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.

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. 

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.

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.

Regulatory Rigmarole: Advocacy Comes in All Forms

By: Ann Sullivan 

As a member of WIPP, you already know more than the average person about regulations that impact small business owners – regardless of whether they are proposed, interim-final, or final rules. But, you probably don’t know exactly what that means or how they get to those stages in the first place.

The first thing to know is that proposed regulations are known as “rules” and the rulemaking process is lengthier than you might expect. When Congress passes a law, the agency then gets to work to implement it. The final product is a new regulation. To get from passage of a law to a new regulation involves a number of steps by the agencies. 

An agency’s first step is to develop a draft regulation known as a proposed rule. Then, the agency sends the draft to the Office of Information and Regulatory Affairs (OIRA) for review. OIRA is tasked with circulating this regulation among other government agencies, taking into account this feedback. OIRA is a Federal office that was created by Congress 1980. In 1991, an Executive Order directed that the office would formally review all draft proposed and final rules before they were published in the Federal Register.

OIRA makes suggested changes and sends the proposed rule back to the agency. The agency then issues a proposed rule which it publishes on www.regulations.gov  for public comment. The comment period is usually open for 60 days, although some only accept comments for 30 days. Comments are not limited to organizations like WIPP – anyone or any entity can provide comments on a proposed rule.

The agency reviews the public input to revise a final product which typically takes another 60 –90 days and summarizes its findings and issues a final rule. Done, right? Not quite. The final rule once again goes to OIRA for review – only when this approval process is complete can the new regulation be published as a final rule.

Given this process, you now know why WIPP is very active in the regulatory space. By commenting on proposed rules, we have the ability to shape the outcome of the regulation. The devil is in the details, so this stage of advocacy is, in many cases, as important as passage of the law. WIPP has commented on a number of important proposed rules on a variety of issues. In 2019, WIPP submitted comments to SBA on a number of small business contracting rules ranging from the proposed WOSB/EDWOSB certification rule, to the rule implementing the Small Business Runway Extension Act. WIPP also submitted comments to the Department of Defense (DoD) on its proposed Cybersecurity Maturity Model Certification—a far reaching cyber certification which will affect every federal contractor and subcontractor.

The Federal Acquisition Regulation (FAR) Council recently proposed an interim final rule that will amend the FAR to prohibit the federal government from procuring or obtaining, or extending or renewing a contract to procure or obtain, “any equipment, system, or service that uses covered telecommunications equipment or services as a substantial or essential component of any system, or as critical technology as part of any system” in order to combat the national security and intellectual property threats that face the United States. The definition of “covered telecommunications equipment or services” are components from: Huawei, ZTE Corporation, Hytera Communications Corporation, Hangzhou Hikvision Digital Technology Company, and Dahua Technology Company. 

The rule prohibits contractors from providing covered telecommunications equipment or services unless the agency confirms that an exception applies or a waiver is granted; requires every offeror for a contract or order to represent whether or not it will provide covered telecommunications equipment or services as part of its offer and, if so, to furnish additional detail about the covered equipment or services; and mandates that contractors report any covered equipment or services if discovered during the course of contract performance. 

It is important to note that the interim rule impacts ALL contractors — not just those that offer information and communication technology. Each contractor is responsible for determining whether telecommunications equipment and services will be provided under both new and existing contracts and orders. WIPP recognized the wide-reaching importance of this rule and jointly submitted comments in response.

On another note, Lowest Price Technically Acceptable (LPTA) has been a long hated acquisition pricing policy in the small business community. Seen as a “race to the bottom,” the FAR Council has issued a proposed rule to avoid using Lowest Price Technically Acceptable (LPTA) source selection criteria in circumstances that would deny the government the benefits of cost and technical tradeoffs in the source selection process. This rule also states specifically that LPTA source selection criteria should be avoided for procurements for IT services, cyber security, systems engineering services, and others. One part of the regulatory process to note— when the FAR Council issues a proposed rule it is listed with a “FAR Case” number instead of a “Regulatory Identification Number” (RIN).

Advocacy comes in all forms. While our team focuses much of our attention on Congressional action, our work with agencies, especially SBA, is every bit as important. Staying vigilant on all fronts is critical to all businesses, large and small. It’s tough to keep up with everything as a small business – I know – I am one.  That’s why membership in WIPP is critical to your bottom line – we follow and initiate the actions important to women-owned businesses. Your job is to get active.

Advocacy Update: FAR Council Rules That Matter To Your Business

By: Ann Sullivan

This New FAR Council Rule on Covered Telecommunication Equipment Will Impact Your Business, Even Outside of the Tech Industry

The Federal Acquisition Regulation (FAR) Council has proposed an interim final rule that will amend the FAR to prohibit the Federal Government from procuring or obtaining, or extending or renewing a contract to procure or obtain, “any equipment, system, or service that uses covered telecommunications equipment or services as a substantial or essential component of any system, or as critical technology as part of any system” in order to combat the national security and intellectual property threats that face the United States. The definition of “covered telecommunications equipment or services” are components from: Huawei, ZTE Corporation, Hytera Communications Corporation, Hangzhou Hikvision Digital Technology Company, and Dahua Technology Company.  

For all businesses, the rule:

• Prohibits contractors from providing covered telecommunications equipment or services unless the agency confirms that an exception applies or a waiver is granted 
• Requires every offeror for a contract or order to represent whether or not it will provide covered telecommunications equipment or services as part of its offer and, if so, to furnish additional detail about the covered equipment or services 
• Mandates that contractors report any covered equipment or services if discovered during the course of contract performance 

WIPP recognized the importance of this rule and the impact it will have on small business federal contractors. Read WIPP’s comments on this rule.

Proposed Rule on Lowest Price Technically Acceptable Source Selection Process (LPTA) from FAR Council Discourages Use of Practice Across Government

Lowest Price Technically Acceptable (LPTA) has been a long hated acquisition pricing policy in the small business community. Seen as a “race to the bottom,” the FAR Council has issued a proposed rule to avoid using Lowest Price Technically Acceptable (LPTA) source selection criteria in circumstances that would deny the Government the benefits of cost and technical tradeoffs in the source selection process. This rule also states specifically that LPTA source selection criteria should be avoided for procurements for IT services, cyber security, systems engineering services, and others.

Think this is a good idea?

Comment on this rule by December 2, 2019.