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New Rules, Regs Affecting All Federal Contractors

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The U.S. Small Business Administration (SBA) recently published the Small Business Government Contracting and National Defense Authorization Act (NDAA) of 2013 Amendments Final Rule (81 FR 34243), which affects small and large government contractors in all industries. This Final Rule went into effect on June 30, 2016, and amends certain regulations which were required to implement the changes mandated by the 2013 NDAA.

While the rule addresses more than 15 topics, several key issues are noted below. The information noted is news and should not be considered legal advice. A contractor should always consult with an attorney experienced in federal contracting on all changing federal rules and regulations affecting one’s business.

The Responsibilities of Procurement Center Representatives (PCRs): The PCR is a well-kept secret in the federal contracting marketplace, and with this rule, their role has broader responsibilities. Generally, PCRs have the ability to review barriers to small business participation in federal contracting, and to review any bundled or consolidated solicitation or contract to advocate for the maximum practicable utilization of small business concerns in federal contracting.

The PCR also now has the ability to confer with the agency’s representative in the event the government wants to change from using contractors to using federal employees to perform similar work. The PRC also is now allowed to receive unsolicited proposals from small business concerns and to provide those proposals to the appropriate agency’s personnel for review and disposition.

Subcontracting Plans: With the Final Rule, the contracting government agency must now collect, report and review data regarding how the agency’s prime contractors meet the goals and objectives set out in their subcontracting plans. This rule further modifies the Small Business Act, to state that a prime contractor that fails to provide a written corrective action plan after receiving a marginal or unsatisfactory rating for its subcontracting plan performance, or that fails to make a good faith effort to comply with its subcontracting plan, not only will be in material breach of the contract — but such failure also shall be considered in any past performance evaluation of the contractor.

The SBA also added a new sentence describing the process for a Commercial Market Representative (CMR) to report firms that are found to have acted fraudulently or in bad faith to the SBA’s area director, for the Office of Government Contracting area office where the firm is headquartered. A reporting mechanism is now required that allows potential subcontractors to report fraudulent activity or bad faith behavior by a prime contractor with respect to a subcontracting plan.

Affiliation Issues: The SBA’s Final Rule clarifies that a presumption of affiliation exists for firms that conduct business with each other, and are owned and controlled by persons who are married couples, parties to a civil union, parents, children and siblings. Additionally, a presumption of affiliation may be based on economic dependence if a firm derives 70% or more of its revenue from another firm over the previous fiscal year. The SBA will presume that the one firm is economically dependent on the other, and therefore, that the two firms are affiliated. However, this 70% limit may be rebutted if the company is a startup and has limited contracts.

Other topics covered in the rule include Limitations on Subcontracting, Joint Ventures, Recertification, Size Protests, the Nonmanufacturer Rule, Small Business Innovation Research, Small Business Technology Transfer Programs and Certificate of Competency issues. For the complete rule, visit https://federalregister.gov/a/2016-12494.

Gloria Larkin is president of TargetGov and a national expert in business development in the government markets. Visit www.targetgov.com or call toll-free 866-579-1346 for more information.