Legal Meets Practical

Last week, I had the pleasure of presenting at the National Veteran Small Business Coalition’s annual conference in Norfolk, Virginia. For those of you not familiar with the Coalition, and especially if you’re in the northern Virginia area, consider looking into the conference – every year, it provides an opportunity for veteran business owners to network with prospective teaming partners and procurement officials.

Because I’ve been busy with conference preparations, I’ve missed a blog or two. Accordingly, in a nutshell, here are a few major items of veteran business news you should know:

It’s (Court) Official: SDVOSBs Trump AbilityOne at VA! According to the U.S. Court of Federal Claims, The VA cannot buy products or services using the AbilityOne List without first applying the “rule of two” and determining whether qualified SDVOSBs and VOSBs are available to bid. In other words, SDVOSBs take precedence over those on the AbilityOne List.

The Court’s decision involved an apparent conflict between two statutes: the Javits-Wagner-O’Day Act, or JWOD, and the Veterans Benefits, Health Care, and Information Technology Act of 2006, or VBA. The VBA states that (with very limited exceptions), the VA must procure goods and services from SDVOSBs and VOSBs when the contracting officer has a reasonable expectation of receiving offers from two or more qualified veteran-owned companies at fair market prices.  The JWOD predates the VBA and provides that government agencies, including the VA, must purpose certain products and services from designated non-profits that employ blind and otherwise severely disabled people (on the “AbilityOne List”).  While after Kingdomware, there was confusion as to which statute took preference – JWOD or VBA – a bid protest filed by SDVOSB contractor, PDS Consultants, Inc., has finally resolved this issue in favor of veteran-owned businesses.

Do You Know How to Properly Calculate Your Size? As small business contractors know, size is determined by looking at receipts over the last three fiscal tax years. Notice there’s a period at the end of this sentence. You cannot manipulate your size by delaying filing your last fiscal year’s tax returns, which was confirmed by a recent Small Business Administration Office of Hearings and Appeals decision. There, it took a federal agency over two years to award a contract to a firm that had self-certified as “small” at the time it submitted its offer, and, upon a size protest, the SBA area office asked the firm to produce its tax return for 2013 even though these had not yet been filed at the time of its 2014 offer. The SBA OHA confirmed that this request was proper and that the awardee’s size should have been calculated by referring to its 2011, 2012 and 2013 tax returns (i.e., the last three years prior to its offer).

Pay Attention to Limitations on Subcontracting Changes. A year ago, the SBA published a rule holding that the new standard for compliance with the limitations on subcontracting requirements is the amount paid by the government, not the cost of personnel (fully burdened direct labor rate). Also, in July of 2016, the VA issued a memorandum noting that from now on, it would be applying the SBA’s new rule (amount paid, not cost of personnel), and would later amend the VAAR to reflect this.

I am finding that many VA contracting officers do not know about this change or the class deviation. As such, if you are pursuing a VA SDVOSB set-aside contract, check to make sure the right clause is being applied. Especially in contracts where the cost of equipment is significant, it is entirely possible to be compliant under one clause but not another. And you don’t want to fall on the wrong side.

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