Sunset Provision Eliminates the Right to Protest Civilian Task Orders Over $10M

Starting October 1, and ending whenever Congress passes the 2017 NDAA, you can no longer protest civilian agency task orders, no matter the value, except in very limited circumstances that almost never occur.

WHAT?

It’s conventional wisdom that you can’t protest task order awards under $10M, but you can protest task order awards over $10M.

This conventional wisdom has a basis in law. Specifically, for Department of Defense contracts, 41 USC 4106, and for civilian agency contracts, 10 USC 2304c.

These two sections of the law are identical as regards task order protests – they both say to start that you cannot protest task order awards. But, that you can protest a task order award above $10M, and GAO has exclusive jurisdiction over those task order protests, and you can protest a task order in other very limited circumstances (that almost never occur).

The civilian law, though, contains a very important additional clause. It contains a sunset provision that eliminates the right to protest a task order over $10M as of September 30, meaning that after that date you can’t protest task order awards at all (except in limited circumstances, etc., etc.)

WHAT ABOUT THE 2017 NDAA?

Congress, both House and Senate, have clauses in the 2017 NDAA that remove the sunset clause and restore the clause that allows you to protest task orders over $10M at the GAO.

By way of background, the “NDAA” is the National Defense Authorization Act. It is the bill that funds the Department of Defense, and of critical importance to federal contractors, it is often (along with the Small Business Act) the primary means by which Congress makes changes to the laws regarding federal contractors.

Reaching way back to remembering how a bill becomes a law, the House and Senate each pass their versions of a bill, then get together in what is called “conference” to work out any differences. Once those differences are worked out, the revised bill is approved again by both the House and Senate, and goes to the President for signature or veto. If the President signs the bill, it becomes a law.

Right now, both the House and Senate have passed their versions of the 2017 NDAA, and the bill is in conference for the differences between the two versions to be worked out. But…it’s an election year, and things move very slowly in Congress during an election year.

Of note, the Senate version of the 2017 NDAA makes huge changes to the GAO bid protest rules. Huge changes worthy of discussion, but that’s beyond the scope of this post, and it remains to be seen whether those changes will make it out of conference into the joint bill.

HAS THIS EVER HAPPENED BEFORE?

Yep. In 2011 the same thing happened. There existed a sunset clause in both the civilian and DoD versions of the law, except that sunset clause eliminated the entire prohibition on task order protests, meaning that for a period of time you could protest any task order – civilian or DoD, of any value – in any forum Agency, GAO, or Court of Federal Claims.

The 2012 NDAA reinstated the task order prohibition and the $10M exception and removed the sunset clause from the DoD version of the law, while setting the civilian sunset to 2016, and making the civilian sunset only apply to the $10M exception.

And here we are.

WHAT ABOUT THOSE ‘LIMITED CIRCUMSTANCES’?

You can always protest on the grounds that the task order increases the scope of the IDIQ, the period of the IDIQ, or the maximum value of the IDIQ. You’ve always been able to bring those protests in any one of the three protest forums – GAO, Agency, or Court of Federal Claims. And none of that changes.

But situations where a task order increases the value or the period of an IDIQ are almost non-existent, and situations where a task order increases the scope of an IDIQ are extremely rare.

So while you still have recourse in those situations, those situations don’t happen that often.

WHAT SHOULD I DO?

Just keep in mind that beginning October 1 for some undefined period of time, likely at least until after the election in November, and possibly through the winter, you can’t protest civilian task order awards for any of the run of the mill reasons that you’ll commonly see in government procurements.

Be extra careful in your civilian procurements this fall and winter and know that for some period of time you will have no recourse if you think you’ve been treated unfairly.

If you have questions about this or other government contract issues, don’t hesitate to contact Christopher Shiplett or Danielle Hart for assistance.

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Government contract regulations and business laws are always changing.

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SBA Proposed Rules Implementing NDAA 2013

There are several important changes proposed in SBA’s rules for Small Business government contractors in this notice of proposed rule-making. The changes are to implement sections of the National Defense Authorization Act of 2013. While some of the changes are ministerial, some have the potential to have a profound impact on small business prime contractors. Here are a few of my -not comprehensive- thoughts:

1) The SBA proposes changing the limitations on subcontracting language in the SBA regulations from “performance of work” to “limitations on subcontracting” and focusing its attention on how much work is subcontracted, rather than how much work the prime contractor performs.

This is a subtle change that the SBA appears to have significant concerns about, and appears to be the primary section of the proposed rule changes on which the SBA seeks public comment. Specifically, the current rules require the prime contract holding small business to perform a certain percentage of the work. The proposed new rules, in conformance with the NDAA 2013 requirements, will forbid the prime contract holding small business from subcontracting out more than an expressed percentage of the work to non-small business subcontractors.

While this seems to be primarily a semantic change, the SBA’s main concern is that is appears that the specific required wording of the changed regulations, when combined with the proposed regulation change exempting “similarly situated businesses” (read small businesses) from the prime’s limitation on subcontracting analysis will allow small businesses to potentially “hide” large business subcontractors by moving them down a tier. For example, a HUBZone concern could subcontract out 90% of a service contract to a second HUBZone concern and remain in compliance with the limitations on subcontracting requirements, while that second HUBZone concern in turn subcontracts out 100% of its subcontract to a large business. The large business is now performing 90% of the work, but because the large business is at the third tier, there is no requirement to report its participation, and the prime contractor appears to be complying with its obligations under the limitations on subcontracting regulations.

2) The SBA is changing the source of figures for the calculation for “limitations on subcontracting” from the cost of the labor portion of the work – for service contracts – and the equivalent for manufacturers to the revenue received. Apart from issues like that described above, this will simplify life for prime contractors, who in my experience typically just use revenue received for their internal compliance calculations anyway, since it is often impossible to know what your subcontractors’ labor costs are (they will never tell you that, it’s proprietary and very, very competitively sensitive)

3) The SBA is removing “similarly situated” entities from the limitations on subcontracting analysis. Apart from the concerns the SBA has, described above, this appears to give small businesses greater teaming flexibility, in that the prime in a teaming arrangement is not required to strictly take over 50% of the work in-house, so long as over 50% of the revenue received remains within a small business concern.

4) The SBA is inserting language clarifying the role of PCRs (Procurement Center Representatives), specifically that PCRs are to be involved in review of potentially bundled contracts, and that PCRs are available to accept unsolicited proposals from small business concerns and forward those to the appropriate agency officials.

This brings up the point that PCRs in general are good resources for small businesses. If you don’t know the SBA PCR for the organization you are contracting with, you should find out, and contact that person and introduce yourself.

5) The SBA is inserting language codifying “economic dependence” for a rebuttable presumption of affiliation purposes as more than 70% of revenue from a single source in the prior fiscal year.

This codifies what has been the rule based on Office of Hearings and Appeals cases within the SBA for some time. It is good to have this in code because it gives the SBA first line reviewers of, for example, 8(a) applications, something solid to refer to. I have heard previously from SBA first line reviewers, for example, that they sometimes calculate the 70% “over the past three years” This also clarifies that the economic dependence is a presumption and can therefore be rebutted.

6) The SBA is inserting language codifying the “family members” for whom affiliation between entities is presumed as parents, children, married couples, and couples in a civil union. This is good because is gives SBA first line reviewers, and contractors, something certain to point to (I won’t have to argue that an aunt or an uncle is not a “family member” for affiliation, for example).

 

 

The are just a few of the things I’ve picked out of the proposes rules. There are a bunch more proposed rule changes, and all of these rule changes will to a greater or lesser extent change the framework within which small businesses work with the Federal Government in ways that those small businesses need to be aware of and track.

The proposed rules themselves can be found here: https://www.federalregister.gov/articles/2014/12/29/2014-29753/small-business-government-contracting-and-national-defense-authorization-act-of-2013-amendments