Five Things Small Businesses Want from the New President

By Ann Sullivan

 

1.  An effective vaccination program. Small businesses, especially vulnerable during the pandemic, need to get employees back to work and customers through their doors. Clear communication from the President and public health officials and a robust vaccination plan will accomplish just that.  

 

2. Capital to weather the pandemic. The Paycheck Protection Program (PPP) got lots of things right – the two rounds of loans assisted many small businesses. However, adjusting to changes caused or accelerated by the pandemic are far from over. Businesses have had to make significant changes, such as investments in technology infrastructure. This spans across industries – accommodating working from home or shifting to take out/delivery services, just to name a few. It is unclear if or when the workforce will return to their workplaces five days a week. 

 

While the second round of PPP funding passed in December expanded covered expenses, the need for capital has never been greater. The temptation by government is to simply pile money on top of existing programs. That has not necessarily been successful—women still get just 4% of all commercial capital and businesses in underserved communities were the last to receive PPP funds. Federal loan programs for these businesses need an overhaul.

 

3. Greater access to public sector contracts. During the pandemic, public sector (federal/state/local) contracting is a way to reposition successful commercial businesses. However, the current set of acquisition policies and federal agency initiatives are really designed to keep them out. Citing efficiency, the federal government buys in large quantities from large companies but in the process relegates smaller businesses to providing goods and services through large prime contractors, rather than buying directly from small businesses.  This strategy results in fewer small federal contractors – which has had a ripple effect on the economy. Access, by the way, does not mean a handout. It just means having a fair shot at winning the business.

 

4. Changing the tax code from “one size fits all.” Although the last tax rewrite made some much-needed changes for small businesses that are organized as pass-throughs as opposed to C corporations, considerable work remains. The Treasury Department should review every deduction/tax credit and its impact on small business vis-à-vis large businesses and make regulatory adjustments and recommended changes to the law that require Congressional action.

 

5. Make small businesses stakeholders in the clean energy future. If small businesses are not at the table, the new Administration’s goal to build a “modern, sustainable infrastructure and deliver an equitable clean energy future” won’t get much traction. If involved, they will find ways to create revenue and business growth. Their unique ability to pivot and innovate will give life to the opportunities the new Administration envisions.

Is There Any End in Sight? 5 Reasons Why You Can’t Quit.

By Ann Sullivan

 

I was on a call recently with fellow business leaders and one of them articulated what I have been thinking. Is there any end in sight? Meaning COVID-19, meaning nasty politics and gridlock on important issues, meaning decreased revenues and meaning people in a pretty bad mood. If you are a business owner, you have dreams of simply walking away saying “I quit.” But you can’t—here are five reasons why.

 

1. You have invested too much into the business to walk away. As satisfying as walking away sounds, why would you throw away all that time and effort that it takes to build a business. More than 50% of businesses fail in the first year. If you made it past that mark, you overcame a big hurdle – the odds are with you.

 

2. You like being your own boss. In a study by Guidant Financial, 55% of respondents said being their own boss was their biggest motivation for owning their business. Business owners don’t necessarily excel in playing corporate politics – they live with the consequences of their own decisions. Plus, being your own boss has the potential for greater income than working for someone else.  

 

3. You’re in good company. Depending on what survey you choose, nearly 1/3 of all small businesses in the US are non-operational due to COVID. If you are in business, you’ve beat the odds, so chances are you’ll climb out of this.  

 

4. You have been given an unusual chance to reposition and get creative. This opportunity doesn’t happen very often but COVID-19 forced us to think about pursuing new business lines and add new capabilities. Not that we wanted to do this – life was pretty good when the revenues were strong, but every business needs a refresh at some point. 2020 just gave us the kick in the pants we probably needed.

 

5. You can’t fix the political world. Having been in the political arena for a long time, I remember when politicians were much more collegial. Even though you can’t fix the political divide, what you can do is vote, volunteer, contribute to candidates that share your views and work for a better future for you and your employees. 

Amidst the continuing pandemic one thing remains the same for all federal contractors– Section 889 implementation.

By Elizabeth Sullivan

Disclaimer: This is longer than our usual blog posts – the rule was 86 pages, so bear with me through this one.  

 

Section 889 – a name that does not mean much to the average person, but carries a lot of weight for contractors. This is a section in the FY2019 National Defense Authorization Act (NDAA) that seeks to eradicate Chinese telecom from the entire U.S. government supply chain. Why write about it now? The part that impacts federal contractors of all sizes (Part B) goes into effect in less than a month.

 

Earlier this year, the Department of Defense (DoD) held a public meeting to hear from industry. Of the salient points made, one resounding theme was that definitions will mean everything for implementation. However, industry hasn’t been able to share any definitional clarity because of the rule release delay. The FAR Council published their interim rule last week – Part B goes into effect before the comment period is over, which means contractors will have to comply with the rule starting on August 13, 2020. Public comments can be submitted until September 14. 

 

Here are the five key components for small/midsize business contractors to pay attention to.

 

You’ll have a new box to check in SAM. Contractors will need to annually check a box in SAM verifying that they do not use any covered telecommunications equipment or services. A contractor can choose to say yes, they do use some of these banned equipment/services, which would require an offer-by-offer representation for contracts and task/delivery orders under IDIQs. It is important to know this ban applies toany equipment, system, or service that uses the covered equipment or services as a substantial or essential component of any system, or as critical technology as part of any of a contractor’s systems. Think this rule does not apply to you? Think again – acquisitions of commercial items (including COTS) and contracts at or below the simplified acquisition threshold (SAT) must also adhere to this prohibition. 

 

Definitions are key. Definitions are critical to the implementation of this rule, which defines words such as “backhaul” and “roaming,” but leaves contractors with uncertainty over what constitutes a covered technology. FAR 4.2101 covers some of these definitions, however there was no further clarity in the rule regarding who is considered “any subsidiary or affiliate of such entities” of the five listed companies (Huawei, ZTE, Hytera, Hikvision and Dahua). It seems problematic that a small business contractor is expected to research all of the subsidiaries and affiliates of these companies to make sure they are not utilizing any prohibited components. Note to government: why not just provide a list? 

 

Another definitional bone I have to pick is the meaning of “reasonable inquiry.” The rule says that a company is compliant if a “reasonable inquiry” by the company does not show any use of the prohibited equipment or services. So, what exactly does that mean? According to the rule, a reasonable inquiry is something that is designed to uncover any use of these covered telecommunications equipment or services and does not need to be an internal or third-party audit. While I am not a lawyer, I can imagine that every procurement attorney would advise contractors to have some type of legitimate audit of systems in case compliance risks arise.

 

The waiver process is laborious. Although a waiver sounds reasonable and gives contractors added time to comply (until August 13, 2022), it doesn’t seem designed for small or midsize contractors. In order to get a one-time waiver, the head of an agency has to grant it. Before this happens, a senior agency official for supply chain risk management has to discuss the waiver with the Federal Acquisition Security Council (FASC). And consult with the Office of the Director of National Intelligence (ODNI) to make sure conditions are met. And provide notice to the ODNI and FASC 15 days before granting the waiver. And notify appropriate Congressional committees within 30 days. The FAR Council does acknowledge that this process could take a few weeks and advises to enter at your own risk because “agencies may reasonably choose not to initiate one and to move forward and make award to an offeror that does not require a waiver.” A quick data point: there are 387,967 companies registered is SAM, 74% of which are small. That would mean if every small company decided to submit an offer for a federal award and sought a waiver, that would be 287,096 waivers. 

 

Six contractor actions are necessary for compliance. A chunk of the rule outlines contractor compliance recommendations. After reading and re-reading these six actions in the rule, I’m left with the same feeling: small contractors need something more detailed than just general guidelines. Generalities like “read and understand the rule and necessary actions for compliance” and “corporate enterprise tracking” sound great, what exactly does that entail? During more normal times – let alone a pandemic – building out a compliance program can be complicated, not to mention costly. It is important contractors have the detailed information to get it right.

 

Finally, I see dollar signs. The rule completely underestimates the time it will take contractors to implement and remain compliant with this rule. A whole section is dedicated to this analysis – and quite a few estimates left me scratching my head (you can find these in Section III, Part D). Companies aware of the rule have been spending months trying to prepare and continue to evaluate the components in their government offerings. An important part of complying with the rule to highlight is that a company cannot use any of these prohibited systems/equipment, even if they are not used in its federal contracts. That means no split networks or having one system for U.S. federal business and a difference one for commercial or contracts with other countries. I see more dollar signs.

 

The FAR Council is seeking public comment on the rule – and federal contractors should respond. In Section IV of the rule you can find a list of questions the Council wants industry to answer, and it is worth taking a look at them. One that is also found in the beginning of the rule is whether an expansion of the prohibition should be made to include all company subsidiaries and affiliates. Feedback is also requested on subjects like challenges, costs and insight into existing systems.

 

One thing all contractors, regardless of size have in common – they want to be compliant so they can compete. Given the uphill battle small and midsize contractors face when it comes to compliance with Section 889 and many other contracting requirements, advocacy on this issue is critical. 

Hearing Reveals Clues for Additional Small Business Relief

By Elizabeth Sullivan

The Senate Small Business Committee had a never-before-seen visitor yesterday: Treasury Secretary Steven Mnuchin. He joined Small Business Administration (SBA) Administrator Jovita Carranza in testifying before the Committee on the small business programs included in the CARES Act. The hearing revealed a few interesting pieces of information about how the programs have been run, as well as what the future may hold. Here were our team’s top takeaways.

 

1.    Small businesses need additional relief. While we have heard this feedback from small business owners countless times over the past month – we weren’t quite sure Congress got the message. Despite the rule changes made in H.R. 7010, many businesses that received Paycheck Protection Program (PPP) dollars are about to reach the end of their forgiveness portion. Meaning, although there was an extension of the forgiveness timeline to 24 weeks, many businesses planned for the 8-weeks and are about to/have reached the end of their funds. Therefore, another round of layoffs is to be expected this month, as many do not have the cashflow to keep their employees on the payroll. This issue was echoed by Senators on both sides of the aisle during the hearing and even the Treasury Secretary said that yes, there was going to need to be some type of additional support.

When asked by Senator Kennedy (R-LA) if relief for investors such as capital gains tax changes were on the table, the Treasury Secretary gave a lukewarm response and echoed the need to focus on getting people back to work. When further asked if he were “king for a day” what he would do moving forward, Mnuchin said, “I definitely think we are going to need another bipartisan legislation to put more money into the economy.” He suggested three things could be on the table: another round of direct payments to individuals, fixing unemployment, and more money to encourage businesses to re-hire, with targeted efforts to industries that are most impacted by COVID-19 such as  hospitality and tourism.

 

2.  Targeted relief is needed for minority-owned and women-owned businesses. Senator Maria Cantwell (D-WA) and Chair Marco Rubio (R-FL) were among many to call for targeted relief to underserved communities who traditionally struggle to access capital and resources. Senator Cantwell sent a letter to both witnesses, pushing for prioritization of these communities and smaller (10 or fewer employees) businesses in existing relief loans and any future  COVID-19-related assistance. 

 

Senior Committee Democrats Ranking Member Cardin (MD), Senator Coons (DE) and Senator Shaheen (NH) announced their intention to introduce the Prioritized Paycheck Protection Program (P4) Act. The bill authorizes new lending under the PPP to small businesses with 100 employees or less, including sole proprietorships and the self-employed. In order to be eligible, businesses must have already depleted an initial PPP loan or be on pace to exhaust the funding and must demonstrate a revenue loss of 50% or more due to the COVID-19 pandemic. This is a step in the right direction.

 

3.  SBA’s abrupt changes to the EIDL program were not random. SBA Administrator Carranza revealed the math behind the $1,000 per employee cap for Economic Injury Disaster Loan (EIDL) advances and $150,000 loan cap for EIDL loans. Based on the number of applications, SBA calculated that in order to lend to all applicants, these limits were necessary.  Ranking Member Cardin (D-MD) and others pushed her to  explain why she didn’t tell Congress more money was needed to be appropriated. She said in the hearing that all 5.4 million applications will be in the EIDL loan portal by next week. For context, a loan officer in the EIDL program typically processed 3-5 loans a day and now handles 50+ loans a day. “Into the portal” doesn’t necessarily mean all the loans will be approved by next week, but they will be out of the EIDL purgatory and processing will begin. Stay tuned.

 

4.  Changing PPP rules to allow small business owners with criminal records to apply for loans could be coming soon. Current rules on the PPP program from the Treasury Department prohibit business owners with felony convictions or who are currently on parole/probation from receiving PPP loans. In his questioning, Senator Booker (D-NJ) asked if the Secretary would be open to changing the program’s rules. The Senator highlighted his legislation, which has bipartisan support and will remove the ban on individuals with non-financial fraud felony convictions. The Treasury Secretary said rules scaling back the criminal conviction from the past five years to the past three years were going to be published shortly. However, Secretary Mnuchin also indicated that if there was bipartisan consensus, he would open to the change proposed by Senator Booker and others. 

 

All of the Senators gave accolades to the agency leaders and their staffs for implementing these unprecedented small business loan programs. They pushed for more timely responses from the SBA to the Committee. So, the question that remains – will there be further action: what will it look like and when? Committee Members expressed a sense of urgency for additional small business relief. 

 

Our suggestion – make this bill about relief and recovery. Put policy changes in place that will also have a lasting effect on the economy. For example, changes to sole source rules for individually-owned 8(a), WOSBs, SDVOSBs and HUBZone companies that have been passed in the House and were included in the draft Senate SBA reauthorization bill would get help contracts get into the hands of small businesses during recovery and into the future. Additionally, allowing equity investment in 8(a) and WOSB firms could give them a boost of capital to remain sustainable. The clock is ticking, and small businesses need these bipartisan solutions as soon as possible. 

Opportunities in the Face of Challenge

By Elizabeth Sullivan 

While many segments of the economy are experiencing unprecedented loss, one sector of the economy, the federal government, is rapidly increasing its spending to combat the COVID-19 virus. Reported spending obligations for COVID-19 as of May 4 are about $8.5 billion and are expected to increase in the coming weeks (note: every time the numbers are updated, the previous link will reflect those updates). Here are a few of the numbers you should be aware of as a federal contractor.

Agencies flowing the most dollars to small businesses are the Departments of Veterans Affairs (VA), Small Business Administration (SBA), Health and Human Services (HHS), Homeland Security (DHS) and Justice (DOJ). Veterans Affairs has awarded over $580 million, while HHS and SBA are tied for second with $417 million. For the Department of Justice – of the total dollars spent so far on coronavirus, 63.5% was awarded to small businesses. That is a little over $39 million of the total $62 million spent as of May 4, 2020. 

Dollars are also being awarded to women-owned small businesses (WOSBs). Across all agencies, since March, over $490 million has been awarded to WOSBs to assist with COVID-19 relief. Just for some context – this number has exceeded the total dollars awarded for WOSBs in FY2018, which was $473.1 million. So, in a matter of months, the dollars awarded have exceeded an entire fiscal year’s previous spend. This increase has been across small business programs – service-disabled veteran-owned small businesses (SDVOSBs) also have been awarded $493 million and HUBZone companies $90 million. 

A few examples of how what federal agencies are pursuing COVID-19 assistance include HHS refocusing its research contracts to seek assistance with COVID-19 and the Army is seeking new technology to help prevent, treat and manage the coronavirus.The SBA is on a hiring spree given their new responsibility to process $620 billion in loans to small businesses.

So, how can you take advantage of this new spending? In addition to working with your existing federal customers, there are two other ways to showcase your capabilities to assist with COVID-19. The first is to sign up on the Disaster Response Registry in SAM, where you can submit your COVID-19 related capability statements and product offerings. This registry is used agency-wide. The second is to submit inquiries to the DHS Procurement Action Innovative Response (PAIR) Team. DHS created this in response to the surge of incoming industry offers of help and innovative ideas to support the fight against COVID-19. 

By the time you read this, more dollars will have been spent. Make sure you are taking advantage of these opportunities now. 

COVID-19: Expect New Employer Obligations

By Ann Sullivan

(Update 4/26/20: For more information, check out the DOL FAQ on these provisions here: https://www.dol.gov/agencies/whd/pandemic/ffcra-questions)

Legislation drafted in a hurry, like the Families First Coronavirus Response Act negotiated by Speaker Nancy Pelosi and Secretary of the Treasury Steven Mnuchin, can be confusing.  We are concentrating only on the employer/employee provisions in this comprehensive coronavirus response package. The President signed this bill into law on March 18.

There are two different employer requirements: emergency sick leave and emergency family leave.  Let’s talk about sick leave first.  Every employer under 500 employees is required to offer two weeks of paid sick leave to employees who are sick from the coronavirus, taking care of someone who is sick with the virus or are providing childcare due to cancelled school/daycare – without fear of losing their jobs.  Full time employees who are sick are allotted 80 hours of sick leave and part time employees/hourly workers are given the typical hours worked in a two-week period. Employers are required to pay employees their normal wages or the minimum wage at the federal/state/local level, whichever is the higher.  Employees who are taking care of others are entitled to two-thirds of their regular earnings.  As I read the current bill, these two weeks are in addition to an employer’s existing sick leave policy.  The bill allows the Secretary of Labor to issue regulations exempting businesses with fewer than 50 employees from the paid leave requirement if it would jeopardize the viability of the business. 

With respect to emergency family leave, which is an expansion of the Family and Medical Leave Act (FMLA), the bill expands FMLA availability to employers under 50 employees.  As context, the current law requires 12 weeks of FMLA for employees of companies above 50 employees.  In order to make FMLA applicable to dealing with the coronavirus, the bill expands the definition of who is eligible for FMLA by adding employees who are unable to work because they are providing childcare due to closed schools/daycare centers.  This change is effective through December 31, 2020.  Requirements for employers include paying employees two-thirds pay for a little more than 10 weeks.  The first 10 days of the 12-week period do not need to be paid.  Employers with less than 25 employees would be exempt from requirements to restore an employee's original position if it no longer exists due to changes in either economic conditions or a change in operations as a result of this public health emergency. The Labor Secretary is allowed to issue similar regulations as the family leave exemptions regarding businesses with fewer than 50 employees. In fact, DOL is looking for feedback from employers on compliance for these new rules through March 29.

So, how will this be paid for?  Employers offering this emergency sick leave and family leave will be able to get 100% payroll tax credit for these additional costs on a quarterly basis.  Employers may deduct up to $511 per day for sick employees or $200 per day for employees who are taking care of others.  The tax credit for family leave is up to $200 per day, not to exceed $10,000.  For the self-employed, these credits will be applied against the self-employment tax.  

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Employer Obligations in H.R. 6201: Families First Coronavirus Response Act

Emergency Paid Sick Leave:

• Requires private employers with fewer than 500 employees and all public employers to provide 80 hours of paid leave for full-time employees and part time employees/hourly workers are given the typical hours worked in a two-week period without fear of losing their job. 
• Reasons for this leave can be: 
• Comply with a federal, state, or local quarantine or isolation order.
• Self-quarantine per a health-care provider’s advice.
• Obtain a medical diagnosis for coronavirus.
• Care for an individual who is in quarantine or for a child whose school or day care has closed due to coronavirus.
• Bill caps per employee costs are $5,110 for an employee who is taking the leave for their own illness or $2,000 for employees caring for another individual or child.  
• Leave mandate sunsets on December 31, 2020 and commences 15 days after the bill is signed into law. 
• Allows the Secretary of Labor to issue regulations exempting businesses with fewer than 50 employees from the paid leave requirement if it would jeopardize the viability of the business.
• An employer cannot require a worker to use any other available paid leave before using the sick time or require a worker to find a replacement to cover their hours.

Emergency Paid Family Leave: 

• Requires all employers with fewer than 500 employees to provide to up to 12-weeks of job-protected leave under FMLA for employees who are unable to work or telework because they have to care for a child younger than 18 whose school or day care has closed because of the coronavirus.
• First 10 days of leave could be unpaid, though a worker could choose to use accrued vacation days, personal leave, or other available paid leave for unpaid time off.
• Following the first 10 days, workers would receive a benefit from their employers that will be at least two-thirds of their normal pay rate.
• Per employee cap on costs for the leave are set at $200 per day or $10,000 total. 
• Leave mandate sunsets on December 31, 2020 and commences 15 days after the bill is signed into law. 
• Employers with less than 25 employees would be exempt from requirements to restore an employee's original position if it no longer exists due to changes in either economic conditions or a change in operations as a result of this public health emergency.
• Allows the Secretary of Labor to issue regulations exempting businesses with fewer than 50 employees from the paid leave requirement if it would jeopardize the viability of the business. 

Employer Tax Credits:

• Employers offering this emergency sick leave and family leave will be able to get 100% payroll tax credit for these additional costs on a quarterly basis. 
• Emergency sick leave credit:
• For each employee the credit would be for wages of as much as $511 per day while the employee is receiving paid sick leave because they are quarantined, or $200 if they are caring for someone else who is quarantined or their child’s school is closed.
• Emergency family leave credit:
• As much as $200 per day while the employee is receiving paid leave, or a total of $10,000.
• The credit would be in effect for wages through the end of 2020.
• For self-employed, there is a similar credit applied against the self-employment tax.

Hey Defense Contractors: DoD’s CMMC is Moving Full Steam Ahead With or Without You

WIPP Works in Washington, March 2020

By Elizabeth Sullivan, WIPP's Advocacy Team

If you need a quick refresher on CMMC before reading this, you can find it here and here.

The final model for the Department of Defense’s (DoD) Cybersecurity Maturity Model Certification (CMMC) came out earlier this year. So, what’s next for businesses? 

Let’s talk certification. Now that version 1.0 of CMMC was released – the final version– DoD is moving full steam ahead. The “accreditation body” has been formed, which is an independent, non-profit group that is responsible for developing the training and assessment standards for the certification. The next step in the certification journey for DoD is forming a Memoranda of Understanding (MOU) with the accreditation body, which will outline the roles and responsibilities of each of the parties. Finally, “accreditors” – of which there are none currently – will be responsible for evaluating businesses and assigning them a CMMC certification level. If all of this third-party stuff leaves you scratching your head, just know that DoD is outsourcing the accreditation of over 300,000 contractors with plans for substantial oversight.

Substantial questions remain for contractors. One of the biggest is the timing of the certification rollout. The Department has said that they will issue 10 “pathfinder” solicitations that require various CMMC levels, including a few that will require level 4 or 5 certifications. Since these will be substantial contracts, if you are a small business tapped to subcontract on one of these – when will you get certified? Will there be some type of cue, where the biggest companies go first? Or will it be ranked by the amount of anticipated work? This remains to be determined.

Let’s talk levels. While the CMMC levels have been refined throughout the DoD’s drafting process, it is important to know that there are five levels. Any contractor, regardless of the type of work they do that wants to do business with DoD will need at least a level one. Level one is the most basic cyber hygiene, which has some noteworthy differences from NIST 800-171. The Defense Department has said that most small businesses only need a level one. But I wouldn’t take that assessment at face value. It is important for small/midsize companies to determine the appropriate level they want to prepare for based on the work they do, or plan to do, for the DoD. For example, if your company handles any Controlled Unclassified Information (CUI) you will need at least a level three. By the way, these levels will also apply to subcontracts. Which brings me into the next section of this article – unknowns. 

Let's talk unknowns. I was recently on a panel at the Women Leaders in Defense & Aerospace Law & Compliance Conference, where I shared the stage with the other two sides of the CMMC equation – a lawyer and prime. One of the things that I learned is that concerns span all business sizes—small businesses aren’t the only ones with questions. First and foremost is how the DoD will handle CMMC certification levels for subcontracted work. There has been a lot of conflicting information about this component flying around, but the latest and greatest (as of the time this is published) is that the program managers for both the DoD and prime contractor will work together to determine the appropriate CMMC levels for the components of subcontracted work.

Another unknown is how a company can dispute an assigned level by an accreditor. While the accreditation body will have some sort of mechanism to address this, DoD’s involvement in this process is unclear. This is an important question because certification levels will be assigned for a three-year period. Finally – and this is a big one – the total cost for contractors remains to be seen. DoD has not yet provided any specific information on the cost of obtaining the certification. Some good news is that something that is known (and has been for a while) is that DoD will not seek levels retroactively – meaning that no current contracts will be modified to require a certain certification level. All of this is to say, stay tuned.

Moral of the story is – as a federal contractor, it is time to pay attention if you aren’t already. WIPP recently offered a webinar on this issue, and we intend to continue to provide the most updated education on this certification roll-out. Although CMMC is only for the DoD supply chain, in the future it could impact civilian agencies as well. So, get ready – it’s moving full steam ahead, with or without you. 

FAR Final Rule Clarifies Discrepancies and Implements Changes to Multiple Award Contracts (MACs) for Small Businesses

By Elizabeth Sullivan

It’s not new that parts of the Small Business Administration (SBA) regulations and the Federal Acquisition Regulation (FAR) have contradicted one another. Or, that the acquisition workforce does not follow new SBA regulations because they are not in the FAR. Today the FAR Council published a final rule implementing regulations such as governmentwide policy for partial set-asides and set-asides for small businesses under multiple-award contracts (MACs), among other things.

Just to give a quick timeline –the SBA published a final rule with these changes in October 2, 2013 (78 FR 61114), and the FAR Council (DoD, GSA and NASA) published a proposed rule to implement the SBA changes on December 5, 2016 (81 FR 88072). So, it takes an average of three years for each step of the process. This needlessly long process further highlights the need for the SBA to have a seat on the FAR Council, as proposed in the Senate Small Business Committee SBA Reauthorization draft. 

Here are some of the key changes made by the rule, which is effective March 30, 2020:

• NAICS code(s) must be assigned to all solicitations, contracts, and task and delivery orders, and that the NAICS code assigned to a task or delivery order must be a NAICS code assigned to the multiple-award contract.
• FAR 19.301-2 is revised to clarify that, for multiple-award contracts with more than one NAICS code assigned, a contractor must rerepresent its size status for each of those NAICS codes.
• FAR 19.301-1 is revised to clarify that, for orders under basic ordering agreements and blanket purchase agreements (BPAs), offerors must be a small business at the time of award of the order and that a HUBZone small business is not required to represent twice for an award under the HUBZone Program. A HUBZone small business is required to represent at the time of its initial offer and be a HUBZone small business at time of award.
• Clarifies that the limitations on subcontracting and the nonmanufacturer rule apply to orders issued directly to one small business under a multiple-award contract with reserves.
• Clarifies the limitations on subcontracting compliance period for orders issued directly, under multiple-award contracts with reserves, to small businesses who qualify for any of the socioeconomic programs.
• FAR 19.507 is revised to apply to any multiple-award contract under which orders will be set aside, regardless of whether the multiple-award contract contains a reserve.
• FAR subpart 19.7 is revised to provide guidance to contracting officers on how to apply the requirement for small business subcontracting plans to multiple-award contracts assigned multiple NAICS codes. With the requirement to assign multiple NAICS codes, it will be possible for a contractor to be both a small business and an other than small business for a single contract.
• FAR subpart 19.13 is revised to clarify that the HUBZone price evaluation preference shall not be used for the reserved portion of a solicitation for a multiple-award contract. The price evaluation preference shall be used in the portion of a solicitation for a multiple-award contract that is not reserved. In addition, the clause at 52.219-4 is revised to remove the proposed text that stated the HUBZone price evaluation preference did not apply to solicitations that have a reserve for HUBZone small businesses.

Five Tips to Successful Federal Contracting

By Ann Sullivan

You never know what you will learn if you just ask.  I recently moderated a panel of successful women business owners/federal contractors at a WIPP ChallengeHER event in Washington, D.C.  The panelists were: Rebecca Askew (CEO and General Counsel of Circuit Media), Anjali Ramakumaran (CEO of Ampcus Inc.), LaShonda Bracey (CEO & President of Health-Works and ASAP Training and Course Development) and Denita Conway (CEO & President of PROVEN Management, LLC)  – all experienced federal contractors.  Below are five points they raised that bear repeating.

1. Hearing “no” is a challenge – not a deterrent.  We discussed this in the context of finding capital to start/grow the federal business.  These women heard “no” from banks, investors, friends and family.  But they kept trying and pieced together the necessary capital to succeed.
2. To succeed requires a single focus.  The panel agreed that their laser beam focus played a big part in their success.  They told stories of disappointments and complications with federal contracts, but their focus kept them on the road to success.
3. It only takes one person to open a door so keep knocking.  These panelists established relationships with buyers in a number of ways.  Doors were opened by colleague referrals, connections though organizations, industry days and friends not necessarily by requesting meetings.  These women did not prejudge whether a person may be able to help – they assumed everyone could help.
4. Pay attention to the smallest details – paperwork can trip you up.  They learned the hard way – dot every “i” and cross every “t” in RFP responses.  Respond to everything the government requests.  Anything less will result in disqualification.
5. Expanding within an agency is an essential part of a growth strategy.  This group is not content to rest with one agency contract.  They see a contract as an opening to expand their presence in sub-agencies or a pathway to a Blanket Purchase Agreement (BPA).   

Four Steps Congress Should Take to Help WOSBs in the FY2021 NDAA

By Elizabeth Sullivan

If you listen to our advocacy team’s monthly updates, you will likely hear us reference the National Defense Authorization Act, or more lovingly known as the “NDAA.” As it remains one of the last “must pass” bills – due to the Constitutional requirement that Congress provides for a common defense – each year presents an opportunity to advocate for changes that will benefit women-owned businesses. So, here is what we think should be included this year: 

1.     Expand investment in women- and minority-owned companies. Currently, women-owned businesses receive around 2.8% of all venture dollars. Due to WIPP’s championship of this issue, Senators Marco Rubio (R-FL) and Maria Cantwell (D-WA) introduced the Women and Minority Equity Investment Act of 2019 (S. 1981), which would allow women-owned contracting firms to take investment by women-owned equity firms and still meet the “51% unconditionally owned and controlled” standard set by SBA to participate in the WOSB/EDWOSB program. Representative Robin Kelly (D-IL) introduced an identical bill in the House (H.R. 3633). The same barriers apply to minority-owned businesses. These bills allow minority-owned federal contracting firms to take investment by minority-owned equity firms.This legislation is groundbreaking on both sides of the equation. It opens up a path for investment in women-owned businesses who are government contractors, as well as strengthens women investors. Women in investment firms tell us that this change in the law would strengthen their ability to secure greater equity positions within their companies and women-owned companies looking for investment will be incentivized to seek out women-owned investment firms. The same holds true for minority investments under this legislation. 

2.     Increase the share of contracts awarded to small businesses. WIPP fought and won sole source authority for the WOSB program in 2015—gaining parity with other federal contracting programs. While the fight has changed in 2019, the drumbeat is the same: parity. Currently, the sole source dollar limits for WOSBs are $4 million and $6.5 million (manufacturing) over the life of the contract. While this might sound like a lot of money, in the $550 billion federal marketplace, $4 million over 5 years is small potatoes. We have also heard from WOSBs that even though agencies are interested in awarding sole source contracts to them, these dollar limits are too small.

A shift in government buying calls for a shift in rules for sole source contracts. As government buying continues to trend toward buying through large vehicles and moving away from direct contracts, the ability for small companies to win sole source awards is more crucial than ever. Increasing the award amounts for sole source contracts is extremely beneficial to the small business contracting community, however, it is equally as important to streamline and simplify rules for awarding these contracts. It is not uncommon to hear from small contractors that are told over and over again by the federal workforce the same thing – awarding a sole source contract is too confusing and/or time consuming. 

WIPP supported H.R. 190, which passed the House and gives all small businesses including WOSBs greater opportunities through sole source contracting. This bill raises the dollar amounts for sole source contracts to $4 million and $7 million to be awarded each year, instead of over the life of the contract. A proposal in the Senate would also raise these thresholds to $8 and $10 million each year. 

With respect to simplification, WOSBs, HUBZones and SDVOSBs require that a contracting officer must justify through market research that not two or more offers at a reasonable price are expected. The contracting community has interpreted this as “you are the only company in the world that performs this work,” leading to exceedingly few sole source awards. While the missions of these programs are all different, one thing is crystal clear – putting these contracting programs on equal footing with respect to this rule would ease the burden for the federal government and the businesses trying to meet its agencies missions.

3.     Give Small Businesses More Runway. You may be thinking wait – I have heard this one before. That’s because a significant WIPP-supported legislative victory was achieved in 2018, giving small firms more “runway” to transition out of the small business set aside program and into full and open competition. The law allows businesses to average revenues over 5 years rather than the previous 3 years for purposes of determining size standards. In fact, the law finally went into effect earlier this month. Despite the expanded time this gives many small contractors, there are some that are still left in the lurch – businesses whose work falls under employee-based NAICS.

These companies face the same challenges – bumping out of their size standards and struggling to compete with billion-dollar companies in the full and open marketplace. Therefore, increasing the length of determination for industries measured based on annual average employees would give small companies a little more runway to succeed when they become midsize companies. Using a five-year standard for all industries this would create parity for small businesses in every industry and promote sustainable growth of small businesses.

4.     Share Best Practices for Contracting with Small Businesses. WOSBs continue to find that agencies are reluctant to use small business programs. Recognizing this challenge, WIPP worked with the Homeland Security and Governmental Affairs Committee to introduce S. 3038, The Promoting Rigorous and Innovative Cost Efficiencies for Federal Procurement and Acquisitions (PRICE) Act of 2019, which addresses agency utilization of small businesses in the federal marketplace. Introduced by Senators Gary Peters (D-MI) and Joni Ernst (R-IA), this bipartisan bill requires the Director of the Office of Management and Budget (OMB) to convene the existing Chief Acquisition Officers Council (CAOC) to identify and disseminate best practices in non-defense small business contracting in the federal government. The PRICE Act would positively impact the way in which this valuable information is gathered and shared across the federal government, as well as provide increased opportunities for small businesses by educating the acquisition workforce on best practices for using small business programs. 

As we promote these changes, look for action alerts and other ways to engage from our team. Since it is an election year, there will be limited opportunity to advance this legislation – all the more reason why the NDAA is so important. These four changes would go a long way to help the government meet its 5% goal of contract awards to women-owned companies.