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Service-Disabled Veteran Owned ("SDVO") contracts are one of several types of "set-aside" contracts which permit qualified entities to compete for federal government contracts on other than "full and open" competition terms. SDVO contracts are taking their place among small business set-asides, 8(a) set-asides, and HUBZone set-asides. With submission of its initial offer for a SDVO Small Business Concerns ("SBC") contract set-aside, a concern must certify that:

 

• it is a SDVO SBC

 

• it is "small" as defined by the NAICS code assigned to the procurement

 

• it will comply with the percentage of work requirements set forth in 13 CFR 125.6

 

• if a joint venture, that both members of the joint venture are small; and

 

• if applicable, it is an eligible nonmanufacturer.

Even if a SDVO meets all of the foregoing on a particular procurement, it must still consider the Small Business Administration’s ("SBA") rules on affiliation, all of which can apply to render a "technically" compliant SDVO as "other than small" and therefore ineligible for the award of SDVO contracts. Whether a SDVO wants to ensure it has not run afoul of the rules prohibiting affiliation between SBCs or a SDVO competitor wants to successfully challenge the SDVO status of a competitor, the SDVO needs to be familiar with the rules by which the SBA determines entities to be affiliated.

For example, a SDVO that is deemed unduly reliant upon a subcontractor for performance of the vital or primary functions of a contract may be deemed to be affiliated with the subcontractor. If the average annual receipts of the SDVO and this "ostensible" subcontractor exceed the applicable size limitation, the SDVO will be deemed ineligible for the SDVO contract. More basic still could be a finding of affiliation based on the "newly organized concern" or shared ownership rules.

Affiliation with a subcontractor may also be found even though a subcontractor is not performing the vital or primary functions of a contract. While bonding assistance alone by a subcontractor generally does not create affiliation between a SBC and a subcontractor, when coupled with other performance assistance, it could result in a finding of affiliation. Other indicia of "assistance" include, but are not limited to, bid preparation by the subcontractor rather than the prime SDVO; the loan of equipment to the SDVO by a subcontractor; office sharing by the SDVO and a subcontractor; and payroll, bookkeeping, and other "back office" assistance by the subcontractor. The proximity of the SDVO’s offices may also come into play when affiliation with a subcontractor is examined. For instance, where a SDVO SBC has been located 1100 miles away from the site of contract performance has been determined by the SBA to render the SDVO unduly reliant upon a subcontractor because the SDVO is too remote to provide meaningful, day-to-day management of the project. However, an SDVO’s location 100 miles away from the site of contract performance has been deemed not too remote.

Whether affiliation exists to render your SDVO or a competitor’s SDVO ineligible for a particular procurement or ineligible generally for the SDVO program is very fact-specific. To minimize the risk of being declared "other than small" SDVOs should carefully review all rules by which the SBA examines allegations of affiliation.

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The Small Business Administration (SBA) plans to implement a Women-Owned Small Business (WOSB) program that includes a full complement of benefits similar to those for the 8(a), HUB-Zone, and other programs. On May 11, 2009, the SBA announced in the Federal Register that it will revoke its previous proposed rule for a WOSB program and promulgate a new rule. Click here for announcement. [.pdf] The SBA says it is "committed to moving forward to implement a successful WOSB procurement program."

To qualify as a WOSB, a company must be small and at least 51% unconditionally and directly owned and controlled by one or more women who are United States citizens. An EDWOSB is a small business that is at least 51% unconditionally and directly owed by one or more women who are United States citizens and economically disadvantaged.

Currently, the WOSB program is limited in scope. It encourages prime contractors to subcontract with WOSBs but does not include many of the significant business opportunities SBA has established for other entities considered socially or economically disadvantaged. For instance, there currently are no set-aside procurements exclusively for competition among WOSBs. Also, there are no sole-source prime contracts for WOSBs. Nor do they enjoy any evaluation preferences in full-and-open competitions as currently exist in other socio-economic programs.

No firm date for issuance of a proposed WOSB program has been established, but the May 11, 2009, notice in the Federal Register anticipates a new announcement some time in July 2009.

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President Obama issued an Executive Order requiring contractors that have won service contracts to hire the non-managerial employees of the losing incumbent. The winning contractor is not permitted to advertise for the non-managerial positions until after the losing contractor’s employees have been given their "right of first refusal". The Order states that "[t]he federal government’s procurement interests in economy and efficiency are served when the successor contractor hires the predecessor’s employees." Although a similar Executive Order was in place during the Clinton Administration, supporters and critics of President Obama's policy are making their voices heard.

Critics are concerned that mandating a predecessor’s employees be retained limits the winning contractor’s flexibility in achieving economy and efficiency. There are concerns also that it gives union-like protection for jobs. One of the exceptions for not hiring a predecessor’s employee is that he or she did not "perform suitably on the job." This language may be used as a sword against successor contractors by non-retained workers who want to contest the decision not to hire them. It might also require that the predecessor contractor hand over the employees’ personnel records. If non-retained workers can sue a contactor for not being hired, that alone may result in winning contractors maintaining "marginal" incumbent employees rather than hiring better skilled or motivated new employees. It may also have a chilling effect on how contractors rate their employees or document their records if there "poor references" may cause an employee not to be hired by a successor contractor.

Supporters of the requirement argue that it increases job stability, decreasing training costs. They point out also that most successor contractors already hired the predecessor’s employees anyway.

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The General Accountability Office ("GAO") considers protest against the solicitation and award of Federal contracts. Generally, under its "bid protest" function, it handles protests which contest the competitive nature of the terms of a solicitation and its compliance with procurement law and regulation and it handles protests against the propriety of the award of contracts.

Many contractors choose the GAO, as opposed to the Court of Federal Claims, because the laws and regulations permitting the right to protest Federal procurements to the GAO require the stay against a protested procurement action, provided the protest is timely filed. No other forum allows for this "automatic stay". Also, it is one of the least expensive and quickest fora for obtaining a decision. Decisions are generally issued within 120 days from the date of protest.

2008 was one of GAO’s busiest protest years. Over 1600 cases were filed, and the GAO closed over 1500 of them. Although the number of actions filed at the GAO was up 17% from the previous fiscal year, the percentage of sustained actions (actions in favor of the protester) fell from 29% to 21%.

The GAO was originally called the General Accounting Office. Although "Accounting" was changed to "Accountability" in 2004, it’s purpose remains the same: "investigate, at the seat of government or elsewhere, all matters relating to the receipt, disbursement, and application of public funds, and shall make to the President...and to Congress...reports (and) recommendations looking to greater economy or efficiency in public expenditures". It is an investigative arm of Congress.

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The Director of Defense Procurement has suspended use of the price evaluation preference for Small Disadvantaged Businesses ("SDBs") for a one-year period beginning March 13, 2009.  By law, the ten percent (10%) price evaluation adjustment in favor of SDBs must be suspended for a 1-year period in which the DoD meets or exceeds the 5% goal set for contract awards to SDBs.  In Fiscal Year 2008, the 5% goal was exceeded.  Therefore, during the period March 13, 2009 through March 12, 2010, DoD solicitations will not include any provision allowing application of the price evaluation preference for SDBs in making award decisions.  Notice of the 1-year suspension was published in the Federal Register on February 19, 2009. 

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If President Obama’s first steps into federal procurement policy are any indication, his will be a pro-labor administration. On January 30, 2009, Obama issued Executive Orders he believes will "level the playing field for workers and the unions that represent their interests". One Executive Order requires successor service contractors to hire employees of the predecessor contractor and another requires contractors to notify their employees that they have the right to unionize and bargain collectively. A third Executive Order prevents federal contractors from being reimbursed for expenses incurred for efforts intended to influence workers' decisions to form unions or engage in collective bargaining. Failure to comply could result in debarment of a contractor.

The Executive Order requiring successor service contractors to offer a job to the employees of the former contractor does not apply to managerial and supervisory employees. It also does not apply to services contract under the simplified acquisition threshold. However, it would require that employees of the predecessor contractor be given a "right of first refusal" that would be no less then 10 days, that is, the employee would have at least 10 days to decide whether to accept a position with the successor contractor. The primary thrust of the Executive Order is to protect the "rank and file" federal contractor employees.

The Executive Order prohibiting contractor from being reimbursed for expenses incurred to influence workers’ decision concerning unionization is opposed by the U.S. Chamber of Commerce. The Executive Order presumes that the expenses contractors have incurred and which the administration wants to prohibit are expenses discourage unionization. However, the National Labor Relations Act has been interpreted by the Supreme Court to require uninhibited information concerning unionization, which would include information both on the right to unionize and the right not to unionize. The U.S. Chamber of Commerce views this Executive Order as an infringement on employers’ free speech rights.

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