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INTRODUCTION TO
FEDERAL GOVERNMENT CONTRACTING
& SBA SET-ASIDE PROGRAMS
January 21, 2015
INTRODUCTION
Holomua Consulting Group, LLC (Holomua) is a small, woman-owned business located in Honolulu, Hawaii. Our full-service, solution-oriented consulting firm focuses on assisting businesses with maximizing small business opportunities, navigating the complex legal and compliance landscape of federal government contracting, and developing its tools and knowledge to excel at government contracting.
Shannon Edie President & Senior Consultant
Daphne Tong-Pave Vice President & Senior Consultant
AGENDA
OVERVIEW OF FEDERAL CONTRACTING • The who, what, when, where and how of federal contracting • What registrations are required and/or recommended • How does a business find contracting opportunities
OVERVIEW OF PROGRAMS AVAILABLE TO SMALL
BUSINESSES • What size standards are and why they matter • What set-aside programs are available to small businesses • What are the benefits of set-aside programs
OVERVIEW OF THE 8(A) BD PROGRAM AND APPLICATION
PROCESS • What the 8(a) BD Program is all about • What qualifications are required for certification • What the application process entails • What happens after certification
OVERVIEW OF FEDERAL CONTRACTING
WHAT DOES THE FEDERAL GOVERNMENT BUY?
• The federal government buys: o Office supplies o Professional services – engineering,
architectural, logistics, IT, etc. o Construction of government facilities o Ship repair and maintenance o Manufacture of military vehicles and
weapons systems o Contracts to provide furniture for
government facilities
• Businesses should do market research to determine if the federal government buys its services/products. There are a number of ways to do this. Let’s take a look at where to begin.
OVERVIEW OF FEDERAL CONTRACTING
• In Fiscal Year 2014, the federal government spent $443.3 billion on contracts nationwide
283.6
25.4 21.3 19.0 15.0
TO
TAL D
OLLAR
S (
BIL
LIO
NS)
AGENCY
FY 2014 PRIME AWARD SPENDING DATA
Department ofDefense
Department ofEnergy
Department of Healthand Human Services
Department ofVeterans Affairs
NASA
Data from USAspending.gov on January 12, 2015
OVERVIEW OF FEDERAL CONTRACTING
• In Fiscal Year 2014, the federal government spent $2.4 billion on contracts in the state of Hawaii
2,152
63 39 34 29 TO
TAL D
OLLAR
S (
MIL
LIO
NS)
AGENCY
FY2014 PRIME AWARD SPENDING DATA
Department of Defense
General ServicesAdministration
Department of Healthand Human Services
Department of Housingand Urban Development
Department ofHomeland Security
Data from USAspending.gov on January 12, 2015
OVERVIEW OF FEDERAL CONTRACTING
WHAT PROCESS DOES THE GOVERNMENT GO THROUGH TO
BUY SERVICES/SUPPLIES?
THRESHOLD TYPE ACTION
<$3,000
($2,000 Davis Bacon;
$2,500 Service Contract Act)
Micro-Purchase Not advertised
>$3,000 <$25,000
($2,000 Davis Bacon;
$2,500 Service Contract Act)
Simplified Acquisition
Procedures
Not advertised (sometimes posted
locally)
Oral or Request for Quotation (RFQ)
Normally reserved for small business
>$25,000 <$150,000 Simplified Acquisition
Procedures
Advertised in FBO
Oral or RFQ
Normally reserved for small business
set-aside
>$150,000 Formal /Large
Contract
Advertised in FBO Invitation for Bid
(IFB) or Request for Proposal (RFP)
Set-aside if ≥ 2 capable small businesses
CONTRACT METHODS
• Federal Acquisitions Regulations (FAR) is used as a guide for government purchases along with other procurement statues and regulations, executive orders, and case law
OVERVIEW OF FEDERAL CONTRACTING
WHAT PROCESS DOES THE GOVERNMENT GO THROUGH TO
BUY SERVICES/SUPPLIES?
Acquisition Planning &
Market Research
Solicitation Advertised
Solicitation Issued Submit
Bids/Proposals
Bids/Proposals Evaluated
Oral Presentations (if required)
Negotiations (if required)
Subcontracting Plan Final
Approval (Large only, if required)
Award
Debriefing (Negotiated
acquisitions, if requested)
Performance & Successful
Completion
Process for Actions Over $150,000
OVERVIEW OF FEDERAL CONTRACTING
What are the various government contract (purchase) vehicles?
Consolidated Purchasing Vehicles (GSA Schedules, GWAC)
Allows for long-term vendor agreements Becoming preferred method of procurement
Contract by Negotiation
RFP and RFQ are primary request vehicles More complex and regulated process
Sealed Bidding
Invitation for Bid Award to lowest bidder fully responsive
Simplified Acquisition Procedures
Generally set aside for small businesses Fewer administrative details
Credit Card/Micro-purchases
Individual purchases under $3,000 Competition Not Required
OVERVIEW OF FEDERAL CONTRACTING
TYPES OF CONTRACTS AND AGREEMENTS
Fixed Price Cost-
Reimbursement Incentive Contracts
Indefinite Delivery
Time & Materials
BOA/BPA
OVERVIEW OF FEDERAL CONTRACTING
Where should businesses be registered to reach potential
federal customers?
SAM
• System for Award Management
• Registration is required for all federal contractors
• Main database for government to collect, validate and store data on federal contractors
D&B
• Dun & Bradstreet
• DUNS number required for federal contractors
• Most widely used number for identifying companies in U.S.
• Helps build and establish business credit
DSBS
• Dynamic Small Business Search (SBA)
• Self-certifying database
• Allows contracting officers to do market research
• Allows contractors to research teaming leads
OVERVIEW OF FEDERAL CONTRACTING
Where can businesses do market research and find
government contracting opportunities?
FBO [Fed Biz Opps]
DSBS [Dynamic Small Business System]
FPDS [Federal Procurement Data System]
ICD [Interagency Contract Directory]
USAspending.gov
GSA e-library
OVERVIEW OF FEDERAL CONTRACTING
LOCAL GOVERNMENT CONTRACTING AND
BUSINESS RESOURCES
SBA Hawaii District Office
www.sba.gov
Hawaii PTAC
www.hiptac.org
Hawaii SBDC
www.hisbdc.org
Business Action Center
cca.hawaii.gov/bac
SCORE
hawaii.score.org
Holomua Consulting Group
SMALL BUSINESSES
How does the federal
government help small
businesses get into
and succeed in the
federal marketplace?
SMALL BUSINESS SIZE STANDARDS
SBA's size standards define whether a business entity is small and, thus, eligible for Government programs and preferences reserved for “small
business” concerns. [13 CFR 121.101(a)]
• Size standards are established by industry, generally under the North American Industry Classification System (NAICS)
• SBA primarily uses two measures of business size: • Number of employees • Annual receipts
NAICS codes NAICS U.S. industry title Size standards in
millions of dollars
Size standards in number of employees
238210 Electrical contractors and other wiring installation contractors
$15.0
334220 Radio and television broadcasting and wireless communications equipment manufacturing
750
541330 Engineering Services $15.0
541712 Research and development in the physical, engineering, and life sciences
500
PROGRAMS AVAILABLE TO SMALL BUSINESSES
• SBA administers federal procurement programs for small businesses:
8(a) Business Development Program
Historically Underutilized Business Zones (HUBZone)
Women-Owned Small Business (WOSB) and
Economically Disadvantaged Women Owned Small Businesses (EDWOSB)
Service-Disabled Veteran-Owned Small Business (SDVOSB)
Small businesses
• Helps small businesses gain access to government contracting
• Increases the federal government’s contracting with small businesses
GOVERNMENT-WIDE CONTRACTING GOALS:
Small Business
23%
WOSB
5%
8(a)
5%
HUBZone
3%
SDVOSB
3%
PROGRAMS AVAILABLE TO SMALL BUSINESSES
SMALL BUSINESS GOALING REPORT FISCAL YEAR 2013
CATEGORY DOLLARS PERCENTAGE
Small Business $83,142,807,957.99 23.39%
Small Disadvantaged Business $30,616,176,486.32 8.61%
8(a) Business $13,997,559,304.36 3.94%
Veteran Owned Small Business $17,810,543,400.01 5.01%
Service Disabled Veteran Owned Small Business $12,023,167,217.12 3.38%
Woman Owned Small Business $15,364,841,129.49 4.32%
Certified HUBZone Small Business $6,244,980,082.24 1.76%
Data from the Federal Procurement Data System
PROGRAMS AVAILABLE TO SMALL BUSINESSES
WOSB Requirements: • Must be small in its primary NAICS
• At least 51% owned and controlled by one or more women who are U.S. citizens
• Business in an industry that SBA identifies as “substantially underrepresented” by women
• Woman must hold highest position, work full-time at the business, and have managerial experience
• To be a EDWOSB, owners must meet economic disadvantage requirements
• Benefits:
• Set-aside opportunities
• FY 2015 NDAA authorized sole-source awards for WOSB /EDWOSB
PROGRAMS AVAILABLE TO SMALL BUSINESSES
HUBZone
• Requirements:
• Must be small
• Owned any controlled at least 51% by a U.S. citizen, Community Development Corporation (CDC), agricultural cooperative, or Indian tribe/ANCs (NHO-owned firms are ineligible)
• Principal office in HUBZone and at least 35% of employees live in a HUBZone
• Benefits:
• Set-aside and sole-source opportunities
• 10% price evaluation preference in full and open contract competitions, as well as subcontracting opportunities
PROGRAMS AVAILABLE TO SMALL BUSINESSES
SDVOSB
• Requirements:
• Must be small
• Veteran must have service-connected disability as determined by VA or DoD
• Unconditionally owned (at least 51%) and controlled by SDV
• SDV must hold the highest officer position
• Benefits
• Set-aside opportunities
• Sole-source opportunities
SBA 8(A) BD PROGRAM
Purpose of the 8(a) BD Program [13 CFR 124.1] – “…to assist eligible small disadvantaged business concerns compete in the American economy through business development.”
• Section 8(a) of the Small Business Act of 1953, as amended– Established a set-aside program for socially and economically disadvantaged individuals
• Government goal to award 5% of prime and subcontracts to Small Disadvantaged Businesses
• Provides mentoring, training, technical assistance, financial assistance, and procurement assistance
• Maximum 9 year program participation
• (4-year developmental stage and 5-year transition stage)
• Goal to help firms successfully compete in the market place
8(a) Business
Development Program
SBA 8(A) BD PROGRAM
PR
OG
RAM
BENEFIT
S Sole-Source
Opportunities
Contracts up to $4 million for goods and services and $6.5 million for manufacturing (exceptions for Native-owned firms)
Set Aside Opportunities
Joint Ventures & Teaming
Provides 8(a) firms with the opportunity to compete for large contracts
Mentor-Protégé Program
Mentor provides mentorship, and technical, management, and financial assistance
Mentor can own up to 40% in Protégé firm
Mentor can enter into joint-venture arrangements with Protégé and compete as a small business
SBA 8(A) BD PROGRAM – QUALIFICATIONS
• Owned and controlled by socially and economically disadvantaged individual(s)
• Must be small
• Potential for success
• Good character
ELIGIBILITY REQUIREMENTS
SBA 8(A) BD PROGRAM - QUALIFICATIONS
SOCIALLY DISADVANTAGED [13 CFR 124.103] - Individuals “who have been subjected to racial or ethnic prejudice or cultural bias within American society because of their identities as members of groups and without regard to their individual qualities.”
• Designated groups include, but are not limited to: - Native Americans - Asian Pacific Americans - Black Americans - Hispanic Americans
• Individuals not included in the presumed groups can participate in the program, but must demonstrate social disadvantage by a “preponderance of the evidence”
SBA 8(A) BD PROGRAM - QUALIFICATIONS
ECONOMICALLY DISADVANTAGED [13 CFR 124.104] - “Socially disadvantaged individuals whose ability to compete in the free enterprise system has been impaired due to diminished capital and credit opportunities as compared to others in the same or similar line of business who are not socially disadvantaged.“
• For initial eligibility, the net worth of an individual claiming economic disadvantage must be less than $250,000. For continued eligibility, net worth must be less than $750,000.
• Not economically disadvantaged if: - Average three year adjusted gross
income exceeds $250,000 - Fair market value of all assets
exceeds $4 million for an applicant and $6 million for continued eligibility
SBA 8(A) BD PROGRAM - QUALIFICATIONS
One time eligibility - Firm and individual for which eligibility is based, are only eligible for the 8(a) program once*
*Exceptions apply for firms owned by Native Hawaiian Organizations or other Native entities
DISADVANTAGED INDIVIDUAL(S) MUST*:
Control the firm (must be unconditional and direct)
Manage the firm on a full-time basis during normal business hours
Have the necessary management experience
Establish policies
Hold the highest position and be the highest compensated
SBA 8(A) BD PROGRAM
Must be small
[13 CFR 121 and 13 CFR 124.102]
Based on SBA size standards (i.e. primary NAICS)
Affiliation is applicable*
Potential for Success
[13 CFR 124.107]
Be in business for at least two full years in the firm’s primary industry, as demonstrated on firm’s Federal tax returns*
Financially sound, access to credit and capital
Managers have technical and management experience
Good Character
[13 CFR 124.108]
Lack of good character include: violations of SBA regulation; debarred or suspended; lack business integrity; knowingly submitted false information; principal is incarcerated, or on parole or probation; fail to pay federal financial obligations (firm and principals)
*Exceptions apply for firms owned by Native Hawaiian Organizations or other Native entities
SBA 8(A) BD PROGRAM - NHOs
NATIVE HAWAIIAN ORGANIZATION (NHO) [13 CFR 124.3] - “any community service organization serving Native Hawaiians in the State of Hawaii which is a not-for-profit organization chartered by the State of Hawaii, is controlled by Native Hawaiians, and whose business activities will principally benefit such Native Hawaiians.”
NHO
For-profit firm
8(a) firm
• For-profit firms owned by NHOs are eligible for the 8(a) BD program, under different rules
• Unlike businesses owned by individuals, proceeds from businesses owned by NHOs go back to the Native Hawaiian community
SBA 8(A) BD PROGRAM - NHOs
• NHO must establish disadvantage: o A majority of NHO members/directors must be Native Hawaiian AND
economically disadvantaged under 13 CFR 124.104 o NHO needs to re-establish eligibility every time a new firm seeks certification
• NHO must demonstrate that its activities will benefit Native Hawaiians • NHO must be majority owner (i.e. 51%) • NHO must control for-profit firm (i.e. NHO must control the for-profit Board of
Directors) • NHO cannot own 51% or more of another business (either at the time of application
or for the previous two years) that is in the 8(a) program under the same primary NAICS code of the applicant
• NHO-owned business must be small and meet standards under 13 CFR 121 o Exceptions to affiliation rules apply for NHOs and its for-profit firms
• Day-to-day operations do not need to be managed by socially and economically disadvantaged individual(s)
• No one-time individual eligibility limitation • No thresholds for ONLY Department of Defense sole-source contracts • No follow on contracts
SPECIAL RULES FOR NHOs [13 CFR 124.110]
SBA 8(A) BD PROGRAM – NATIVE ENTITIES
• ANCs deemed socially and economically disadvantaged
• Tribes need to only establish economic disadvantage ONCE
• No contract thresholds for ALL federal agencies
SPECIAL RULES FOR INDIAN TRIBES & ALASKA NATIVE
CORPORATIONS - [13 CFR 124.109]
ANC/TRIBE
Other Ventures (i.e. non-profit)/
Tribal Government Functions
Holding Company/
Economic Development
8(a) Firm 8(a) Firm For-profit
Firm
SBA 8(A) BD APPLICATION PROCESS
1. Ensure program eligibility 2. Gather supporting documents
a. Individual – Personal and financial b. Business – General company,
corporate, and financial c. NHO – Corporate, financial, and non-
profit plan/activities 3. Register in SAM 4. Register in SBA General Login System
(GLS) – Application submitted online and hard copies (signed and dated) mailed to SBA
5. Requests for clarification/information and documents
SBA 8(A) POST-CERTIFICATION
• Sign Participation Agreement [SBA Form]
• Submit Business Plan [13 CFR 124.402]
• Submit Annual Review [13 CFR 124.112(b)]
• Remain small in primary NAICS [13 CFR 124.102 (a)(2)]
• Report and seek approval for any Ownership/Management Changes [13 CFR 124.105(i)]
• Non-8(a) Business Activity Targets [13 CFR 124.509]
GENERAL REQUIREMENTS:
SBA 8(A) POST-CERTIFICATION G
ENER
AL R
EQ
UIR
EM
ENTS
Sign Participation Agreement [SBA Form] - Requires 8(a) participant to acknowledge that it will abide by the program requirements set forth in the regulations and to acknowledge the consequences of failing to comply
Submit Business Plan [13 CFR 124.402] - Must be submitted prior to receiving any 8(a) contracts. If SBA determines (prior to expiration of the 9-year term) that the firm has achieved the Development Goals set forth in the Business Plan, the SBA will graduate the firm
Submit Annual Review [13 CFR 124.112(b)] - Requires the firm to provide information demonstrating that the firm meets all of the 8(a) program eligibility requirements.
SBA 8(A) POST-CERTIFICATION G
ENER
AL R
EQ
UIR
EM
ENTS
Remain small in primary NAICS [13 CFR 124.102(a)(2)] - A firm can request that its primary NAICS be changed if it can show that the majority of its total revenues during a 3-year period evolved from one NAICS code to another
Report Ownership/Management changes to the SBA prior to making changes [13 CFR 124.105 (i)] - SBA must approve any ownership/management or structure changes prior to making the change
SBA 8(A) POST-CERTIFICATION G
ENER
AL R
EQ
UIR
EM
ENTS
Non-8(a) Business Activity Targets [13 CFR 124.509] - Firms must make efforts to obtain business outside the 8(a) program. Monitoring begins in the first year of the Transitional Stage and is expressed as a percentage of total revenue
Participant’s year in the
transitional stage
Non-8(a) Business Activity Targets
(required minimum non-8(a) revenue
as a percentage of total revenue)
1 15
2 25
3 35
4 45
5 55
SBA 8(A) POST-CERTIFICATION
Consequences of Noncompliance with SBA 8(a) BD Program Regulations (including size misrepresentations)
- Inability to receive sole-source contracts
[13 CFR 124.509]
- Suspension and/or debarment from government contracting
[13 CFR 124.305]
- Termination from the 8(a) BD program
[13 CFR 124.301]
- Civil lawsuits and penalties under False Claims Act
[13 CFR 121.108]
SBA 8(A) POST-CERTIFICATION
Term Completion
Expiration of 9-year term
Graduation The firm has substantially achieved targets, goals and objectives set forth in the business plan and demonstrated the ability to compete in the marketplace
Early Graduation
Achievement of targets, goals and objectives prior to expiration of program term
Voluntary Withdrawal
The firm elects to voluntarily withdraw from the program
Termination SBA may terminate a firm for good cause
Examples of good cause: Submission of false information; Failure to maintain eligibility requirements; Failure to obtain prior approval from SBA for management/ownership changes
SBA 8(A) POST-CERTIFICATION
GENERAL AREAS OF CONTRACTOR COMPLIANCE
• Code of Business Ethics and Conduct
• Anti-kickbacks, gratuities, conflict of interest
Business Ethics
• Nondiscrimination in employment
• Affirmative action and recordkeeping OFCCP Compliance
• Prime contractor performance requirements
• Be aware of upcoming changes Limits on
Subcontracting
• Can impact a company’s size
• Affiliation principles apply to many government programs
Affiliation
THE CASE FOR COMPLIANCE
• From 2008 – 2014, various 8(a) companies were awarded government contracts but passed them through to a non-eligible company in order to get a percentage of the value of the contract.
8(a) Fraud: Guilty Plea in Pass-Through Case
(10/2014)
• A company received more than $6.8 Million in government contracts based on falsely representing that one of the owners was a service-disabled veteran when he was in fact not a service-disabled veteran.
SDVOSB Fraud: Guilty Plea in False Claim of Service-
Disabled Veteran (9/2014)
• A company obtained 8(a) certification and subsequently received government contracts based on that certification; an investigation revealed that the company was actually controlled by an individual that did not qualify as socially or economically disadvantaged under the 8(a) program.
8(a) Fraud: Guilty Plea in Fraudulent Control Case
(3/2014)
CONCLUSION
QUESTIONS?
RESOURCES AND TOOLS
System for Award Management (SAM) www.sam.gov
Dun & Bradstreet www.dnb.com
U.S. Small Business Administration www.sba.gov
Dynamic Small Business Search http://dsbs.sba.gov
Federal Procurement Data System (Small Business Goaling Reports) www.fpds.gov
USAspending.gov http://usaspending.gov
Federal Business Opportunities (FBO) www.fbo.gov
Acquisition Central (Federal Agency Procurement Forecasts) www.acquisition.gov
Interagency Contract Directory www.contractdirectory.gov
GSA e-library www.gsaelibrary.gsa.gov
Electronic Code of Federal Regulations www.ecfr.gov
U.S. Census Bureau – NAICS Information www.census.gov/eos/www/naics
NAICS Association www.naics.com
MAHALO!
THANK YOU FOR ATTENDING TODAY’S WORKSHOP!
For more information about Holomua Consulting Group, LLC
and future workshops, please visit: www.holomuaconsulting.com
