Program Slides

1. What Every Corporate CounselNeeds To Know About Doing BusinessWith the Federal Government Presented By:

David Kessler, Symantec Corporation

Bill Walsh, Venable LLP

Scott Hommer, Venable LLP

Government policy establishes competition criteria for procurements

Government contracts contain extensive clauses, many of which are non-negotiable by law

Government may terminate a contract for failure to make progress or for its convenience

Extensive reporting requirements

Company determines competition criteria

Uniform Commercial Code and agreed-upon provisions govern the contract

Unilateral termination right is usually not available unless mutually agreed upon

Social pressures dictate whether socioeconomic policies are included, some required by law

No reporting required unless agreed upon by the parties

Cover Page

Section A: Solicitation/Contract Form

Section B: Supplies or Services and Prices/Costs

Section C: Description/Specs/Work Statement

Section D: Packaging and Marking

Section E: Inspection and Acceptance

Section F: Deliveries or Performance

Section G: Contract Administration Data

Section H: Special Contract Requirements

SectionI: Contract Clauses

Section J:List of Attachments

Section K: Representations, Certifications, Other Offeror Statements

Section L: Instructions, Conditions, Notices to Offerors

Section M: Evaluation Factors For Award

Federal Acquisition Regulation (FAR)

Sets forth policies and procedures for acquisitions by all executive agencies.

Codified at Title 48 of the Code of Federal Regulations.

While the FAR is the primary document, each agency may and most often does adopt acquisition regulations that supplement the FAR.

Examples include:

Department of Defense (DFAR)

Department of Agriculture (AGAR)

Department of Education (DEAR)

Environmental Protection Agency (EPAAR)

Department of Transportation (TAR)

The FAR and Agency Supplements to the FAR Include Standard Solicitation Provisions and Contract Clauses.

No deviations from Standard FAR Clauses

Individual deviations affect only one contract action, and . . . may be authorized by the agency head.FAR 1.403

But under FAR Part 12 Commercial Item Acquisition Contracting Officers may tailor

Homemade clauses

To challenge the inclusion of a clause in a solicitation, an offeror must protest the terms of a solicitation prior to bidding

Cost-reimbursement

Time-and-materials; Fixed Labor Hour

Fixed-price

Risk to Contractors Varies With Contract Type

Contract Type Will Drive Application of Certain FAR Provisions

Full and Open Competition

In 1984, theCompetition in Contracting Act (CICA)was enacted, requiring executive agencies to achieve full and open competition in the acquisition process unless an enumerated exception applies.

Two Basic Methods:

Sealed Bidding

Government issues anInvitation for Bids (IFB)

Rigid adherence to formal procedures

Agency must award to the responsible bidder with the lowest responsive bid

Competitive Negotiation

Government issues aRequest for Proposals (RFP)

Flexible procedures

Agency may conduct discussion, evaluate offers, permit revisions, and award the contract using price and other factors

Federal Supply Schedule (FSS) Contracts

Under the GSA Schedules (also referred to as Multiple Award Schedules and Federal Supply Schedules) Program, GSA establishes long-term, government-wide contracts with commercial firms to provide access to over 11 million commercial supplies (products) and services that can be ordered directly from GSA Schedule contractors or through the GSAAdvantage! online shopping and ordering system.

Blanket Purchase Agreements (BPAs)

A simplified method of filling anticipated repetitive needs for services and supplies

Akin to "charge accounts" established with schedule contractors by ordering agencies

Government-Wide Acquisition Contracts (GWACs)

Issued by Agencies Other Than GSA, Usually for a Discrete Range of Supplies or Services

GWAC Examples Include :

ITOP - IT Omnibus Procurement - includes technical services, hardware and software

Millennia Lite Performance based, full spectrum IT

MOBIS - Management, Organizational and Business Improvement Services

Historically, Single Award Contracts (i.e., one contract, one contractor) Were the Norm

Federal Acquisition Streamlining Act of 1994 (FASA)

Made multiple award a preference over single award contracts

MACs Emphasize the Task Order Environment

Individual contract order placed under overall contract vehicle

Competition for Task Orders is Limited to MAC Contractors

Hunting License

Limited Right to Protest Task Order Award

Items that can be protested include maximum value, scope or period, or orders in excess of $10M

Actual Authority Doctrine

Only those with actual authority may bind the government

Contracting Officer versus COTR

Termination for Convenience

Government may terminate in whole or in part at any time when in the Governments best interest

Flowdowns to Subcontractors

Many standard FAR contract clauses require the prime contract to make the terms of such clauses applicable to its subcontractors

Prime Contractors often go beyond mandatory flow-down clauses and impose additional or different terms and conditions, leading to issues for negotiation

Changes Clause

Allows the Government tounilaterallyissue orders to the contractor to change the terms of the contract

Contractor may submit request for equitable adjustment to price, schedule and other applicable terms

FAR Part 12 requiresbilateralmodifications to change the terms of the contract

Christian Doctrine

In the event that the Government contracting officer fails to include a mandatory contract clause in a prime contract, the omitted clause will be read into and made applicable to the contract by operation of law under theChristiandoctrine, enunciated inG.L. Christian & Assoc. v. U.S .

Commercial Item Acquisitions

To implement the Federal Governments preference for acquiring commercial items, policies and procedures more closely resembling those of the commercial marketplace were added to the FAR.

For commercial item acquisitions, Government contracting officers are authorized to tailor all but a few of the standard FAR contract clauses in a manner that is not inconsistent with customary commercial practice for the item being acquired.

Truth in Negotiations Act (TINA)

Contractors must submitcost or pricing datawhere any negotiated contract is expected to exceed $500,000

Government obtains substantial visibility into underlying elements of pricing

Cost Principles

Define when and to what extent costs can be recovered under a government contract

All costs must be allowable, allocable, and reasonable

Cost Accounting Standards (CAS)

Certain contractors and subcontractors are required to comply with CAS and to disclose in writing, and follow consistently, their cost accounting practices.

Audits

Government may audit a contractors proposal price, as well as any other data of the contractor for up to three years after the final contract payment

DCAA audits many aspects of government contractor operations, including: purchasing, government property, estimating, compensation, and management information systems

Choice of Forum = CO, GAO, USCOFC

Timeliness Rules

Varying Degrees of Discovery

Protective Orders for Competition Sensitive and Source Selection Sensitive Information

Stay of Contract Performance During the Pendency of the Protest

Remedies

Contract Disputes Act (CDA)

Codified a special process for disputes arising under a government contract between the Government and the contractor

Contractors must follow the mandated procedures of the CDA, or risk waiving or otherwise losing their right to proceed against the agency

The FAR implements the CDA through the standard disputes clause

The Disputes Clause Defines a Claim as:

A written demand or written assertion by one of the contracting parties seeking, as a matter of right, the payment of money in a sum certain, the adjustment or interpretation of contract terms, or other relief arising under or relating to [the] contract.

Contractors Must Continue Performance Pending Resolution of a Dispute with the Government

Contractor Initiates the Dispute Process by Submitting a Claim to the Contracting Officer (CO)

Claims Over $100,000 Must be Certified by the Contractor

If the Contractor and the Government are Unable to Negotiate a Resolution to the Dispute, the CO Must Issue a Final Decision

Once a Final Decision (or Sufficient Passage of Time) has Occurred, the Contractor may Appeal the COs Final Decision

Request for Final Decision

Issuance of Contracting Officers (COs) Final Decision

Notice of Appeal and Filing of the Complaint

Civilian Agency Board of Contract Appeals or Armed Services Board of Contract Appeals or the U.S. Court of Federal Claims

Appeal to the U.S. Court of Appeals for the Federal Circuit

IP Rights

Contractor Claims for Money

Government Claims

Termination for Default

Cure Notice

Show Cause Notice

Challenging the T4D

Past Performance

Non-responsibility

Excess Reprocurement Costs

Are Agencies Ordering Properly scope issues?

Contractors are Expected to be Proactive

Ensuring Competition on Schedules

Do Contractors Report Sales Correctly?

Civil False Claims Act

Provides for treble damages and civil fines for the reckless submission of false claims for payment to the Government.

Also includes whistleblower (orqui tam ) provisions.

Improper Business Practices

The FAR contains several prohibitions and restrictions on actual (and sometimes only apparent) improper business practices, including:

Contractor gratuities to Government personnel, kickbacks, antitrust violations, agreements to pay contingent fees, prohibitions on placing unreasonable restrictions on subcontractor sales, andOrganizational Conflicts of Interest(OCIs)

Remedies available to the Government include criminal and civil penalties, default termination of affected contracts, and suspension and debarment from Federal acquisitions.

Mandatory Disclosure

Requires mandatory disclosure in writing to the Office of the Inspector General with a copy to the contracting officer whenever, in connection with the award, performance, or closeout of a contract or any subcontract, the contractor has credible evidence of:

Criminal law violations involving fraud, conflict of interest, bribery, or gratuity violations;

Civil False Claims Act violations; or

Significant overpayments.

Mandatory Disclosure Rule provides for suspension or debarment penalty forknowing failure to timely disclose .

Ethics and Compliance Programs

Recent FAR changes require companies to have an ongoing business ethics and compliance program and internal control system within 90 days of contract award (not required for small business or commercial item contracts).

Program requires companies to:

Establish standards and procedures to facilitate timely discovery of improper conduct in connection with Government contracts;

Ensure corrective measures are promptly instituted and carried out;

Assign responsibility at a sufficiently high level and provide adequate resources to ensure effectiveness of the business ethics awareness and compliance program and internal control system; and

Exclude principals whom due diligence would have exposed as having engaged in conduct that is in conflict with the Contractors code of business ethics and conduct.

Intellectual Property RightsThe FAR and agency supplements to the FAR contain complex provisions applicable to intellectual property rights

For example, unless the contractor takes steps to identify limitations on the Governments rights to the contractors intellectual property ( e.g. , technical data), the Government may acquire unlimited rights to such property, meaning that the Government has the right to use, disclose, reproduce, prepare derivative works, distribute copies to the public, and perform publicly and display publicly, in any manner and for any purpose, and to have or permit others to do so.

Revolving Door Restri ctionsRestrictions and/or limitations apply to post-Government employment activities of certain former Government employees

The Federal Acquisition Regulation (FAR) Part 19 Implements Socioeconomic Programs Applicable to Agency Acquisitions:

Small business program

Small disadvantaged business program

Economically and socially disadvantaged (8(a)) business program

Woman-owned business program

Historically underutilized business zone (HUBZone) program

Veteran-owned small business program

Service-Disabled Veteran-Owned small business program

Native American, Alaskan, and Hawaiian program incentives

Qualifying Contractors may Receive Preferential Treatment or Competitive Price Reductions

Benefits of Contracting with Qualified Companies Under the Small Business Program Include :

Contracts being totally or partially set-aside for small businesses;

Competitive contracts being awarded with a price elevation preference; and/or

Subcontracting plans for large business Federal contractors including a small business subcontracting goal.

Disadvantages(?) to Consider:

Control and Affiliation Pitfalls

A Company Must be Small According to the SBA for Entry into any Small Business Program

Size Standards are Based on the North American Industry Classification System (NAICS), Which Establishes Standards for Various Types of Industries

Under the NAICS, Size is Based on Either:

1. Number of Employees:The number of employees of the concern (including part-time employees and the employees of domestic and foreign affiliates) based on number of employees for each of the pay periods over the past 12 months; or

2.Annual Receipts:Gross revenue averaged over previous three years.

A Business Development Program Created to Help Small Disadvantaged Businesses Compete and Access the Federal Procurement Market.

To Qualify, a Company Must:

Meet applicable size standards for small businesses;

Be at least 51% owned and controlled by a socially and economically disadvantaged individual or individuals;

African Americans, Hispanic Americans, Asian Pacific Americans, Subcontinent Asian Americans, and Native Americans are presumed to qualify;

Other individuals can qualify if they show by a

preponderance of the evidence that they are disadvantaged;

All individuals must have a net worth of less than $750,000, excluding the equity of their business and primary residence.

Qualified prime contractors can receive an evaluation price credit of 10% in competing with other contractors if:

The SDB is certified by the SBA; and

The procurement is a competitive negotiated acquisition over $500,000, or $1,000,000 in construction

The evaluation credit does not apply to small business set asides, 8(a) acquisitions, or contracts performed entirely outside the United States.

Offers a Broad Scope of Assistance to Socially and Economically Disadvantaged Firms and Does Not Strictly Pertain to Benefits in Federal Procurement, as does the SDB Program.

Qualified companies may remain in the 8(a) program for a total of 9 years.

8(a) Firms Automatically Qualify for SDB Certification.

In Addition to the Qualifications Necessary for SDB Certification, 8(a) Firms Must:

Be in business for at least two years;

Display reasonable success potential;

Demonstrate good character; and

All individuals must have a net worth of less than $250,000, excluding the value of their business and personnel residence.

8(a) Firms may form Joint Ventures and Teams to Bid on Contracts;

This Enhances the Ability of 8(a) Firms to Perform Larger Prime Contracts and Overcome the Effects of Contract Bundling;

Sole Source Awards When no Reasonable Expectation that Two Eligible Firms will Submit Offers and Award will not Exceed $5M for Contracts Assigned NAICS Codes and $3M for all Other Contracts.

The Federal Acquisition Streamlining Act of 1994 Established the Government-wide Goal for Participation by Small Business Concerns Owned and Controlled by Women at not Less than 5% of the Total Value of All Prime Contract and Subcontract Awards.

Normally, a self-certification process.

Benefits of Subcontracting with a Woman-Owned Business:

Although there are currently no set-aside procurement programs or incentives for contracting with women-owned businesses, the 5% procurement goal established by FASA means agencies have a strong incentive to look for qualified women-owned businesses when filling contractual needs.

The HUBZone Empowerment Contracting Program is Designed to Stimulate Economic Development and Encourage Job Creation in Urban and Rural Communities.

To Qualify a Company:

Must be a small business;

Must be owned and controlled by U.S. citizens;

35% of employees must live in a HUBZone; and

Must maintain a principal office in a HUBZone.

Woman-Owned Businesses, 8(a) Participants, and SDBs can Qualify as HUBZone SBCs, and Receive Preferential Treatment, including:

Permanent status as an HUBZone SBC, if otherwise qualified

Benefits of Contracting with a HUBZone Company:

HUBZone companies receive federal contracting preferences .

Benefits for Service Disabled Veteran Owned Businesses

Veterans Entrepreneurship and Small Business Development Act of 1999, Expanded the Eligibility for Certain Small Business Assistance Programs to Include Veterans:

Veterans Benefits Act of 2003 authorized agencies to award sole source or set-aside contracts to service disabled veteran owned businesses

Benefits of Contracting with a Veteran-Owned Companies:

Federal contracting agencies must establish and achieve a participation goal of 3% of the total value of all prime contract and subcontract awards for each fiscal year for small businesses owned and controlled by veterans with service-connected disabilities.

Office of Native American Affairs is Devoted to Ensuring American Indians, Native Alaskans and Native Hawaiians Seeking to Create, Develop and Expand Small Businesses Have Full Access to Business Development and Expansion Tools Available Through the Agency's Entrepreneurial Development, Lending and Procurement Programs .

SBA has a particular interest in assisting small business and economic development in disadvantaged tribal areas.

Native American businesses increased 84% from 1992 to 1997.

Benefits of Contracting with Native American Businesses:

May permanently remain an 8(a) company, if otherwise qualified

Rebuttable presumption of socially disadvantaged status.

No Determination of Affiliation or Control:

Between a protg firm and its mentor based on the mentor/protg agreement or any assistance provided pursuant to the agreement.

Generally, a Mentor May Only Have one Protg at a Time .

Credit Under Subcontracting Plans for Un-reimbursed costs:

Mentors may receive credit for certain costs incurred under the Program in providing developmental assistance to protg firms

A Plan, Adopted by the Contractor, to Further the Government's Program Under the Small Business Act

Successful Offerors Under both Negotiated and Sealed Bidding Acquisitions that are Expected to Exceed $500,000 ($1M for construction) and that have Subcontracting Possibilities must Provide a Formal Subcontracting Plan

Percentage Goals for using Small Business Concerns, SDBs, Woman-owned Small Businesses

The name of the individual who will administer the offeror's subcontracting program;

A description of the efforts the offeror will make to ensure that small businesses have an equitable opportunity to compete for subcontracts;

Assurances that the offeror will include the clause at FAR 52.219-8 (Utilization of Small Business Concerns, SDB and Woman-owned Small Business Concerns);

Additional Assurances A recitation of the records the offeror will maintain

to demonstrate procedures adopted to comply with the plan

Enforceability?

Trend is Toward Larger and More Complex Teams

How to Avoid a Finding of Affiliation if Teaming to Win a Set-Aside Procurement

A Concern May not be Awarded a Contract Under Subsection (a) of this Section as a Small Business Concern Unless the Concern Agrees That -

in the case of a contract for services (except construction), at least 50 percent of the cost of contract performance incurred for personnel shall be expended for employees of the concern; or

in the case of a contract for procurement of supplies (other than procurement from a regular dealer in such supplies), the concern will perform work for at least 50 percent of the cost of manufacturing the supplies (not including the cost of materials).

15 U.S.C. 644(o)(1)

Small Business Administration Regulations, 13 C.F.R. 125

Generally defines the cost of performing the contract as All allowable direct and indirect costs allocable to the contract, excluding profit or fee.

Cost of Manufacturing

Those costs incurred by the firm in the production of the end item being acquired

Cost of Service Contract

Direct labor costs plus any overhead which has only direct labor as its base, plus general and administrative costs multiplied by the labor cost

For Restricted Procurements (other than 8(a)), the Following Individuals or Entities may Challenge an Offerors Self-Certification as a Small Business:

The Contracting Officer may protest the representation of an offeror;

An offeror, the SBA, or other interested party may protest the representation of an offeror in a specific offer; and/or

A protest may be lodged by any interested party.

FAR 19.302(a) & (b)

The Regulation:

A contractor and subcontractor are treated as joint venturers if the ostensible subcontractor will perform primary and vital requirements of a contract or if the prime contractor is unusually reliant upon the ostensible subcontractor. All requirements of the contract are considered in reviewing such relationship, including contract management, technical responsibility, and the percentage of subcontracted work.

13 C.F.R. 121.103(f)(4)

Courts Look To:

Who will manage the contract?

Which party possesses the requisite background and expertise to carry out the contract?

Which party chased the contract?

What degree of collaboration was there on the bid or proposal?

Are there discrete tasks to be performed by each concern or is there a commingling of personnel and resources?

What is the amount of work to be performed by each?

Which concern will perform the more complex and/or costly contract functions?

Through Contractual Relationships

(13 C.F.R. 121.103(a))

Through Common Management

(13 C.F.R. 121.103(e))

Under Joint Venture Relationships

(13 C.F.R. 121.103(f))

Through Stock Ownership

(13 C.F.R. 121.103(c))

The SBA will closely scrutinize a newly organized concern

The Traditional Rule

SBA determines the size status of a concern, including its affiliates, as of the date the concern submits a written self-certification that it is small to the procuring activity as part of its initial offer . . . which includes price.

Thus, under the traditional rule, it is irrelevant whether the contractor grows beyond the size standard, or is acquired by a large business, during performance of the contract.

Several exceptions to the traditional rule have been established.

Novation or Change of Name Agreements

Within 30 days of an approved contract novation, a contractor must recertify its small business size status to the procuring agency, or inform the procuring agency that it is other than small. If the contractor is other than small, the agency can no longer count the options or orders issued

Merger or Acquisition

Where a contract novation is not required, the contractor must, within 30 days of the transaction becoming final, recertify its small business size status to the procuring agency, or inform the procuring agency that it is other than small. If the contractor is other than small, the agency can no longer count the options or orders issued pursuant to the contract, from that point forward, towards its small business goals. The agency and the contractor must immediately revise all applicable Federal contract databases to reflect the new size status.

Long Term Contracts

Final Rule including these provisions went into effect on April 20, 2009.

Long term contracts are contracts of more than 5 years, including options. Long term contracts may include Multiple Award Schedule (MAS) Contracts, Multiple Agency Contracts (MACs) and Government-wide Acquisition Contracts (GWACs).

A contracting officer must request that a business concern re-certify its small business size status no more than 120 days prior to the end of the fifth year of the contract, and no more than 120 days prior to exercising any option thereafter. If the contractor certifies that it is other than small, the agency can no longer count the options or orders issued pursuant to the contract towards its small business prime contracting goals. The agency and the contractor must immediately revise all applicable Federal contract databases to reflect the new size status.

A business concern that certified itself as other than small, either initially or prior to an option being exercised, may recertify itself as small for a subsequent option period if it meets the applicable size standard.

Long Term Contracts (contd)

Contracting Officers Discretion

A contracting officer may require concerns to recertify their size status in response to a solicitation for an order.The SBA will determine size as of the date the concern submits its self-representation as part of its response to the solicitation for the order.

Blanket Purchase Agreement

The SBA does not consider a Blanket Purchase Agreement (BPA) a contract. Goods and services are acquired under a BPA when an order is issued. Thus, a concern's size may not be determined based on its size at the time of a response to a solicitation for a BPA.

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