GSA Hosts Inaugural Meeting of Committee to Advise High Level Acquisition Changes

By Samantha Holt | Government Relations Analyst

Last month, the General Services Administration (GSA) held its inaugural meeting of the Acquisition Policy Federal Advisory Committee (GAP FAC). The GAP FAC advises GSA’s Administrator on how the agency’s acquisitions tools and authorities can drive positive regulatory, policy, and process changes. There are three things government contractors should take away from this meeting:

 

1.     While GAP FAC identified climate and sustainability federal acquisition issues as the initial focus, many committee members brought up challenges faced by small business contractors. The Small Business Administration’s (SBA) Deputy Associate Administrator of the Office of Government Contracting and Business Development, Antonio Doss, is part of the Committee and drove this discussion. Some of the issues identified were:

• Focusing on GSA schedule barriers of entry for small, disadvantaged businesses (SDBs)

• Creating policies that tackle the climate and sustainability issues but do not create new barriers for SDBs

• Constructing teaming framework that make it easier for small businesses to bid and win large contract opportunities

• Introducing strategies that support the longevity of small businesses within federal procurement

• Creating resources to support small, disadvantaged businesses with the climate and sustainability federal acquisition regulatory, policy, and process changes

 

2.     GSA expressed its willingness to support pushing these and other small business changes with the Federal Acquisition Regulatory (FAR) Council. This is important for the small business community because there are often significant lag times between SBA final rulemaking and implementation of these changes in the FAR. 

 

3.     All GAP FAC full committee and subcommittee meetings are open to the public. Written comments can be submitted at gapfac@gsa.gov. Additionally, there are three subcommittees – Policy and Practices, Industry Partnerships, and Acquisition Workforce. While subcommittee meetings have not been announced, keep an eye out for them here.

 
The next GAP FAC meeting is on October 27, 2022 from 1pm – 4pm EST. 

Small Business Wins in the House's FY2022 National Defense Authorization Act Amendments

On September 23, the House passed H.R. 4350, the FY2022 National Defense Authorization Act (NDAA). Accompanying the 1,362 pages of legislation were  476 amendments offered by lawmakers. Included in the amendments were several wins for MSGI clients: HUBZone Contractors National Council, GovEvolve, and Montgomery County Chamber of Commerce (MCCC). These amendments are huge win for the small business community and are the result of months of advocacy. 

• Floor #352 - Transfers decisions for HUBZones to OHA. 
• Floor #314 – Clarifies that the HUBZone price preference applies to task orders. 
• Floor #365 – Raises sole source thresholds for all socioeconomic programs from $4/$7.5 to $8/$10 million (does not eliminate option years, this is total over the life of the contract). 
• Floor #26– Raises small business contracting goals. 
• Floor #186 – Creates category management exemptions for tier 0 contracts. 
• Floor #412 –Requires a company to update their small business status in SAM/notify KO’s if status changes within 2 days. 
• Floor #149–Adds cyber counseling capability to SBDCs. 
• Floor #337 – Requires DoD Report impact of CMMC on small businesses. 

Considering the ongoing hardships resulting from the COVID-19 pandemic, adoption of these changes would assist small businesses seeking to succeed in the federal marketplace. In October, MSGI pushed for these amendments to be included in the Senate’s version of the FY2022 NDAA by writing a letter to Senate Small Business Committee Chair, Ben Cardin of Maryland and Ranking Member, Rand Paul of Kentucky. The letter was supported by MSGI clients listed above, as well as the Women Veterans Business Coalition (WVBC), the Small and Emerging Contractors Advisory Forum (SECAF), the Women Construction Owners and Executives (WCOE), and hundreds of independent small businesses across the country. 

Read the Small Business Amendments Support Letter here. 

Access a detailed list of small business amendments in the House FY2022 NDAA here. 

Senate Passes Bipartisan PRICE Act, Legislation Supported by MSGI Clients GovEvolve, HUBZone Contractors National Council, the Montgomery County Chamber of Commerce, and the Women Veterans Business Coalition

Win for small business contractors today – a bipartisan bill that encourages interagency collaboration to utilize small business contractors has passed the Senate. The Promoting Rigorous and Innovative Cost Efficiencies for Federal Procurement and Acquisitions (PRICE) Act expands opportunities for small companies by requiring the Office of Management and Budget (OMB) to work with federal acquisition leaders to share best practices, including awarding more contracts to small businesses.

Reintroduced by Senators Gary Peters (D-MI), Chair of the Senate Homeland Security and Governmental Affairs Committee (HSGAC), and Joni Ernst (R-IA), MSGI clients GovEvolve, HUBZone Contractors National Council, the Montgomery County Chamber of Commerce, and the Women Veterans Business Coalition, supported this legislation. Client quotes in the HSGAC press release include: 

“Small business participation in the federal marketplace is key to ensuring a strong industrial base, however, small businesses find that agencies continue to be reluctant to utilize these programs,” said Michelle Burnett, Executive Director. HUBZone Contractors National Council. “The PRICE Act provides increased opportunities for HUBZone companies by encouraging the acquisition workforce to share innovative best practices to increase small business participation across the federal government.”

“Small IT companies are at the forefront of innovation, but often face barriers when selling to the federal government,” said Eminence Griffin, Executive Director, GovEvolve. “The PRICE Act addresses the need for modernizing the federal acquisition system and will be transformative for small business IT contractors around the country.”

Read the bill text here. Read the press release from the Senate Committee on Homeland Security and Governmental Affairs here. 

MSGI Clients Participate in House Small Business Roundtable to Discuss Supply Chain Issues in the Aftermath of COVID-19

Small businesses face increasing supply chain challenges due to the ongoing impacts of COVID-19. Highlighting this important issue, the bipartisan House Small Business Caucus held a roundtable with small business leaders to discuss their challenges and brainstorm solutions. 

MSGI clients Jackie Wilson, CEO of American Fashion Network; Chris Oliver, GovEvolve member and President of ID Technologies; Qin Li, CEO of Soliel LLC; and Rosemary Swierk, President of Direct Steel and Construction shared their experiences with Caucus Co-Chairs, Rep. Chris Pappas (D-NH) and Rep. Kevin Hern (R-OK). In addition, over 35 Congressional offices participated in the robust discussion. 

Issues of price increases, scarcity of raw materials, and intensified security risks were at the center of the discussion. Recommendations from the panel included adopting federal initiatives to buy products made in America, raising small business contracting sole source limits, establishing a NAICS code for IT resellers, and allowing price adjustments to federal contracts to accommodate the costs associated with price increases for goods and services.

We are grateful for the enthusiasm of the Co-Chairs to confront the challenges facing small businesses, and we look forward to continued collaboration in the future. 

MSGI Congressional Hearing Recap - House Small Business Committee Hearing “Utilization of Small Contractors in the Infrastructure Plan”

 

MSGI Congressional Hearing Recap

Committee: House Small Business Committee, Subcommittee on Contracting and Infrastructure

Hearing Title: “Utilization of Small Contractors in the Infrastructure Plan”

Subcommittee Chair: Representative Kweisi Mfume (D-MD)

Ranking Member: Representative Maria Salazar (R-FL)

Date: June 10, 2021

Witnesses

Ms. Sheila Ohrenberg

National President, Women Construction Owners and Executives (WCOE)

President, Sorella Group

Testimony

Mr. Ralph Thomas III

Executive Director Emeritus, National Association of Minority Contractors (NAMC)

Attorney, Law Offices of Ralph C. Thomas III PLLC

Testimony

Mr. Josh Bone

Executive Director

ELECTRI International

Testimony

Dr. Annie Mecias-Murphy

Co-Owner & President

JA&M Developing Corp.

Testimony

Main Issues Discussed

Participation of Minority-Owned and Women-Owned Small Businesses 

• Chair Mfume (D-MD) Questions:
• Mr. Thomas, please detail your experience with Amtrak.
• Response: We were working through the Department of Transportation’s (DOT) DBE program on the project.  We performed within budget and on time, the goal was 15% actual action was 17%. The excuse of “we can't find minority businesses” no longer and should never apply.
• Mr. Boon, do recruitment strategies change based on the segment of the population you are trying to attract? How can we attract women and minorities more effectively?
• Response: We must use different methods. Women bring a lot of new skill sets, there are a lot of misconceptions that construction is male driven. We need to educate young girls that this industry is changing, such as shifting to off-site construction and is increasingly driven by technology.
• Mr. Thomas, what are the biggest obstacles that need to be addressed in the infrastructure bill to reach minorities?
• Response: We need a stronger approach to compliance and enforcement. The DOT has a 10% contracting goal for disadvantaged small businesses. However, 23/50 states do not comply or hit this goal, they ask for waivers. Organizations should be funded for the purpose of identifying small, disadvantaged contractors, since many people are unaware.  If Sole source threshold was higher, it would create more opportunities, smaller companies would like this.

Timely Payment to Contractors 

• Ranking Member Salazar (R-FL) Question: 
• Mr. Boon, I am concerned about delays in payments to subcontractors. Can you expand on your suggestion on getting paid on time?
• Response: Capital is king, small businesses have limited funds. When you are a subcontractor of a subcontractor of a subcontractor, it takes a long time to get money. I suggest expanded opportunities for these businesses to work directly with the large companies.
• Response from Dr. Macias-Murphy: Paid when paid clause, can be 60, 90, 120 days – very detrimental to small businesses who don’t have large reserves of money. Prompt payment is a theory rather than a reality. 
• Ranking Member Salazar (R-FL) Question: 
• Mr. Boon, how can Congress help? 
• Response: The paperwork, the bureaucratic part is the problematic – there needs to be a quicker way of going through the leaps and hurdles.

Project Labor Agreements (PLAs), the PRO Act, Unions

• Ranking Member Salazar (R-FL) Question: 
• Dr. Mecias- Murphy, explain the issue of favoring unionized workers over non-unionized workers. What would this look like?
• Response: It would completely take us out from being able to bid on these projects. 80% of the workforce is not part of a union, we would not qualify. 
• Chair Mfume (D-MD) Question: 
• Mr. Boon, can you talk about the importance of unions?
• Response: Electri is not affiliated with unions, but National Electrical Contractors Association (NECA) has no issues - we haven’t seen strikes. 
• Representative Meuser (R-PA) Question: 
• I am favorable to trades. Unions have great apprenticeship programs. However, PLAs are not inclusionary. This is the reason companies have issues with them. The PRO Act removes state rights, states should be able to determine such things on their own. Dr. Mecias-Murphy, how would the PRO Act effect your business?
• Response: The increase in taxes would be harmful. It would impact us financially in a huge way. There was a 3–4-month delay of projects during COVID, we went 4-6 months with no new projects. 
• Representative Newman (D-IL) Question: 
• More than 80% of the time when there is a PLA in place it is beneficial. PLAs require a very specific payment chronology on top of the federal law. PLAs don’t exclude non-unions; they just protect unions and promote safety. Dr. Mecias-Murphy, what are the top 3 things that frustrate you about PLAs?
• Response: First, PLA’s restrict businesses like a “merit-based company” if the certain provisions in the PLA aren’t in place. Second, is the issue of protesting. I will be the one who had to deal with the strikes from labor unions. Third, the increased cost for having unions on the jobs, I have seen this in Florida.

Tax Increases in the American Jobs Plan

• Ranking Member Salazar (R-FL) Question: 
• Dr. Mecias-Murphy, how did the Tax Cuts and Jobs Act help you?
• Response: We experienced a lot of cash flow; my employee was able to purchase their first home.

Labor Shortage & Workforce Development

• Representative Newman (D-IL) Question: 
• Mr. Thomas, can you share what would be helpful to you with workforce training and development?
• Response: We were happy to see more funds for workforce development projected in the American Jobs Plan, but the focus must be on diversity. There hasn’t been a move towards workforce development in DOT since 2017.
• Representative Hagedorn (R-MN) Question: 
• Labor shortage is a huge problem. We must encourage our Governors to forgo extra unemployment benefits – people need to be pushed into the workforce. I have introduced H.R. 2691, a bill that would permit 529 plans (tax advantage savings plan for saving for future education costs) to be used for certain non-degree technical training certificate programs and apprenticeship programs. Dr. Mecias -Murphy, how have you encouraged workforce development?
• Response: We have been able to go into Boys and Girls clubs and expose the students to our industry. We have seen that working with middle and high school students is very important, it exposes students to the future of work. From this effort, close to 40 students have been hired by one of our member companies.

Organizational Protesting

• Representative Stauber (R-MN) Question: 
• Currently there is a pipeline replacement project in Minnesota. This project will supply jobs for small contractors and should be celebrated. However, Democrats are bussing in protestors from large cities and disrupting the process. Dr. Mecias-Murphy, what are the dangers of protestors showing up? What would this do to your small businesses?
• Response: Safety is important to us. People don’t realize that a day of delay can be catastrophic. It can delay you two or four weeks sometimes. It also disrupts cash flow for small businesses -workers cannot go into work, then they cannot get paid. The Biden Administration has cancelled Keystone Pipeline project, ruining many small business contracting opportunities.

Senate Hearing Highlights Importance of Acquisition Workforce Training and Leveraging Small Businesses for Tech Contracts

By Rebecca Pselos | MSGI Partner 
President of Kite Tail Strategy 

This week the Subcommittee on Readiness, Senate Armed Services Committee held a hearing on acquisition reform to help inform the FY22 National Defense Authorization Act (NDAA). Witnesses were asked to comment on how to achieve a quicker acquisition system while reducing risks. Ms. Stacy Cummings performing the duties of Under Secretary of Defense for Acquisition and Sustainment (USD(A&S)), Department of Defense (DOD); Ms. Shelby Oakley, Director, Contracting and National Security Acquisitions, Government Accountability Office (GAO); and Dr. Raymond O’Toole, Acting Director, Operational Test and Evaluation, DOD (DOT&E) testified as the witnesses. 

Overall, the April 28th hearing highlighted 2021 procurement issues relevant to both defense and civilian agencies - quicker acquisitions, role of small businesses, emerging tech, and cybersecurity. In addition to DOD’s acquisition authorities and policy, the importance of traditional metrics of acquisitions success - cost and schedule - were mentioned. As were new factors to consider, such as value to the end-user and contribution to maintaining a competitive edge against U.S. competitors. DOD alluded to some authorities they’ll likely seek to change in this year’s NDAA - DoD’s Commercial Solutions Opening program and DOT&E authority. 

Ms. Cummings highlighted DoD’s Adaptive Acquisition Framework (AAF) as a recent reform to emphasize speed and agility. The framework established six acquisition pathways. Ms. Cummings added her office is working on improving data analytics to determine the success of the framework. GAO applauded the effort to measure success, but cautioned that the reform may be undermined if acquisitions are not based on sound business cases. Metrics should go beyond cost and schedule to include the value to the end user.    

Additionally, Ms. Cummings said that Defense Acquisition University (DAU) training will be revamped to align with the framework. Historically, the defense acquisition workforce has been taught a one-size fits all approach for acquisitions. The revised training will focus on different AAF pathways. I imagine DAU’s updated training will increase awareness of authorities benefiting non-traditional and small businesses and that awareness will spill over to civil agencies’ procurement shops.    

When asked about engaging with non-traditional and small businesses to leverage technology, Ms. Cummings provided two examples. DOD utilized recent contracting authorities to engage with these entities to respond to Covid-19. The authorities included Commercial Solutions Opening which accounted for roughly $7 billion in obligations related to the pandemic (just under half of the program’s total $16 billion in FY20 obligations). Under AAF, DOD has competed systems’ individual components among non-traditional and small businesses which then partner with Primes to integrate innovation.  

While GAO recognized that one of the key priorities of DOD’s new acquisition framework is to improve its ability to benefit from commercial innovation, GAO found the department has been challenged in developing and integrating innovative technologies into its weapon systems. GAO recommended DOD find the right balance of disruptive and incremental technology solutions and create an environment that attracts businesses that do not typically sell or develop solutions for DOD’s use. DOD will also need to address intellectual property and cybersecurity to fully take advantage of new technology. 

Dr. O’Toole agreed with GAO that focusing on incremental, open systems would allow DOD to speed up delivery for the warfighter. The approach would quickly field minimal viable capabilities which can be upgraded later. Moreover, the approach helps promote innovation and maintain a competitive edge against U.S. competitors. Dr. O’Toole went further to say the incremental approach needed to also be applied to testing. However, a larger concern he raised was cybersecurity. Of the programs DOT&E assessed in FY20, virally none were survivable against relevant cyber threats. 

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.

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. 

What’s Next?

By Ann Sullivan, WIPP Chief Advocate

WIPP Works in Washington May 2020

COVID-19 relief took the form of four bills passed by Congress in the last two months. All of this is centered around relief for workers and employers hit by COVID-19, including small business loan and forgiveness programs, aid to hospitals and money for test deployment, employer required sick leave, and direct payments to Americans. 

A staggering $2 trillion was spent in these four bills and the Federal Reserve Bank spent an estimated additional $4 trillion on relief. We learned the demand from small businesses for the Paycheck Protection Program (PPP) and the Economic Injury Disaster loans (EIDL) far exceeded available funding. Everyone is curious about the direction of future aid for obvious reasons. What’s going to be in the next bill or is there going to be a next bill?  

My best guess is that the next Congressional bill will be a hybrid of relief and recovery. Much is left to do on the relief side and refinement of the programs put in place by previous legislation. When programs are drafted in a hurry, unexpected issues arise that need to be addressed.  Evidence is the number of guidance documents issued by the Small Business Administration (SBA) and the Treasury/IRS surrounding small business loan programs. For federal contractors, implementation of Section 3610 relief has generated extensive documentation. The next bill will most certainly contain changes to existing programs.

Is Congress going to deliver additional relief by providing additional funding for the PPP or EIDL programs? Senate Majority Leader Mitch McConnell (R-KY) suggested that Congress slow down future relief, saying "until we can begin to open up the economy, we can’t spend enough money to solve the problem." Relief to state and localities has yet to materialize but is widely considered to be a major part of any future bill.

As Governors start loosening restrictions on stay-at-home orders and industry starts to slowly reopen, the focus is slowly shifting toward economic recovery. Congressional leaders are looking at successful programs deployed during the Great Recession (2007-2009) that could be helpful during this pandemic. Another much talked about idea is a stimulus, such as a massive infrastructure program. This would not only cover shovel ready construction projects, but broadband, telecommunications and technology infrastructure. Also bubbling up are tax deductions and credits for businesses who will need relief for many months to come. Businesses are asking for special liability restrictions due to COVID-19 in order to feel comfortable bringing employees back to work and opening their doors to consumers. The Senate has signaled this as a priority, but their House counterparts are not so sure. Lastly, the federal marketplace offers a tremendous opportunity for small business recovery, but the rules need to change to allow more dollars to flow to these businesses.

The “What’s Next” list is overwhelming because the need is so great. Our advocacy team is dedicated to ensuring women business owners have a voice in all of these deliberations. That’s the mission of WIPP – we intend on keeping it that way.

DoD Issues Class Deviation on Section 3610 Implementation

By Elizabeth Sullivan 

**UPDATE (4/17/20): OMB has released guidance on Section 3610 implementation that can be found here. The CAAC has issued a class deviation here.

Kim Herrington, Acting Principal Director, Defense Pricing and Contracting at the Department of Defense has issued a class deviation for implementation of Section 3610 of the CARES Act. Class deviations can be issued when necessary to allow agencies to deviate from the FAR and DFARS. To read the document, click here. The DoD's FAQ can be found here.

This deviation allows contracting officers to use DFARS 231.205-79 (page 5 of the document) as a framework for implementation of Section 3610. As a reminder, Section 3610 of the CARES Act allows agencies to reimburse at the minimum applicable contract billing rates (not to exceed an average of 40 hours per week) any paid/sick leave a contractor provides to keep its employees or subcontractors in a ready state, including to protect the life and safety of Government and contractor personnel during the public health emergency declared for COVID–19 (January 31- September 30, 2020). 

Acknowledged in the letter, many DoD contractors are struggling to maintain a mission-ready workforce due to work site issues related to COVID-19. Therefore, the class deviation lays out the implementation of 3610 in DFARS 231.205-79. 

All contractors, especially small businesses, should pay attention to the following from the letter: 

• Some contractors may receive compensation from other provisions of the CARES Act, or other COVID-19 relief scenarios, including tax credits, and contracting officers must avoid duplication of payments. For example, the Paycheck Protection Program (PPP) established in the CARES Act may provide, in some cases, a direct means for a small business to obtain relief. A small business contractor that is sheltering-in-place and unable to telework could use the PPP to pay its employees and then have the PPP loan forgiven, pursuant to the criteria established in the interim rule published by the Small Business Administration. In such a case, the small business should not seek reimbursement for the payment from DoD using the provisions of section 3610. (*Note: Contractors should consult their legal counsel - SBA has said that just because you have applied for PPP does not necessarily mean you can not seek relief from this provision)

• Contractors are responsible for supporting any claimed costs, including claimed leave costs for their employees, with appropriate documentation and for identifying credits that may reduce reimbursement under section 3610. Contracting officers are encouraged to work with contractors to understand how they are using or plan to use the COVID-19 relief provisions and encourage contractors to use existing contract terms or the relief provisions available to them in response to COVID-19. 

• It is important that contracting officers secure representations from contractors regarding any other relief claimed or received stemming from COVID-19, including an affirmation that the contractor has not or will not pursue reimbursement for the same costs accounted for under their request, to support their requests for reimbursement under section 3610. 

• When implementing section 3610, contracting officers shall consider the immediacy of the specific circumstances of the contractor involved and respond accordingly.

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Additional information/guidance:

• FAQ from DoD
• Memo from the Office of the Director of National Intelligence (ODNI)
• Letter from U.S. Senator Mark Warner to OMB on implementation 
• Letter from Ohio's congressional delegation to DoD on implementation