Policy Update

1. Policy Update Todd Lacks February 19, 2015

2. Open FAR Cases (Summary) • 2014-015, Consolidation of Contract Requirements • 2014-003, Small Business Subcontracting Improvements • 2014-002, Set Asides under Multiple Award Contracts • 2013-018, Clarification of Requirements for Justifications for 8(a) • Sole-Source Contracts • 2012-022, Contracts under the SBA 8(a) Program • 2012-015, Small Business Set-Asides for Research and • Development Contracts

3. Consolidation of Contract Requirements FAR Case 2014-015 • Similar to “Bundling.” • “Consolidation” is the combining of existing contracts held by • any size contractors (small or large) into a new larger single • requirement. • Applicable to consolidated contracts > $2M in total estimated value. • To have a consolidation approved, agency must demonstrate and document “financial benefits,” as follows: • Financial Benefits = Aggregate total estimated value of cost savings, price reductions, better T&Cs, better quality, cycle time reduction, and/or any other benefits; and • For actions at or below $94M, agency must demonstrate financial benefits > 10% of the total estimated contract value. For actions over $94M, agency must demonstrate financial benefits the greater of $9.4M or 5% of the total estimated contract value. • CAO or SPE must approve the “financial benefits” determination; SBS coordination required. • Proposed Rule projected issuance ~ March 2015.

4. Small Business Subcontracting ImprovementsFAR Case 2014-003 • Implements Sections 1321 and 1322 of the Small Business Job • Acts of 2010 • Adds requirement for prime contractors to represent that they will make “a good faith effort” to use the SBs that participated in proposal preparation in the performance of the contract. Must notify the CO when they do not. • Requires assurances in SB subcontracting plan that the prime contractor will notify unsuccessful SB subs when they were given a preference for actions over the SAT. • Authorizes COs the discretion/option to: • include the prime contractor’s subcontractor payment history as an evaluation factor; and • require a SB subcontracting plan when a prime contractor re-reps to LB.

5. Small Business Subcontracting ImprovementsFAR Case 2014-003 (Continued) • If a LB contract grows to over $650K, COs must request SB subcontracting plan. • Prime contractors will use “best fit” NAICS and corresponding size standard to determine sub’s status. • Prime contractors can rely on written representation by the sub or SAM data to determine sub’s size status. • For IDIQs, Prime will report SB subcontracting data at the order level. Goals will remain at the contract level. • The removal of NASA’s semi-annual SSR reporting requirement is included in this case. • Proposed Rule projected issuance ~ March 2015.

6. Set-Asides under Multiple Award ContractsFAR Case 2014-002 • Addresses new SB authorities provided by the Small Business Jobs Act of 2010— • Authorizes and encourages partial set-asides, reserves, and order set-asides on Multiple Award Contracts (MACs). • MACs include FSS schedules, BPAs, GWACs & multiple award IDIQs. • Replaces the cumbersome process at 19.502-3 that requires SBs to first submit responsive offers on the non set-aside portion in order to be consider for the set-aside portion. • Provides COs the discretion/option to set-aside a portion or portions of a MAC requirement (i.e., partial set-asides, reserves, and/or set-asides at the order level. • A “reserve” is a new regulatory authority granting COs the discretion/option to set-aside and award a portion(s) of a MAC to a SB, on a sole-source basis, without having to meet “rule of two.” • Proposed Rule projected issuance ~ March 2015

7. Justification for 8(a) Sole-Source Contracts > $20MCase 2013-018 • Clarifies requirement first added by FAC 2005-50 (3/16/2011). • GAO report found low levels of compliance. • 8(a) sole-source contract > $20M must have an approved “J&A.” • Separate requirement completely apart from Part 6, CICA; different content and purpose. • The 8(a) sole-source J&A: • Must be provided with the offer letter; and • Must be publically posted after award. • This requirement primarily affects Indian tribes and ANCs. • Case clarifies what happens: • When the estimated values change between 8(a) offer letter and award; and • If value exceeds $20M after award. • Final Rule in OFPP review; projected issuance ~ March 2015

8. Contracts under the SBA 8(a) ProgramCase 2012-022 • Proposed changes: • 8(a) contractors to be official known as “8(a) participants;” • If an offer letter response is not received from the servicing SBA office within 10 days, CO may request acceptance from the SBA AA for BD; • For acquisitions under SAT, offering agency can assume acceptance after 2 business days from servicing SBA office receipt; • Offer and acceptance letters are not needed for IDIQ orders exclusively set-aside for 8(a) participants; • Agencies can take SBA credit for 8(a) firms still under contract, but who have since left the program, including priced options and IDIQ orders. Continues unless a re-representation changes them to LB status; and • Cannot have a sole-source follow-on with an ANC firm that is owned by the same parent ANC as the predecessor 8(a). • DAR and FAR Councils resolving differences re. draft final rule; final rule projected issuance ~ April 2015

9. Small Business Set-Asides for Research & DevelopmentCase 2015-015 • Clarifies language regarding the use of small business set-asides for R&D contracts. • Case on hold since July 3, 2013, at the direction of the FAR Council, pending further consideration. Issuance tentative.

10. SBA Proposed Rule (RIN 3245-AG24)Re. Mentor Protégé (Feb 5, 2015) • The SBA’s proposed rule would— • Establish a Government-wide mentor-protégé program for all small business concerns, consistent with SBA’s mentor-protégé program for Participants in SBA’s 8(a) Business Development (BD) program. • For agency-specific mentor-protégé programs, will introduce requirement for advance approval of the agency’s plan by the SBA Administrator. • Amend the current joint venture provisions to clarify the conditions for creating and operating joint venture partnerships, including the effect of such partnerships on any mentor-protégé relationships. • Make several additional changes to current size, 8(a) Office of Hearings and Appeals or HUBZone regulations, concerning among other things, ownership and control, changes in primary industry, standards of review and interested party status for some appeals. • Comments re. SBA proposed rule due on or before April 6, 2015

11. SBA Proposed Rule (RIN 3245-AG58)Re. Similarly Situated Entity (Dec. 29, 2014) • The SBA proposes— • No more than 50% of the total amount paid/obligated by the government to the prime may be paid to firms, at any tier, that are not a “similarly situated entity,” and in addition— • Any work that a similarly situated entity subcontractor further subcontracts to an entity that is not similarly situated will count toward the 50% subcontract amount; and • A similar 50% limitation applies to the amount paid/obligated by the government for supply contracts; 15% limitation is applied to the amount paid/obligated by the government for construction contracts. • Under the new rule, a small business prime is barred from subcontracting more than 50% of the amount paid/obligated by the government under the prime contract, unless a subcontract is to a “similarly situated entity.” • In this rule, SBA is also proposing to toughen up requirements pertaining to small business subcontracting plans, which could have significant consequences for large business prime contracts. • Comments re. SBA proposed rule due on or before Feb. 27, 2015

12. SBA Proposed Rule (RIN 3245-AG58)Re. Exemption to Nonmanufacturer Rule (Continued) • The SBA proposes— • Exempt acquisitions valued between $3,000 to $150,000 from the nonmanufacturer rule. • The nonmanufacturer rule, in essence, states “if the small business cannot perform 50% of the cost of manufacturing the items on its own, the nonmanufacturer rule allows a small business that is engaged in the wholesale or retail trade to supply the items as long as they are manufactured by a small business in the U.S. • Agencies will be permitted to purchase supplies from the small business resellers on a set-aside basis without regard to the size of the manufacturer or the location of manufacturing. • While the stated aim is to encourage the use of small business set-asides, the new rule may actually result in greater utilization of large business manufacturers. • Comments re. SBA proposed rule due on or before Feb. 27, 2015

13. Questions