Joint Ventures 101: What You Need to Know About Joint Ventures & Government Contracts

Last month, we hosted a “Joint Ventures 101” seminar to educate small businesses about the benefits of forming Joint Ventures in order to compete for federal contracts. I wanted to take a moment to share the same information here in the hope that it will help others who are looking for ways to take advantage of the SBA’s Joint Venture rules and regulations.
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Please click here to read through my presentation, and don’t hesitate to contact Randolph Law for more information!

Avoiding Pitfalls in the 8(a) Application Process

I was recently invited to present a webinar on pitfalls in the 8(a) application process for Jennifer Schaus and her government contracts consulting firm, Jennifer Schaus & Associates.
Here’s the full video:

 

Here’s a link to the powerpoint presentation.

Trimming out everything else, the key take away is to read, re-read, and then read again the SBA requirements for the 8(a) program, you can find them here.
While you are reading them, take notes on every specific item that is required. Here’s a very basic checklist of questions you should ask yourself:

1) Am I a member of one of the defined minority groups? How do I know?

For example, we get inquiries from folks who say “well, my grandmother was native american, does that count?” No, it does not. You must be an enrolled member of a Native American Indian Tribe to be considered Native American Indian. Each tribe has its own criteria for enrollment, and you have to match that criteria.

2) Is my annual income under $250,000?

Look at your taxes. What’s the top line. If you file taxes jointly with your spouse, does he or she contribute in some way to the business, whether working or guaranteeing a loan or name on a lease? If yes, it’s your joint income, if no, it’s yours alone.

3) Is my net worth under $250,000?

Your house doesn’t count, and your equity in the business doesn’t count. Your retirement accounts don’t count, unless you’re over 59 1/2. Everything else counts. Your bank accounts, other businesses, vacation house, car. Everything.

4) Have I been in business over two years?

This is a yes / no. When was your business registered with the state. Count two years past that. While there are waivers available to businesses that have not been in business for two years, they are very difficult to get.

5) Am I ready to collect all the documents necessary?

I’d say the average 8(a) application if printed out would run to about 1,000 pages. Be prepared, you will be asked for everything, and you must provide everything.
These are just some of the things you’ll need to be prepared for. Review the video, read the slides, go to the SBA website. When you’re ready, give us a call and we might be able to help you out.

July 2017 Government Contract Regulations Update

This month, there have been a few large regulatory updates and changes within the government contract world. Below, read up on the progress of the Regulatory Accountability Act’s journey through the House and the death of one of the final Fair Pay and Safe Workplaces provisions.

Regulatory Accountability Act

The bipartisan Regulatory Accountability Act is currently being debated in the House of Representatives. This Act would require agencies to provide members of the public with an opportunity to participate in the rulemaking process and hold a hearing before the adoption of any “high-impact” rule, which could benefit government contractors by giving them a voice in policy decisions. According to the bill, a “High Impact” rule refers to “a rule that the Office of Information and Regulatory Affairs (OIRA) determines is likely to have an annual cost on the economy of $1 billion or more.” Additionally, the bill would require federal agencies to conduct a cost/benefit analysis prior to implementing any new regulation.

Fair Pay and Safe Workplaces Final Rule

Following President Trump’s move to repeal the Fair Pay and Safe Workspaces rule earlier this year, the GSA recently issued a class deviation to prohibit FAR clause 52.222-60, which mandated paycheck transparency for government contractors. The rule, set in place by former President Obama, was the last to be prohibited, following the dismantling of FAR 52.222-57, 52.222-58, 52.222-59 and 52.222-61. However, due to a ruling by a federal judge in late 2016, the clause remained untouched, along with the notice provision for independent contractors . Moving forward, the GSA has ordered contractors to amend solicitations and remove the clause from their current contracts immediately.

Are you currently in the market for legal assistance for your government contracting practice or need assistant navigating recent regulatory changes? Contact us today to discuss your needs!

A Graceful Exit: Planning Now For 8(a) Graduation

The regulations governing the 8(a) program mandate (i) that 8(a) contracts are generally non-assignable, and (ii) if the ownership of an 8(a) contract holder, even an 8(a) graduate, changes such that the control of the company has changed, any 8(a) contracts the company holds are subject to termination.

This causes problems if your 8(a) graduation exit strategy is “graduate and sell.” Generally, the rule of thumb for business advisors advising buyers and sellers in the government contracts space is “no more than 25% of revenue from 8(a) contracts.”  This means that the value of an 8(a) company is dramatically lowered in the market, sometimes to zero. Even if your graduation strategy is “graduate and grow” or “graduate and maintain,” you can run in to problems if your nine year past focus, and your past performance and team expertise has been in winning 8(a) contracts. In fact, any post-graduate plan other than “graduate and retire someplace nice” requires careful up-front planning from day 1 of your certification in the 8(a) program. Nine years goes by a lot faster than you think.

With that in mind, here are a few strategies you can use to try to minimize the disruption your graduation will inevitably bring, and maximize your company’s value

  1. Use your first 8(a) contract wins to create a “war chest” for going after non-8(a) work

You are limited as the 8(a) owner in how much you can withdraw from the company in compensation. For successful 8(a)s, this can become a problem. By way of example, a $20M in revenue IT company could at a 10% margin generate 2M in profit. But the qualified owner can’t withdraw more than $350K per year (averaged over 3 years and considering the owner’s salary as well).[*] When searching for what to do with potentially excess profit, consider using that profit to fund development of non-8(a) business, whether full-and-open, small business, or state or commercial. You’re going to have to start sometime, why not start from day 1.

2. Look for other certifications that aren’t time-limited, such as Women-Owned Small Businesses (WOSB) or Service-Disabled Veteran-Owned Small Business (SDVOSB) without expiration.

While these certifications are, like the 8(a) certification, size and owner limited, if you’re not looking to sell, they can be a good maintenance and growth vehicle. Of course, you have to qualify for each of these programs and since they are owner limited, they may have similar difficulties for you if your exit strategy is “graduate and sell.” The WOSB federal contract program is designed to provide greater access to federal contracting opportunities for WOSBs and economically-disadvantaged women-owned small businesses (EDWOSBs) by allowing contracting officers to set aside specific contracts for certified firms in an effort to achieve their statutory goal of five percent of federal contracting dollars being awarded to women-owned small businesses. The SDVOSB procurement program helps provide acquisitions for exclusive competition among service-disabled veteran-owned small business concerns, and to make sole source awards to service-disabled veteran-owned small business concerns if certain conditions are met.

3. Pursue 8(a) Indefinite Delivery Indefinite Quantity (IDIQ) contracts.

IDIQ contacts, depending on the contract language, may allow graduated 8(a)s to remain eligible for 8(a) task orders sourced through the contract vehicle. GSA STARS II is a great example of a contract like this.[†]  This can allow you to continue to receive 8(a) set aside work – as a task order under the IDIQ – beyond your graduation date. In the end, this only delays the inevitable, but if that delay means the difference between getting a full-and-open BD team together and closing up shop and going home, any little bit helps.

These are just a couple of examples of ways in which you can begin looking for non-8(a) work. It may seem counter-intuitive to get this wonderful certification and then immediately try to get work that doesn’t require it, but remember, it’s only 9 years. As Ferris Bueller  said, in a different context, “life moves pretty fast.”

[*]It’s actually more complicated than that, but the point is as you grow you may be unable to distribute all of your company’s profits without potentially losing your 8(a) status.

[†] Mandatory disclaimer, this isn’t legal advice, but this is based on my experience assisting a STARS II holder. If your experience was different, don’t come tell me I’m wrong, and certainly don’t file a CDA claim in the CBCA or ASBCA or anywhere claiming some lawyer told you your company shouldn’t have been kicked of an IDIQ for graduating 8(a). I’m just reporting an example.

Avoiding Ambiguities in the RFP Process

Responding to an RFP is an expensive and time-consuming process. Once your organization has decided to make that investment, it’s important to make sure your proposal is just right. Ambiguities – unclear statements or demands – in the RFP process can derail your success with the following negative consequences:

  • Bids rejected for lack of compliance
  • Bids less competitive for failure to follow unknown/misunderstood specifications
  • Bids open to rejection for other reasons under the cover of ambiguities

In order to make your proposal as effective and competitive as possible, it’s critical to resolve any questionable statements in the RFP before you submit your proposal.

Identifying Ambiguities

The first step in resolving unclear statements, demands, or terminology is to identify them. There are three main types of RFP ambiguities to watch out for and resolve:

  • Specification
  • Process
  • Terms & Conditions

In order to identify unclear portions of the RFP, you may need to call upon your technical specialists, project managers, and legal counsel to review the request and identify any areas of concern.

Examples of Ambiguities:

  • Specification: An RFP for a new piece of technology tells bidders that they can recommend a product that exceeds specifications. In some cases, it’s easy to pick out things that would exceed specifications (e.g.: faster processing speeds or more memory). However, the waters get murky when you consider things like screen size. Would a smaller screen exceed specifications because it’s lighter and easier for employees to transport? Or would a larger screen be a preferred option to avoid taxing employees’ eyes?
  • Process: The RFP specifies that all submissions must be made by 5pm on a given date. But the contracting officer is based on the East Coast, the agency is headquartered in Texas, and the work is being performed in California. Which time zone applies?
  • Terms & Conditions: The language used in an RFP is the language a contractor will be beholden to once a contract is awarded. Unclear terms and conditions are subject to definition by the contracting officer, not the contractor, so it’s very important to make sure all the legal language is crystal clear before responding to an RFP.

Quick Steps to Respond to Ambiguities in an RFP

  1. Identify unclear portions of the RFP: Let the experts at your organization review each portion of the RFP and point out any areas of concern.
  2. Submit questions to the contracting officer: At this stage, it’s important to make sure that your questions are extremely clear to avoid further confusion and get the answers you need to move ahead.
  3. Follow up with more questions: If the contracting officer’s answers are unclear, you can follow up with additional questions. These may or may not receive answers depending on the timeframe remaining for submissions.
  4. No response? Consider whether a protest is appropriate.

Bid protests are time-sensitive and costly. In order to make your proposal competitive from the start, resolve ambiguities with the contracting officer as early as you can. However, if you truly aren’t able to get answers and lose an award because of ambiguities in the RFP, a protest may be the best way to obtain a satisfactory resolution. A good government contract lawyer can carefully evaluate the merits of any protest to make sure you are able to make an informed decision about your options.

Whether you’re struggling to resolve ambiguities in an RFP or considering a bid protest, Randolph Law is here to help. 

Contact us to learn more. 

Making the Most of Your Debrief

If you have responded to a FAR Part 15 RFP or to a FAR part 16 Task Order or Delivery Order RFP, you are entitled to a debrief. You should make the most of the opportunity.

If you have responded to a FAR Part 12 Commercial Items solicitation or to a FAR Part 8 GSA Schedule Task or Delivery Order RFP or RFQ, you are not entitled to a debriefing, you are only entitled to a “brief explanation” of the reasons for the decision. You may not receive as thorough of an explanation for the award decision, but you should nevertheless use this same guidelines to make the most of that explanation as well.

Asking for a Debrief

You must ask for a debrief within three days of when you receive your notice that either you have not been selected for award, of you’ve been down-selected in an initial or multi-round selection process.

Always ask for a debrief. There is almost always no downside to ask for a debrief. The only time you may not want to ask for a debrief is if you have already decided to file a bid protest, and you’re concerned that the Agency will drag their feet (sometimes for weeks or months) on giving the debrief, leaving you unable to file you protest; since once you’ve asked for a debrief you are not allowed to protest until the debrief is completed.

Preparing for Your Debriefing

If your debriefing will take place in person or via telephone, you can prepare in advance to get the best information out of the time you have.

Think about what you want to accomplish. There are two simple questions you should aim to have answered by the time you finish:

  1. Why did you lose the bid?
  2. Why does the government say you lost the bid?

Sometimes, these answers will be the same. Other times, the requesting agency will have a favored contractor, and the government may simply say that your proposal was not as good as the winner’s. An in-person or telephone debriefing can be used to determine whether or not you have grounds to protest the award.

Once you’ve given some thought to the outcome, prepare questions that will help you walk away with the information you’re after. Your questions should be directed to the specific issues identified in the award notice. In some cases, you may choose to include members of your technical team or legal counsel in the debriefing in order to address critical concerns. Be aware of the following considerations:

  • Don’t allow technical people to get mired in minutiae, and detract from your overall purpose. Make sure that anyone who attends the debriefing understands that a high-level discussion is in order.
  • Bringing your attorney has the potential to help you get accurate answers from the contracting officer and translate his or her statements into layman’s terms. However, having a lawyer present may also cause the contracting officer to clam up for fear of saying anything that might lead to a bid protest. Weigh your options.

Setting the Tone & Gathering Information

As with any business meeting, a professional tone is required. You aren’t there to convince the contracting officer to award you the contract. Be mindful of your ability to work with the contracting officer and the agency he or she represents in the future. Be firm in your request for information, but maintain a positive working relationship at the same time.

Another thing to keep in mind is how to cut through the buzzwords to ensure that you leave with the information you need. Don’t use industry-speak, and challenge any buzzwords the contracting officer is using to explain why you lost the contract. Phrases like “best value” and similar terms are non-specific and therefore, unhelpful. Acronyms, too, can be a source of confusion. Demand clear, specific language.

Concluding Your Debriefing

At the end of the meeting, you should have some sense of whether or not a bid protest is in order. If it is, start your clock and get to work; bid protests are highly time-sensitive, and in most cases, you have no more than 10 days to protest, which is effectively five days if you want a CICA stay.

If you decide that a protest isn’t warranted, take the information you received at the debriefing and apply it to future RFPs. What that looks like will depend on your business and what you discover at the debriefing, but in all cases, the information will make you more competitive in the future. Remember, usable knowledge is the ultimate goal of any debriefing.

 

Do you need assistance preparing for a debriefing or working with the federal government in another capacity? Our experienced team can provide a legal consultation for your business. Contact us today to discuss your needs!

 

 

Important News and Notes for Government Contractors

Randolph Law has put together a round-up of recent news and regulatory changes that impact government contractors today. Read on to learn more about upcoming compliance issues, changes in regulations, and opportunities for government contractors. 

The Projected Impact of the Trump Administration on Government Contractors

Government contractors no longer need to disclose potential labor violations when bidding on a contract, as per President Trump’s repeal of the Fair Pay and Safe Workplaces executive order. Federal contractors should be aware that the Trump administration is expected to preserve Executive Order 11246, which forbids discrimination on the basis of gender or sexual orientation. However, questions remain about how the administration will handle Executive Order 13706, which requires paid sick leave for workers on federal contracts.

“Buy American & Hire American” Order Could Impact Federal Contractors

While the federal government has always maintained requirements that favor buying American-made products and hiring American contractors, Trump’s April 18thBuy American & Hire American” order attempts to strengthen those requirements and increase preference for U.S. manufacturing and employment. It’s recommended that federal contractors take care to evaluate their existing compliance policies in preparation for the order’s enforcement and the similar government contract regulations that can be expected in the near future.

Digital Services Acquisition Training to Expand

In an effort to combat recent backslides in IT modernization and innovation, the federal government is preparing to increase agile acquisition efforts. The U.S. Digital Services department will be working alongside federal agencies to improve agile procurement and scale up the Digital IT Acquisition Professional Training Program for contracting officers. Ultimately, federal contractors in the IT space should have more opportunities to work with the government and influence technological innovation.

Contractors Who Use Standard Confidentiality Language May Be Disqualified

Raising a compliance issue for federal contractors, FAR 52.203-19 prohibits contractors from requiring their employees or subcontractors to sign a standard agreement that might prevent them from reporting fraud, waste, or abuse while working on a federal contract. Contractors must cease to use such confidentiality agreements and must notify all of their employees – even those not currently working on a federal contract – that the agreements no longer apply.

Do you have questions about remaining in compliance with federal regulations or expanding your opportunities with the federal government? Contact Randolph Law’s team of government contract attorneys for assistance.

Who Owns the Code? Spotlight on Intellectual Property in Software Development

(This article originally appeared in the Association of Software Professionals newsletter, in February 2009).

Re-usable code is a key component of any developer’s toolkit, and creating and owning re-usable code is a critical step in the process of creating a profitable software development business. Whether the code consists of web-site management scripts, “black box” modules or self-contained classes contributed to larger projects, re-usable code is the centerpiece of modern object-oriented and rapid-prototyping design principals. To fully leverage the power of re-usable code, however, you must understand the legal framework that defines who owns that code.

I assume for the purposes of this article that the code at issue is copyrightable. Some of the most basic code fragments, for example a simple “for” loop to iterate through an array of objects and perform some action on each object, may not be copyrightable at all. Most larger code segments, however, are copyrightable.

Copyright Law Creates A Framework For Software Ownership

Ownership of the copyright in software code is important because the copyright owner controls the ability to copy, distribute, sell, or modify the code, and generally controls the ability to profit from the code. Under copyright law, the author of a line of software code is the owner of the copyright in that code. That is, the person who physically puts fingers to the keyboard and types out the sequence of words and symbols that constitutes a line of software code is the “author” and owns the copyright to the code. A copy-right is created by federal law and consists of six rights the owner of a “work” has to the exclusion of any other person or business. Four of these rights are applicable to software code. Those are:

  1. The right to reproduce the code
  2. The right to create “derivative works” based on the code, such as the screen display that the code generates, future versions of the software, or other software programs into which the code is integrated
  3. The right to distribute copies of the code
  4. The right to “display” the code, for example by posting to a web site. (17 U.S.C. § 106)

Applying the basic law of copyright to software development, if you personally write a class or a module, you own the copyright to that class or module. If you write a website in html, or a website display script in a scripting language like PHP or ASP.NET, you own the copyright to those lines of code you wrote. You are free to re-use that code in any way you like, and no other person or entity can legally use that code without your permission.

The basic rule is subject to several exceptions. In the software world, there are three exceptions so common they swallow the rule. A more nuanced and practical understanding of the role of copyright in re-usable code requires as much understanding of the exceptions as the basic rules. The three exceptions to the basic rule of copyright ownership most prevalent in the context of software development are the “work-made-for-hire” rule, the “License or Assignment” clause in a development contract, and the unique situation encountered when developing on an “Open Source” platform.

The “work-made-for-hire” doctrine generally defines the relationship between a software developer and his or her client.

A segment of software code is a “work-made-for-hire” if it is either:

a) A work prepared by an employee in the scope of his or her employment; or

b) a work specially ordered or commissioned for use as [1] a contribution to a collective work, [2] as a part of a motion picture or [3] other audiovisual work, [4] as a translation, [5] as a supplementary work, [6] as a compilation, [7] as an instructional text, [8] as a test, [9] as answer material for a test, or [10] as an atlas, if the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire. (17 U.S.C. § 101)

In either situation, the author of the code does not own the copyright in the code, as would be expected under the basic copyright framework. Rather, the person or business that employs the author or that commissioned the software owns the copyright in the code.

When a developer creates software as an employee, determining ownership of that software under the “work-made-for-hire” rule is relatively straightforward. Any work a developer creates within the scope of his or her employment is owned by the employer. Analysis of whether work is “within the scope of employment” can be extremely complex. However, at its most basic, if a developer writes a particular piece of software for work, his or her employer owns the copyright to that software.

When a developer creates software as a contractor, analyzing who owns the copyright in code created as a result of that relationship becomes both more complex and more important. Courts and legal analysts use a three-part test to determine whether the developer or the client owns a particular segment or module of code. First, the work must have been specially ordered or commissioned. Second, the work must specifically fall within one of the ten categories enumerated in part (b) of the “work-made-for-hire” rule. If the work at issue does not fall within one of the enumerated categories, it cannot ever be a “work-made-for-hire.” Almost all software code is consumer-facing code and will fall under category three, audio-visual work, although some software without a human-readable interface may not fall under any of the ten enumerated categories. Third, and most significant, a commissioned and copyrightable work will only be considered “work-made-for-hire” owned by the client if the parties have a written agreement signed by the developer that explicitly states that the work is “work-made-for-hire.”

If a particular piece of software is a “work-made-for-hire,” the employer or client that commissioned the code owns the copyright in it. In order for the developer to have any right to use the software later or in different projects, the developer must negotiate a license to the software in the same way any third-party would.

Outside of “work-made-for-hire,” almost every development engagement includes some arrangement for the ownership, assignment, or licensing of the software.

The original author or any other owner can also transfer or share copyright rights to or with others through an assignment of the copyright or a license of the copyright. These two concepts should not be confused. An assignment is a grant of all of the rights of the author in the copyright to another party. If the developer assigns his rights to code he or she has written, the developer no longer has any right to the code, and must license the code from the new owner to have the right to re-use it. Additionally, for an assignment to be binding, it must be made in writing, and must be signed by the developer. Any alleged verbal assignment of copyright rights will be considered a license of those rights and not an assignment.

A license, in contrast, is a grant of permission to use the code without giving up ownership of the code. If assigning copyright in software is like selling your house, licensing copyrighted software is like renting your house. A license can range from a mere right to use the software, module, script, or class in the completed software, to granting rights to re-write the software or create derivative software from it, all the way up to all of the rights to the code that the original creator has. A license can be exclusive in the sense that the author agrees not to license the code to anyone else in a particular geographic region, industry, for a period of time, or at all, or it can be non-exclusive in the sense that the licensee is only one of several concurrent licensees, each with the same or overlapping rights. Importantly, the terms of licenses are interpreted according to the contract rules of your local jurisdiction. Therefore it is extremely important that the parties understand exactly what they are agreeing to before coming to an agreement.

Licenses and assignments are the two building blocks of software development agreements, and should be a part of every software development contract. If software is not a work-made-for-hire, or the software copyright is not either expressly assigned to the client or licensed to the client at the end of the development project, then the client will infringe the developer’s copyrights in the code every time the client uses that code. Therefore, every well written software development contract will contain a clause designating the code a work-made-for-hire, assigning the code to the client on completion, or granting the client a license to use the code on completion.

Putting it Together, A Sample Contract Clause

It is not uncommon for contracts to have a clause or series of clauses addressing all three of the above ideas, work-made-for-hire, license, and assignment. Below is an example of a typical section addressing copyright partitioning:

The copyright in all works of authorship created pursuant to this agreement are owned by Client. All such works or portions of works created by Developer are “works made for hire” as defined in 17 U.S.C. § 201. Developer assigns to Clients all right, title, and interest in:

(a) The copyright to all works of authorship (“Work”) and contribution to any such Work (“Contribution”) created pursuant to this agreement;

(b) Any registrations and copyright applications, along with any renewals and extensions thereof, relating to the Contribution or the Work;
(c) All works based upon, derived from, or incorporating the Contribution or the Work;

(d) All income, royalties, damages, claims and payments now or hereafter due or payable with respect to the Contribution or the Work;

(e) All causes of action, either in law or in equity, for past, present, or future infringement of copyright related to the Contribution or the Work, and all rights corresponding to any of the foregoing, throughout the world.

Developer may use the Work only until Developer delivers a final product to Client, and may use the Work only insomuch as such use is necessary to the creation of the final product. Client grants no license to developer for any use of the Work other than as expressly described herein. Developer must request a separate license from Clients for any use of the Work other than as expressly described herein. Such license must be explicitly granted in writing, signed by Client, or it is void. Should a court of law with jurisdiction over the parties and the subject matter of this contract deem the Work not a “work for hire,” and should a court of law with jurisdiction over the parties and the subject matter judge the above assignment of copyright void, Developer grants Client an exclusive, royalty-free, irrevocable worldwide license to use the Work without limitation in any manner Client deems appropriate.

This clause attempts to cover each of the bases for the client to control the work, first by asserting that the work is a work-made-for-hire, then, by assigning the work to the client, and licensing back only the rights to the code necessary for the Developer to work on the project at issue, and finally, by granting the client an unlimited license for use of the work, in the event a court deems the code neither a work-made-for-hire, nor lawfully assigned. This particular example gives all of the rights to the code to the client. Of course, each of the component parts of this clause can and should be negotiated beforehand. Under a contract containing the clause above, the developer would not be allowed to re-use the code developed for the project. In negotiations, the savvy developer must understand each of the components to the above clause, and understand the ownership interest in the code each clause represents.

Open-source software platforms complicate the ownership of code

Open-source software is ubiquitous today, and it is impossible to develop software without encountering some form of open-source code, either as a platform on which to develop your software or as a component of your software. The key to understanding the implications of open source software on development is the understanding that open-source software, while free, is not in the “public domain.” Open-source software is copyrighted software, the proper use of which is mandated according to the particular terms of the license. Importantly for developers, derivative software that is based on open-source software must generally conform to the terms of the original open source license, while software written to perform on an open-source platform need not. For example, if you write a flavor of Linux for use with a particular hardware suite, you must grant access to your source code in the same way you have been granted access to the Linux source code. Conversely, if you write a program to run on the Linux operating system, you need not conform to the GPL 2 open source license under which Linux is released, because in that case, Linux, while necessary for your software to function, is not a component of your software. In copyright terminology, your software is not a “derivative work” of Linux.

On the distribution side, if you choose to release your software under an open-source license, be aware that there are different flavors of open-source licenses. (See, for example, the Wikipedia entry on “Open Source Licenses”describing, comparing and contrasting many of the licenses.

Each flavor allows users of the software to do slightly different things, places slightly different restrictions on the user’s use of your software, and grants slightly different remedies in the event a user breaches the open source agreement.

What It All Means

There are a number of things you can do while negotiating a development agreement to ensure that you can fully leverage the power of re-usable code, and that your interests in the code you write are protected. The following are a sample of the most important things you should consider before you write a single line of code:

Get agreement in writing on ownership of the code before you write a line of code: In almost every aspect, copyright law defers to the agreement between the parties. Before you start writing code for a project, make sure that both you and the client completely understand each other’s expectations for who will own the copyright in the code and what rights the respective parties will have to use the code when the project is over.

Clearly define what pre-built code you are bringing to the engagement versus what code you are writing to the specifications of the client: Often projects are a mix of pre-created code and custom written code. Make sure that the agreement spells out what components you created prior to the engagement, and what components you will write specifically for this project. While you will own the copyright to anything you wrote before beginning the engagement, you do not want the question of ownership of your entire software toolkit left open if there is an eventual conflict. Spell it out beforehand.

If possible, retain ownership of the code and license it to the client: Your code is valuable. It may be that the client only wants the security of knowing you will not revoke their right to use the code and walk away from a half-completed website, or they may be concerned about you re-selling an idea they feel they have an ownership interest in to a direct competitor. All of this should be part of your negotiation. If you can satisfy your client’s desire for security and assurances of a well-built, sophisticated web site, script, class, or module, without assigning the code to them, try to keep ownership of the code and license it to the client, rather than assigning it to them, or having them own the copyright outright under the work-made-for-hire doctrine.

Use ownership of the code as a negotiating point: A developer generally owns the code he or she creates. If the client insists on ownership, or an exclusive license to that code, use that to negotiate. You can ask that the client pay a premium for exclusive rights to the code, or ownership of the code. You can ask for a license back to create derivative software based on the code, and grant the client ownership of the code, again for a premium rate. Whatever you and your client decide, however, make sure that both sides are clear on the terms of the agreement, on what the words, such as “ownership,” “license,” “author,” or “work-made-for-hire,” actually mean, and, of course, abide by the agreement once it’s completed.

Be aware of open source restrictions: “Open-source” does not mean free for everyone to use in any way they like. Open source contracts are binding, and will be enforced. If you write code on an open source platform, read the license and abide by its terms. Make the client aware of any restrictions in their use of your code that may flow from use of an open-source platform.

Write it all down and sign it: Each of the key components of copyright law require a written agreement, signed by the parties. Without a written agreement, and without the parties’ signature, copyright law defaults to the basic rule described above. While it may seem advantageous as a developer to leave an agreement unsigned, because the default rule typically grants ownership to that developer, remember that your work for a client and their satisfaction is based on your performance against their expectations. If the client expects sole ownership of a code segment, and you have agreed to it, don’t use the signatory requirements of copyright law as leverage after the fact to change the agreement.

When in doubt, consult a lawyer: Lawyers in this situation act as insurance. Like buying insurance, hiring a lawyer to review your contract can seem like an unnecessary up-front expense. However, the up-front cost of consulting with a lawyer before you negotiate an agreement can save a huge amount of frustration, wasted effort, and money in the long term by ensuring that any agreement you sign reflects your understanding of the agreement you negotiated, and that both parties understand the terms that they have agreed to. The price of not having a properly negotiated and signed agreement could mean losing all copyright rights and control of the code.

Concerned about copyrights? Contact us with your intellectual property law questions.

Answers to The Most Common 8(a) Questions

We get calls all the time from people and companies interested in registering for the Federal 8(a) Business Development program. Here are some of the most common questions about the 8(a) program. These are just some of the things you have to think about when looking to get 8(a) Certified, but they are some of the most common issues that come up with our clients and potential clients.

1. Can I get an 8(a) if I just started my business

By regulation, yes, but as a practical matter, no. By regulation you can file an 8(a) application immediately on starting a new business. But there is generally a requirement that demands two years of business history. You can request a waiver of that requirement, but in our experience those waivers are rarely if ever granted. We generally recommend that you file after two years of business. Waiting out the two years means you don’t have to request a waiver, which vastly simplifies the process. It also means you can address other issues you might have if you file right when you start the business. For example, the “full time working” for the 8(a) requirement, and the “more than one client” requirement.

2. My firm has one client, can I get my 8(a)?

No. You have to have no more than 70% of your revenue from any single client. SBA will accept evidence that you are soon going to have more than one client if you’ve just signed a contract for your second client, but generally, you should have two clients.

That also means that if you have just set up your consulting company, and you’re working for your former employer, you won’t meet this requirement. The 8(a) program is designed for companies, not for consultants who have decided it would be better to consult as a 1099. If you want to be 8(a) registered, go find more work, stop working on-site as a direct bill, and develop your business. It will be easier for you to successfully register as an 8(a), and you will be more successful in general as you develop your federal contracting business.

3. Does my husband’s / wife’s salary count towards my annual income?

Maybe. Does your spouse work in the 8(a) or has your spouse contributed to the 8(a)’s development, either as an officer, a director, a landlord, a client, or an employee? If so, your spouse’s salary may count towards your annual income. If not, it likely won’t.

4. I’m working full-time and have just started this business, can I get 8(a) certified?

No. You have to be working full-time for the 8(a), and while there are occasionally cases that suggest that your full-time 8(a) work could, maybe, not be 9-5, the general rule is that you have to work 9-5 for the 8(a) certified company.

This relates back to the question about having more than one client and the “I just set up the business” question. The 8(a) program is designed for small but growing businesses, not for consultants and not for startups. You’re better off focusing on growing your business so you can quit your full-time job and join that business, then applying for 8(a).

5. Does an 8(a) Certification mean I will get money from the Federal Government?

I’m surprised that we sometimes get this question. The answer is a resounding “No.” The 8(a) program is not a grant or a loan program. It is a certification program that will make your business more competitive in seeking out and winning federal contracts. BUT, being 8(a) certified doesn’t mean you get any contracts. It means that you should go out and find work, go out and develop business, and apply to win the contracts that you are entitled to compete for as a result of your certification status.

 

For more information about becoming 8(a) certified, contact us today.

 

What the Heck is a HUBZone?

We regularly take calls from people and companies that are interested in registering in the HUBZone program. Believe it or not, it’s the simplest of the Socio-Economic set asides in principle. Well, maybe the Woman Owned Small Business (WOSB) designation is simpler. Are you a woman? Do you own and operate the company? Prove it and you’re certified. Actually, so is Veteran Owned (Veteran? Own and operate the company?), and so is Service-Disabled Veteran Owned (Veteran? Service-disabled? Own and operate the company?).

Ok maybe HUBZone’s not the most straightforward, but in principle it’s fairly simple:

  • Your primary business location must be located in a HUBZone
  • More than 35% of your employees must live in a HUBZone

Of course, in application, it isn’t quite that easy, and that’s where we come in. Here are the requirements broken down into their component parts:

1. What’s a HUBZone?

“HUBZone” stands for Historically Underutilized Business Zone. These are tracts designated by the Census as historically under-utilized by business. You can find them on this HUBZone Map.

They are updated as often as several times a year. If you are in a HUBZone and the HUBZone is scheduled to be  de-designated, you will have a period of time to move your primary business location to another HUBZone.

2. What does it mean to be “located in” a HUBZone?

That’s the easiest one. Your physical address has to be there. But, whatever the address is, whether your “primary business location,” or an employee’s residence, it has to be legit. No virtual offices (you can rent space in a place that also houses virtual offices but your office space must be big enough to house the number of people you claim work there). No employees living at relatives’ houses.

3. What’s “Your primary business location”?

That is the place of business, other than a client site, where the largest number of employees work. For most service companies, it’s the headquarters which is where all your back-office people are located, and likely where some of your on-contract people are located, too. It could, however, be a regional office if your regional employees aren’t on a client site and there’s more of them than at your headquarters.

For products and some services companies, it could be a factory, manufacturing, distribution, or warehousing facility other than your headquarters if the two are separated and if you have more workers at that location than you have at your headquarters.

4. What’s an “employee”?

Start with your W-2s. Those are all employees if they work more than 40 hours per month, which is roughly 10 hours per week (but note the requirement is monthly, not weekly). Others such as 1099s or volunteers could be considered employees depending on the type of work they do.

5. What does “35%” mean?

Just that. 35%. The difficulty is not in the percentage itself, it’s in maintaining the percentage as your company grows. For example, if a company has one employee, that employee has to live in a HUBZone. If there are two employees, one of the two has to live in a HUBZone. So if there are two partners, one should live in a HUBZone. But when those two partners hire a 3rd employee, that employee must live in a HUBZone (one of three is only 33%). The 4th does not (two of four), and neither does the fifth in this scenario (two of five is 40%).

Another issue arises when a service company gets a large contract. If you have 10 employees and five live in a HUBZone, when you get your big win for 10 more employees, you have to make sure that at least two of those 10 lives in a HUBZone to keep you at 35% (seven of 20). Plus, you may want to maintain a cushion so that an unexpected resignation does not take you immediately out of compliance.

6. What does “live in a HUBZone” mean?

Your employees’ primary residence. The meaning of this is often pretty clear, but the proof required may not be. If you have interns, employees who have recently moved, or an otherwise fluid workforce, you may have employees who don’t live at the address on their drivers’ license. You can use voter registration cards, leases, mortgages, or utility bills to prove an employee’s address, but for anything “non standard” you have to have an affidavit signed by the employee explaining why they don’t live where their identification card says they live. That can become difficult to obtain particularly in the “look-back” period I talk about below if your HUBZone status is challenged.

7. And finally, what happens next?

You file for and receive your HUBZone certification. But that’s not it. HUBZone is a perpetual program, meaning that as long as you fit all the HUBZone requirements – and you are a small business – you remain in the program.

But, there’s a catch: record-keeping. You must not only comply with the requirements, you must keep records that demonstrate your compliance. If your HUBZone status is protested, the SBA will determine that status based on two points in time: (1) When you submitted your proposal; and (2) When the contract is awarded. Those two points can be months to over a year or two years apart. If your status is protested, you will have to produce at least 4 weeks of payroll records and other records demonstrating your HUBZone status on each of those two dates.

Keep your records, and you’ll avoid a lot of difficulty if your status is challenged.

Do you have questions about becoming HUBZone certified? Contact Randolph Law to learn more about the program and how HUBZone certification can open the door for government contract opportunities.