certification as a requirement of winning a FAA SDVOSB set-aside award.  One interesting question: will other agencies follow the FAA’s lead?

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