311th Human Systems Wingsbrock.ipower.com/presentations/20107956204a8323003bb57.pdfECOS $300M 68% NA NA 0 7 100% Sep 09 WERC $7.5B 77% 13% 43% 11 16 59.26% Nov/Dec 08 PRESS $88M 32%

I n t e g r i t y - S e r v i c e - E x c e l l e n c e

311th Human Systems Wing

Overview of All Major Small Business Programs

Mary S. Urey311 HSW/SB

210-536-434828 July 2009


Ongoing Changes

2009 has seen significant amount of regulatory and legislative activity across multiple SB programs

Some of what is presented today will change this year…this week….today

As of 8/1/2009 2


Administrative Announcement

Please use index cards provided to list your questions

Moderator will collect cards

Q&A at end to respond to submitted questions and additional questions as time allows

As of 8/1/2009 3


Agenda

NAICS CodesFY09 SB goals by categoryOverall trends on AFCEE contractsRothe Decision – 8(a) programDelex Decision – Rule of Two Mission Critical Solutions Decision – HUBZone priorityEA Engineering affiliation protest – LB ownership impactCongressional committee update of ANC 8(a) ProgramUpdate on HUBZONE programUpdate on Women Owned SB legislationUpdate on Service Disabled Veteran Owned Small BusinessJV’s, Affiliation, & Limitation on SubcontractingUpdate on Mentor Protégé Program

As of 8/1/2009 4


North American Industrial Classification System (NAICS) Codes

www.naics.com for an overview of NAICShttp://naics.com/search.htm for list of major categorieshttp://www.naics.com/naics23.htm for criteria for SB (e.g.: Construction)

For employee based size standards, SBA counts all individuals employed by firm on any basis. SBA bases size on number of employees for each of the pay periods for preceding completed 12months

Firms not in business for 12 months - SBA uses average number of employees for each pay period been in business

For revenue based size standards, SBA uses annual receipts of firms most recently completed three fiscal years divided by three

Firm in business less than three completed fiscal years - SBA uses receipts for period of time been in business divided by number of weeks been in business multiplied by 52

SBA continually reviews, no major changes pendingAs of 8/1/2009 5


NAICS Codes Home Pagewww.naics.com

for an overview of NAICS

As of 8/1/2009 6


NAICS Codes Search

As of 8/1/2009 7


Code 23 Drill-Down

As of 8/1/2009 8


SB Size Standards13 CFR 121.201

Sector 23 – ConstructionSubsector 236 – Construction of Buildings

236115 New Single-Family Housing Construction (except Operative Builders)

$33.5

236116 New Multifamily Housing Construction (except Operative Builders)

$33.5

236117 New Housing Operative Builders

$33.5

236118 Residential Remodelers $33.5

236210 Industrial Building Construction

$33.5

236220 Commercial and Institutional Building Construction

$33.5

As of 8/1/2009 9


SB Size Standards13 CFR 121.201

Subsector 562 – Waste Management and Remediation Services562111 Solid Waste Collection $12.5562112 Hazardous Waste Collection $12.5562119 Other Waste Collection $12.5562211 Hazardous Waste Treatment and Disposal $12.5562212 Solid Waste Landfill $12.5562213 Solid Waste Combustors and Incinerators $12.5562219 Other Nonhazardous Waste Treatment

and Disposal$12.5

562910 Remediation Services $14.0Except, Environmental Remediation Services14 50014

562920 Materials Recovery Facilities $12.5562991 Septic Tank and Related Services $7.0562998 All Other Miscellaneous Waste

Management Services$7.0

As of 8/1/2009 10


FY09 SB Goals by Category

DOD USAF AFMC ASCHSW

(AFCEE)

FY08HSW GOAL/

ACH'D

SB 23% 20.77% 18% 6.8% 23%23%

23.48%

SDB 5.8% 5.89% 3.33% 1.02% 13%12%

14.47%

WOSB 5% 4.06% 3.55% 2.35% 1.4%1.4%1.16%

HUBZone 3% 2.54% 1.78% 0.4% 0.5%.5%

1.3%

SDVOSB 3% 2.34% 1.53% 0.22% 0.5%.5%.37%

As of 8/1/2009 11


AFCEE SB Awards as of 31 Mar 09

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

FY09 Wing Goal 23.0% 13.0% 1.4% 0.5% 0.5%FY09 2nd Qtr 9.73% 3.49% 0.08% 0.046% 0.15%FY08 19.22% 8.19% 0.24% 0.49% 0.18%FY07 19.38% 8.27% 0.73% 0.17% 0.00%

SB SDB WOB HBZ SDVOB

FY09 - Dollars ($M)

SB Base $268.5SB $26.1SDB $9.3WOB $212K HUBZone $122KSDVOSB $408K

As of 8/1/2009 12


Current Programsas of 31 Mar 09

Program Ceiling CeilingStatus

Internal SBGoal

Internal SBActual

# ofLB

# of SB

% of SB

OrderingPeriod

ISE&AS $48M 63% NA NA 1 0 0% May 09

GEITA 05 $850M 53% 23% 26% 3 2 40% Dec 09

DBP03 (8a) $400M 21% NA NA 0 6 100% Dec 08

DBP03 (LB) $2.1B 31% NA NA 9 0 0% Dec 08

FUELS A-E $25M 60% 0% 5% 5 1 16.67% Feb 10

ECOS $300M 68% NA NA 0 7 100% Sep 09

WERC $7.5B 77% 13% 43% 11 16 59.26% Nov/Dec 08

PRESS $88M 32% 15% 17% 3 1 25% Sep 10

HERC $6B 63% 10% 5% 15 4 21.05% Apr 11

DBR2 $400M 50% 0% 23% 4 4 50% Sep 14

4PAE08 $3B 20% 17% 23% 15 14 48.28% Feb 13

PCM $73M 28% NA NA 1 0 0% Mar 13

3 Admin Supt $27M varies NA NA 0 3 100% varies

Total $21.05B 67 58 46.40%

As of 8/1/2009 13


Current Programs

ISE&AS Independent Systems Engineering & Acquisition SupportGEITA05 Global Engineering, Integration & Technical Asst 2005 DBP03+ Design Build Plus 2003 Fuels A-E FuelsECOS Environmental, Construction and Operations & Services WERC Worldwide Environmental Restoration & Construction PRESS Privatization Real Estate Support Services HERC Heavy Engineering Repair & ConstructionDBR2 Design-Build, Restore, Remediate

4PAE08 Worldwide Planning, Program, and DesignPCM Post Closing Management (PCM) Admin Includes IT, Contracting, and Management Support

As of 8/1/2009 14


4PAE08 OverviewOrdering Period: February 2008 – February 2013

Performance Period continues thru February 2016

Ceiling: $3B ceiling

Awards : 29NAICS Code 562910 = 500 employees

Environmental Remediation Services19 Full and Open awards (15 LB, 3 SB, and1 SDVOSB)7 Small Business awards (6 SB and 1 8a)2 8a awards1 SDVOSB

Obligations as of 31 MarchTotal $381.3M Small Business $87.7M (23%)

As of 8/1/2009 15


TrendsObligation rate slower than 4PA&EMost LTOM/LTM moved from 4P to ECOS in 2008 Must have significant remedial process optimization to remain on 4POther services work moved to ECOS

RecompeteNo reason to assume this contract will not be recompetedRecompetes are not looked at until they are either near POP or ceiling

4PAE08 Overview (cont’d)

As of 8/1/2009 16


ECOS OverviewOrdering Period: March 2004 - September 2009

Performance Period continues through April 2011

Ceiling: $150M Increased to $300M

Awards: 7NAICS Code 562910 = 500 employees

Environmental Remediation Services100% Small Business Set-Aside5 SB and 2 8(a)

Obligations as of 31 MarchTotal $171M

As of 8/1/2009 17


TrendsObligation rate slow first two yearsBurn rate has significantly increasedMost LTOM/LTM moved from 4P to ECOS in 2008Other services work moved from 4P to ECOS

RecompeteECOS09 currently in source selection Proposals being evaluatedPlan to make award as soon as possible

ECOS Overview (cont’d)

As of 8/1/2009 18


HERC OverviewOrdering Period: April 2006 – April 2011

Three option yearsPerformance Period continues through April 2014

Ceiling: $6.0B

Awards: 19NAICS Code 236220 = $31M

Commercial and Institutional Building Construction15 Full and Open awards (15 LB)5 8(a) awards

One 8(a) contract terminated after LB acquired the 8(a)

Obligations as of 31 MarchTotal $2.9B8(a)’s $1.5M (5%)

As of 8/1/2009 19


HERC Overview (cont’d)

Trends2008 CONUS vs. OCONUS obligation was about equal2009 OCONUS most likely larger than CONUS due to increase in AOR fundingAOR could increase significantly for FY10 and FY11Several “Stimulus” projects set aside for 8a last quarterHERC task orders competed, best value applied, cost was significant

RecompeteWERC09, ECOS09, PRESS & GEITA10 ahead in the queueAFCEE will update via their websiteMay see partial SB set-asides due to Jun 08 OSD memo reinstituting SB set-asides under this NAICS Code

As of 8/1/2009 20


SB Competitiveness Demonstration Program

Unrestricted competition in designated industry groups (DIG)

Assess ability of small businesses to compete successfully in certain industry groups without use of restricted competition through small business set-asides

8(a), HUBZone, and SDVOSB set-asides still allowed

Participating agencies are required to reinstitute use of small business set-asides whenever contract awards fall below 40% under in any of the DIGs

FY07 DoD fell below the 40% under construction NAICS codes and small business set-asides were reinstituted

Remains to be seen what happens in futureAs of 8/1/2009 21


GEITA OverviewOrdering Period: December 2004 to December 2009

Performance Period cont’s through December 2010

Ceiling $850M

Awards: 5NAICS code 541620 = $7M

Environmental Consulting3 Full and Open awards (3 LB)2 Small Business awards (2 SB)

Obligations as of 31 MarchTotal $405M Small Business $105M (26%)

As of 8/1/2009 22


RecompeteGEITA10 is in market researchAnticipate $750M ceiling5 awards with 3 and 2 breakoutRFI released and is on websiteComments were due back on April 10th

Expect to see information shortly on acquisition milestones and assessment of number and type of awardsExpect same Organizational Conflict of Interest provisions

GEITA Overview (cont’d)

As of 8/1/2009 23


Privatization Real Estate Support Services (PRESS) Overview

Ordering Period: September 2005 – September 2010Performance Period cont’s through September 2012

Ceiling: $88M

Awards: 4NAICS Code 531390 = $2M

Other activities related to Real Estate3 Full and Open awards (3 LB)1 Small Business awards (1 SB)

Obligations through 31 MarchTotal $19M Small Business $3.23M (17%)

RecompeteProject RFP in early 2010See website for acquisition information and update

As of 8/1/2009 24


WERC 09 Overview

Active source selection so comments are limited

Discussions closed

Evaluations being completed

Awards expected as soon as possible

As of 8/1/2009 25


Environmental Operations and Services (EOS) Overview

Very early in the process

Details will be made available as soon as possible

Possibly placed in queue ahead of HERC recompete

Scope anticipated to be all services

Focus will be Service Contract Act work

LTOM/LTM; HAZMAT Pharmacy operation; RCRA waste collection operations; Other types of staffing support

As of 8/1/2009 26


Three recent cases brought before the GAO and the US Court of Appeals may have far reaching implications for the overall small business programs

Rothe Development Corporation (US Court of Appeals)Delex Systems Incorporated (GAO)Mission Critical Solutions (GAO)

Overview of Recent GAOand Court Decisions

As of 8/1/2009 27


Background on Legal Basis for 8(a) Set-Aside Program

1972 Small Business Act (section 8a) established what we currently know as the 8(a) program

10 USC 2323 prescribed goal of 5% of total obligated contracts and subcontracts for SDB’s and HBCU/MI’s

In addition, 10 USC 2323: Allowed for less than full and open competition with 10% price evaluation factor if agency not reached 5% goal

Note: DoD has met 5% goal since 1998 and has not used the evaluation factor since that time

Provides for technical assistance and infrastructure assistancePromotes partnerships between labs and institutes for trainingAllows for advance payments to SDB’s

From 1998 to 2008, Rothe successfully contested language in 10 USC 2323. All court decisions over this period address this law– did not include Small Business Act authorization of 8(a) program.

As of 8/1/2009 28


Highlights of Rothe CaseFrom late 1980’s to late 1990’s, Rothe held contract for computer support services. Late 1990’s AF consolidated that contract with contract for communications support.

RFP allowed for price evaluation adjustment factor of 10% for SDB’s

Rothe was low bid at $5.57M.

International Computer and Telecommunications, SDB firm (also 8(a)), bid $5.75M. After 10% was subtracted from their bid, they became low at $5.175M and received the contract

Rothe filed suit with District Court in Texas claiming 10 USC 2323 was unconstitutional under the Equal Protection of the Fifth Amendment

As of 8/1/2009 29


Highlights of Rothe Case (cont’d)

Rothe won. DoD appealed. For next 10 years, case went back and forth with one or the other winning and appealing.

Case turned on lack of “defensible data supporting claim that DOD needed to offset existing discrimination”.

DoD lacked strong basis in evidence when concluding that race-conscious contracting was necessary to remedy discrimination in defense industry

Without data to support claim of discrimination, no basis for 10USC 2323

November 2008 - Federal Appeals Court ruled in support of Rothe

February 2009 - US District Court in San Antonio denied DoD Entry of Injunctive Order and found 10 USC 2323 unconstitutional

As of 8/1/2009 30


Rothe Decision & 8(a) Program

10 Mar 09 DoD issued memo with preliminary guidance that contracts relying “exclusively” on the authority of 10 USC 2323 should cease

DoD continues 8(a) program despite injunction because injunctionwas issued against 10 USC 2323

Small Business Act gives statutory authority for all SB programsexcept HBCU/MI

Rothe decision does not affect Small Business Act

Only impact is DoD can no longer limit competition to HBCU/MI’s

Case being discussed by DOJ & OSD legal to determine further implications

As of 8/1/2009 31


Highlights of Delex CaseAug 03, Navy awarded multiple award, IDIQ contract to eight firms – four LB and four SB. Ceiling was $3B with eight year ordering period

Contract awardees all had right to compete for delivery orders. Navy reserved the right to solicit individual delivery orders onsmall business set-aside basis to meet Commander’s small business goals

22 May 08 delivery order RFP issued as small business set-aside with estimated value of $75M and five year period of performance

11 Jun 08 Navy modified basic contract to add FAR 52.219-28 Post Award Small Business Program Representation

Recertification of small business contract holders required prior to start of year six on basic contract

As of 8/1/2009 32


Highlights of Delex Case (cont’d)

16 Jun 08 CO requested each SB recertify their size status

17 Jun 08 CO posted notice that delivery order would now be unrestricted competition rather than small business set-aside

Recertification letters received between 17 and 20 Jun 08 . Two of four small businesses were now large businesses

CO prepared Memorandum for the Record stating: Field of “potential” small businesses narrowed down No guarantee proposals would be received from more than one SBPrevious competition of this requirement in FY03, where all contract holders were given fair opportunity to compete, resulted in only two small business proposalsScope and complexity was estimated at $75MAgency Small Business Advisor and SBA had “no objections” to CO decision to withdraw small business set-aside

As of 8/1/2009 33


Highlights of Delex Case (cont’d)

Navy report to GAO showed Agency Small Business Advisor disagreed with the rationale set forth in the memorandum and if CO decided to proceed a small business participation plan shouldbe incorporated to mitigate impact of this change

Delex complained to Agency and received negative response from contract Ombudsman. Delex filed GAO protest.

Delex argued that delivery order should have remained small business set-aside and that Navy erred in concluding no reasonable expectation of receiving offers from the two small business contract holders

Navy contends FAR 19.502-2(b), which sets forth Rule of Two, does not apply to delivery orders. Navy view was that set-aside requirements apply only to initial contract awards

As of 8/1/2009 34


Delex Decision GAO sustained Delex protest

GAO decision Rule of Two applies to all acquisitions over $100,000Task orders are properly viewed as acquisitionsRule of Two applies to task ordersTask orders must be set-aside for SB’s when reasonable expectation of receipt of two or more proposals and award can be made at fair and reasonable priceAssessment of availability of firms should include prior procurement history, market surveys and advice from appropriate Small Business Specialist to support CO decision to set-aside, or not, task ordersSet-aside, or not, determinations must be adequately supportedRule of Two does not conflict with Fair Opportunity

As of 8/1/2009 35


Delex Decision (cont’d)GAO decisions not binding on Federal Agencies without one of the following:

FAR Interim RuleOSD Policy MemoOFPP Policy Memo

11 Feb 08 Army Office of Legal Counsel issued memo to DoD Office of Legal Counsel proposing FAR revision that states Rule of Two does not apply to task and delivery orders of DoD multiple award contracts

No guidance from SAF/SB or SAF/AQC since November timeframe

Delex case being discussed with the legal communitiesWe are in a wait and see mode

As of 8/1/2009 36


Primer on FAR and Key Federal Agencies

CFR: Congress passes laws but specifics fleshed out in regulations contained in CFR

FAR: Procurement regulations for all Federal agenciesCFR and FAR not always in sync with each other

SBA: Agency created by the Small Business Act (1953)Regulations in CFR—and guidance can differ from FAR

OMB: Executive Branch/Largest cabinet officeOversees and coordinates the Administration's procurement, financial management, information, and regulatory policies.

GAO: "the investigative arm of Congress" and "the congressional watchdog” with power to audit, evaluate, investigate

Can’t dictate to Federal Agencies but…..

As of 8/1/2009 37


Highlights of Mission Critical Solutions (MCS) Case

Jan 08 Army awarded one year 8(a) sole source IT support services contract to MCS for $3.45M

Prior to recompete, Army restructured requirement adding scope and option years.

Anticipated value would exceed $3.5M. Sole source award to incumbent precluded by FAR 19.805-1

Army determined ANC firm was capable of performing effort

Jan 09 Army awarded contract to Copper River Information Technology, LLC

MCS protested to GAO challenging Army decision to make sole source award to Copper River, arguing HUBZone statute requires procurement to be set-aside for HUBZone competition

As of 8/1/2009 38


Highlights of MCS Case (cont’d)

GAO sustained MCS protest

GAO decision Improper to proceed with sole source award without considering whether set-aside for HUBZone concerns was requiredArmy did not make reasonable effort at market research to determine whether award could be made as required by HUBZone statuteDistinction made between mandatory language of HUBZone statute & discretionary language of 8(a) statute

All language says “shall” when referring to HUBZones8(a) statutory language gives CO discretion on deciding to offer to SBA for an 8(a) contract

As of 8/1/2009 39


Highlights of MCS Case (cont’d)

SBA requested GAO reconsider decision arguing GAO erred in concluding HUBZone statute creates mandatory preference

6 Jul 09 - GAO denied request for reconsideration stating newly raised information failed to show GAO prior decision contained any errors of fact or law

10 Jul 09 - OMB issued memo stating GAO decision is not binding on Federal Agencies and is contrary to SBA regulations that provide for parity among HUBZone, 8(a), and SDVOSB programs

Pending completion of legal review SBA parity rules should not be disregarded by CO’sFederal Agencies should not be compelled to prioritize HUBZone small businesses over 8(a) or SDVOSBs

23 Jul 09 – Senate passed amendment to include provision in FY10 National Defense Authorization Act which will place HUBZone, 8(a), and SDVOSB on equal playing field

As of 8/1/2009 40


ParityFAR 19.800(e) – Before deciding to set-aside an acquisition IAW subpart 19.5, 19.13 or 19.14, CO should review for offering under the 8(a) program. SBA regulations give first priority to HUBZone 8(a) concerns. (13 CFR 126.607(b))

FAR 19.1305(a) – CO shall consider HUBZone set-asides before considering HUBZone sole source or other small business set-asides

FAR 19.1405(a) – CO may set-aside requirement for competitive SDVOSB

13 CFR 126.607(b) – if 13 CFR 126.605 does not apply, CO shall set-aside for HUBZone, 8(a), or SDVOSB before setting aside as small business set-aside

13 CFR 26.605(b) – may not make available for a HUBZone if requirement is currently being performed under the 8(a) program or if SBA has accepted requirement into 8(a) program, unless SBA consents to release from the 8(a) program.

Above bullets show conflicting language in FAR & between the FAR & the CFR

OMB memo clearly states to follow CFR but CO’s hesitant to follow CFR in lieu of FAR

How do we follow a Small Business Regulation that is not in the FAR?

As of 8/1/2009 41


Order of Precedence(as Mary understands it)

All 8(a)’s, competitive HUBZone, and competitive SDVOSB

HUBZone sole source (requires J&A)

SDVOSB sole source (requires J&A)

100% Small Business Set-Aside

Partial Small Business Set-Aside

Full and Open Competition

Sole Source (requires J&A for all except 8(a))

Market research is key and all decisions should be based on mission needs, goals, capabilities, and other contributing factors

As of 8/1/2009 42


EA Decision: Support for LB ownership of SB

Initial protest: Louis Berger Group’s 49.5% ownership equaled affiliation with EA Engineering Science and Technology (EA)

SBA Area Office upheld protest based on language in EA-LBG 2005 shareholders agreement

Final determination from SBA Office of Appeals: Clarified no affiliation as EA still functioned as independent firm

Significance. Provided additional clarification for acceptable conditions of LB ownership of a SB. Upholding protest would have “a chilling effect” on LB capital investment into SBs

As of 8/1/2009 43


Background on EA Decision

Ecological Analysts (EA) established in 1972

Apr 05: LBG acquired 49.5% of stock with employee stock ownership plan & small group of employees owning remaining 50.5%

Founder/owner ready to retire and divest all holdingsWanted employees to hold majority stakeDid not want to lose company culture or SB statusBest case scenario was employee stock ownership plan controlling majority share along with capital from a minority investorEmployees remained majority owners Ingrained culture maintainedSmall business status maintained

As of 8/1/2009 44


Background on EA Decision (cont’d)

Jan 08: AFCEE announced EA won 4PAE08 as NAICS 562910 Small Business

Feb 08: Protest filed alleging EA and LBG affiliated

May 08: SBA Area Office determined “EA other than small”

Jun 08: EA appeals to SBA Office of Appeals

Jul 08: Office of Appeals overturns Area Office action

Aug 08: EA awarded 4PAE08 from AFCEE

As of 8/1/2009 45


Basis for Area Office Affiliation Determination

Area Office noted 3 aspects from Shareholders Agreement

EA needed LBG approval to issue new stock; EA needed LBG approval to enter into new servicesEA needed LBG approval to change bylaws

Area Office Concluded:Collectively LBG had “negative control” on EAEA financially dependent on LBG and therefore had “identity of interest”If LBG divests stock it would have negative financial impactThis control over EA equated to affiliation

As of 8/1/2009 46


Basis for Office of Appeals “No Affiliation” Determination

EA did not rely on LBG for revenue (<2%)

EA and LBG were competitors in Federal market

EA demonstrated clear day-to-day control of operations

EA held 3 of 5 seats (a quorum) on Board of Directors

Area Office ruling would cause passive investors to have no defense against fundamental changes in their investment

Prohibiting LB from this protection would have “a chilling effect”on SB access to capital

LBG’s right to weigh in on new service lines, issuance of new stock (which would effectively dilute LBG share) and by-law changes were reasonable precautions for any investor

As of 8/1/2009 47


Lessons Going Forward

Case provides additional reference point for the numerous existing SB-LB ownership

Provides additional legal guidance on shareholder agreements for future SB-LB agreements

Key points: EA was not financially dependentEA and LBG were direct competitorsLBG stock purchase was a capital investmentNot one of day-to-day interaction nor significant teamingNo exchange of personnel

As of 8/1/2009 48


Update: Congressional Hearings on ANC Program

Background: 1986: Congress made ANC’s uniquely qualified to participate in 8(a) program

ANCs virtually unlimited ability to create new 8(a)sANCs & Tribal Corporations able to own multiple, non-affiliated 8(a) firmsMay receive sole source contracts with no cap on dollar value

Post 9-11ANC’s extremely successful in Federal contractingParticularly successful in IT and ConstructionMajority of their work is in lower 48

As of 8/1/2009 49


Update :Congressional Hearings on ANC program (cont’d)

SBA reviewed ANC program in last administration but did not implement any changes

Various Congressional committees began evaluating ANC program in 2008

16 Jul 09 - Senate Subcommittee on Homeland Security and Governmental Affairs (Chaired by Claire McCaskill) held hearings with concerns:

Permanent “economically disadvantaged” statusUnlimited sole source capabilityUnlimited number of affiliated companies

As of 8/1/2009 50


Update :Congressional Hearings on ANC program (cont’d)

22 Jul 09 - Sen. McCaskill put forth amendment to eliminate the unlimited sole source privilege

23 Jul 09 - Pulled back for now to give ANC community opportunity to develop options for changes

Google Claire McCaskill and ANC or Congressional hearings on ANCs to get updates

As of 8/1/2009 51


Update on HUBZone ProgramTo promote job growth, capital investment, and economic development to historically underutilized business zones, referred to as HUBZones, by providing contracting assistance to small businesses located in these economically distressed communitiesHUBZone must:

Have only individual ownership; no corporate stock ownership

No limit on number or ethnicity of ownersHave “Principal Office” (largest office) in an SBA designated HUBZone

http://map.sba.gov/hubzone/init.asp#address enables you to determine locations of HUBZone nationwide

At all times have 35% of employees be living in a HUBZoneSBA audits hours of employees living in a HUBZone vs. non HUBZoneSalaries do not factor into determination

As of 8/1/2009 52


Update on HUBZone Program (cont’d)

Winter and Spring of 2009: House Committee on Small Businesses reviewed HUBZone Program

GAO found lack of oversight and significant fraud in the programChairwoman Rep. Nydia Velázquez, recommended this program be scrappedSBA does not want program dropped; prefers additional oversight to correct the problems

No changes in current SBA regulations but additional hearings pending

Google HUBZones and congressional hearings for updates

As of 8/1/2009 53


Woman Owned Small Business Update

No major changes in this program during FY09

12 Jul 09 – President Obama proposes to Implement Women Owned Business Contracting Program (WOBCP)

WOBCP law signed by Clinton in 2000SBA did not promulgate regulations Women Owned SBs currently receive 3.3% of Federal contractsWOBCP would raise participation to 5% and through incentives

SBA is not on board with WOBCP

Google SBA and Women Owned Small Business for updates

As of 8/1/2009 54


Update on Changes to the SDVOSB Program

DOD put emphasis on this program in FY09 resulting in significant increase in SDVOSB awards

VA has issued sole source contracts

Congress has considered expanding the program to give equal status to 8(a) but no changes to date

DOD is intending to meet goals through competitive awards

AFCEE has SDVOSB contracts under 4PAE08 and anticipates having SDVOSB awards under WERC09

SBA would not permit AFCEE to have SDVOSB set aside under ECOS09

SBA “frowns” on taking a 100% small business set-aside and further restricting it

As of 8/1/2009 55


FAR DiscussionJoint Ventures

FAR 19.101 defines a Joint Venture as an association of persons or concerns…concerting to engage in and carry out a single specific business venture for joint profit, for which purpose they combine their efforts, property, money, skill, or knowledge, but not on a continuing or permanent basis

As of 8/1/2009 56


Formal Joint Ventures

Contract in Joint Venture’s name

Contract performance responsibility lies with Joint Venture

Agreement must include sharing profits/losses proportionate to each party’s contributions to business operation

Certain exclusions for joint venture between SBA approved Mentor-Protégé relationships (13 CFR 121.103)

As of 8/1/2009 57


AffiliationDefinition: Associated business concerns or individuals if, directly or indirectly, either one controls or can control the other or a third party controls or can control both.

Prime-subcontractor relationship not normally equate to affiliation

Examples of AffiliationPrime-sub relationship that is not at arms length (e.g. Prime has too much decision making influence)Formal Joint Venture (exceptions apply)Business relationship outside particular contract that may cause affiliation e.g. both parties have shared $$ interest in a 3rd enterprise

As of 8/1/2009 58


Affiliation RulesNormal Rule: Affiliated business concerns’ receipts are added to determine eligibility under size standards

SBA excludes affiliation from joint ventures/teaming arrangements in certain circumstances

A JV of two or more business concerns may submit an offer as a SB, without regard to affiliation, and the size standard is applied to the individual concerns rather than to the combined assets of the team/joint venture as long as all are small under the NAICS used

IF…

As of 8/1/2009 59


Affiliation RulesSet-Aside other than 8(a)

The acquisition is bundled at any dollar value

The acquisition is not bundled and Contract value (including options) exceeds ½ the applicable revenue-based size standard

e.g. NAICS code 236220 has SB size standard of $31M. For exception to affiliation rule, acquisition has to exceed $15.5M

Contract value (including options) exceeds $10M for employee-based size standard

e.g. NAICS code 562910 has SB size standard of 500 employees. For exception to affiliation rule, acquisition has to exceed $10M

As of 8/1/2009 60


Affiliation Rules8(a) Set-Aside

Normal affiliation rules apply toAll sole source 8(a) acquisitionsCompetitive 8(a) acquisitions that do not meet the thresholds shown in previous slide

8(a) Affiliation ExclusionA JV / teaming arrangement of at least one 8(a) and one or more other business concerns may submit an offer under a competitive 8(a), as an 8(a) concern, without regard to affiliation

IF…

As of 8/1/2009 61


Affiliation Rules8(a) Set-Aside (cont’d)

13 CFR 124.513(c)

Each concern is small under the solicitation NAICS codeAt least one 8(a) participant to the joint venture is less that ½the NAICS size standard – does not have to be 51% entity8(a) is managing venturerEmployee of 8(a) managing venturer is project manager of contract51% of joint venture profits go to 8(a) member(s)Approved by Small Business Administration (SBA) prior to contract awardIf you consider forming a JV or affiliation, consult legal counsel to address all liability scenarios should problems arise e.g. injuries, cost overruns, vendor lawsuits against the JV

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Affiliation RulesOther Exceptions

Under any procurement:8(a) firm is exempt from affiliation rules when it joint ventures as a protégé with it’s mentor firm (large or small) under the SBA Mentor Protégé ProgramSBA must approve Joint Venture agreement prior to award of contract8(a) must be small under NAICS codeMust meet limitations on total sole source dollars (monitored by SBA and firm)

Note: SBA Mentor Protégé agreements are not approved overnight. Once RFP hits street, normally too late to get approved agreement to try to JV for that requirement

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Affiliation RulesOther Exceptions (cont’d)

Indian Tribes, Alaskan Regional or Village Corporations (ANC), Native Hawaiian Organizations (NHO)

Business concerns owned by these groups are not considered affiliates of such entities, or with other concerns owned by these entities solely because of their common ownership (13 CFR 121.103)An ANC can establish a business entity that owns and manages multiple 8(a)s without affiliation

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Two IssuesAffiliation and Limitation of Subcontracting are separate issues

Affiliation deals with how business relationships can affect the size standing of a small business (13 CFR 121.103)Limitations on Subcontracting deals with how much work a small business can subcontract (FAR 52.219-14)

Both issues apply only if a contractor must be small to be eligible for awardFull and open contract awards, regardless of size of business, should not have FAR 52.219-14 in the contract

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Limitations on SubcontractingFAR 52.219-14 Limitations on Subcontracting (Dec 1996)

(a) This clause does not apply to the unrestricted portion of a partial set-aside.(b) By submission of an offer and execution of a contract, the Offeror/

Contractor agrees that in performance of the contract in the case of a contract for --

(1) Services (except construction). At least 50 percent of the cost of contract performance incurred for personnel shall be expended for employees of the concern.

(2) Supplies (other than procurement from a nonmanufacturer of such supplies). The concern shall perform work for at least 50 percent of the cost of manufacturing the supplies, not including the cost of materials.

(3) General construction. The concern will perform at least 15 percent of the cost of the contract, not including the cost of materials, with its own employees.

(4) Construction by special trade contractors. The concern will perform at least 25 percent of the cost of the contract, not including the cost of materials, with its own employees.

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Meeting FAR 52.219-1413 CFR 125.6(i) allows the cooperative efforts of joint ventures (formal or informal) in meeting FAR 52.219-14

Informal joint venture is a prime and its 1st tier small business subcontractors

AFMC allowed for presumption of informal joint ventures (teams) between the small business prime and its 1st tier small business subcontractors

Recent SBA ruling states informal joint venture is not presumed and must be evidenced by an agreement between the business concerns explaining the relationship is an informal joint venture and meets the CFR definition of joint venture. (13 CFR 121.103(h))

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Meeting FAR 52.219-14 (cont’d)

AFMC/PK Policy Memo 2006-PK-004 signed 19 Oct 06Subcontracting limitations requirement may be fulfilled by formal or informal joint ventures meeting the requirements of CFRCO shall request agreement as part of proposal submittalAt a minimum, agreement shall include

Official names of parties to the joint venture and their respective signaturesStatement as to whether the joint venture is formal or informalPurpose of the agreementEffective dates/performance period for the agreement

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Selecting Teaming Partners

Compatible contractorsAssess team chemistry

Management styles, corporate cultures, strategic visionsAssess team member capabilities

Business, financial, other resourcesAssess team member past performanceAssess legal constraints

OCI issues, debarments/suspensions, qualification requirements

All must understand terms & conditions of agreementLanguage should reflect both parties understanding on who gets what work and when

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Mentor ProtégéProgram Overview

The Mentor-Protégé Program is designed to encourage prime contractors to assist eligible Protégés in enhancing their capabilities to perform contracts and subcontracts, foster the establishment of long-term business, and increase the overall number of these entities that receive contracts and subcontract awards.

Multiple agencies have these programs because all are looking toenhance their industry base.

Each Mentor Protégé program is completely separate from another agencies program. Mentors and Protégé’s may participate in multiple programs at the same time. The agency will ensure the Protégé has the resources to do this.

Each program has own reimbursement rules. Some are credit only. Others are both credit and cost reimbursement.

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DoD Mentor ProtégéProgram Overview

Assist small businesses (Protégés) to successfully compete for prime contract and subcontract awards by partnering with large companies (Mentors) under individual, project-based Agreements

Mentor companies: Provide developmental assistance and technology transfer to their protégés

Protégés: Establish relationships with major DoD contractors and develop necessary business and technical capabilities to performsignificant work on DoD contracts

Protégé must be a SDB, a qualifying organization employing the severely disabled, WOSB, SDVOSB, or HUBZone

SAF/SB runs Air Force Mentor Protégé ProgramMr. Timothy Douglas (703) 696-1103 http://www.selltoairforce.org/programs/support/mp.php

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SBA Mentor ProtégéProgram Overview

SBA Mentor-Protégé Program (13 CFR 124.520)Designated to provide technical/management assistance, financial assistance, subcontract support, contract performance assistance through Joint VenturesMentor may be large or smallProtégé must be 8(a) in development stage, or never have received 8(a) contract, or less than ½ size standard or primary NAICS codeMentor Protégé Agreement will not be approved if used as mechanism to enable non-8(a) to receive 8(a) contractSBA program in only one which allows the Mentor and Protégé to joint venture and remain 8(a)Apply at cognizant SBA District Office of 8(a) firm

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Small Business Office

Fred LagunasSBA-PCR

[email protected]

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Any Questions?

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Documents

311th Human Systems Wingsbrock.ipower.com/presentations/20107956204a8323003bb57.pdfECOS $300M 68% NA NA 0 7 100% Sep 09 WERC $7.5B 77% 13% 43% 11 16 59.26% Nov/Dec 08 PRESS $88M 32%