The SBA’s New Mentor-Protégé Program: The Dilemma of Hiring Project Managers

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By Jon Williams, Partner with PilieroMazza and a member of the Government Contracts Group. He may be reached at jwilliams@pilieromazza.com

On July 25, 2016, SBA released its long-awaited final rule creating the new mentor-protégé program for all small businesses. Many aspects of the new rule are very exciting and should be beneficial for the small business community at large. However, buried in the lengthy rulemaking are a few provisions that will be problematic for small businesses when the rules go into effect on August 24, 2016. One of the problematic provisions will adversely affect how many small businesses form joint ventures with their mentors.

A primary benefit of the mentor-protégé relationship is the ability of the mentor and protégé to form joint ventures. SBA’s rules require the joint venture to have a project manager that is responsible for the performance of the contract. The new rules state that the project manager must be an employee of the protégé by the time of contract performance. SBA helpfully clarified that the protégé does not need to employ the project manager at the time of proposal submission, as long as the protégé has a letter of commitment from the individual to confirm he or she will become an employee of the protégé and serve as project manager by the time of contract award.

SBA then added a further “clarification” in the final rule to prohibit the protégé from hiring the project manager from its mentor. This was not a clarification of existing rules, however. SBA did not previously propose this significant change and, therefore, the public was not given an opportunity to comment on it. As a result, this rule was not the product of proper notice and comment rulemaking and should not be implemented, at least not before the public has an opportunity to weigh in.

If SBA had sought public comment on this new requirement, the small business community (as well as large business mentors) surely would have voiced strong objections. When a protégé needs to hire a project manager, the mentor is an excellent resource. Indeed, assisting with personnel in this manner is often precisely the type of mentoring envisioned under the mentor-protégé relationship. But SBA’s new rule will force small businesses to forgo the mentor as a source of a new hire for the project manager position. This undercuts a key aspect of the mentoring relationship and makes the mentor-protégé joint venture harder to form than it should be.

SBA believes the new rule is necessary because it is concerned that the project manager could easily go back to the mentor at the end of the contract because project manager has no previous ties to the protégé and is not bound to stay with the protégé after the performance of the contract. If that happens, in SBA’s eyes, the business development of the protégé firm would be diminished.

What SBA overlooks here is that these concerns would be present any time the protégé goes outside its existing workforce to hire the project manager; the concerns are not unique to hiring from the mentor. Moreover, many contract workforces follow the contract, so if the protégé does not retain the contract it would expect to lose its project manager and perhaps other personnel. Again, this would be true whether the personnel came from the mentor or another previous employer. In the new rule, SBA recognized the importance of giving protégés the flexibility to hire a project manager from outside its workforce. There was no reason to make a distinction and prevent that hiring from the mentor.

Additionally, we disagree with SBA’s conclusion that the protégé’s business development would be diminished if the project manager leaves at the end of the contract. The new mentor-protégé program does not permit open-ended mentoring relationships. At most, the protégé can have a six-year mentoring term with one mentor. Therefore, the protégé has to plan for the end of the mentoring by maximizing the time while that relationship exists. To this end, the project manager can impart significant institutional knowledge and assistance, both in terms of performing the contract and more generally for the protégé’s operations, while the project manager is an employee of the protégé.

This will not all evaporate if the project manager leaves at the end of the contract. Like with the end of the mentor-protégé relationship itself, the protégé can continue to benefit after the end of the contract from the experience and expertise the project manager imparted while employed by the protégé and working on the contract. Even if just for a few years, having an experienced project manager on staff with the protégé is the type of assistance that can make a real difference for the protégé and should be encouraged, rather than prohibited, by the new rules.

Unless SBA changes this rule, or pulls it back for public comment before it goes into effect, small and large businesses must plan around the new requirement. That means for new and existing mentor-protégé joint ventures, once the rule goes into effect on August 24th, the protégé cannot propose to use a project manager that is hired from the mentor.

For a full accounting of the new All Small Business Mentor-Protégé program, including the Project Manager Dilemma, please watch the following webinar:

Give Me 5: Any Day Now! SBA’s New Mentor-Protégé Programs
Guest Speakers: Megan C. Connor, Associate, PilieroMazza PLLC and Katie Floor, Associate, PilieroMazza PLLC
Listen to the Podcast | View the Presentation

This blog was reposted from PM Legal Minute blog, which provides updates and analysis of issues that practice groups have encountered, as well as tips and practical advice for government contractors.

Does the Tax Code discriminate against women?

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By Caroline Bruckner, Managing Director of the Kogod Tax Policy Center

indexWomen-owned businesses are one of the fastest growing segments of our economy. Between 1997 and 2013, the number of women-owned businesses increased by 59% – 1.5 times the rate of U.S. businesses overall, according to a 2013 Women-Owned Business Report prepared by American Express. What’s more, over the past 16 years, employment by companies owned by female entrepreneurs is up by 10% and their revenues grew by 63%. Both increases exceed those of all but the largest, publicly traded firms. Today, more than 8.6 million U.S. businesses are owned by women. They generate more than $1.3 trillion in revenues and employ nearly 7.8 million people.

Those are impressive figures, especially considering that women business owners face many challenges men do not, such as having a much harder time accessing capital than their male counterparts. Only 4% of all commercial loan dollars go to women, in fact. But what other hurdles must they overcome? What about the U.S. tax code? Is the tax code—first codified more than 100 years ago, before women even won the right to vote—written in a way that inherently discriminates against women entrepreneurs?

The Kogod Tax Policy Center, with WIPP’s help, intends to find out.

Kogod will perform groundbreaking research in the coming months into whether small business tax incentives discriminate against women business owners—a question that has received scant attention from policymakers and academia.

Given the current political and budget environment, we think that researching and answering this question is vital to informing Congress about the policy implications of existing small business tax incentives as policymakers look to move forward with tax reform.

The tax code is ripe with provisions designed to specifically target various taxpayer populations like small businesses, veterans, and low-income workers. However, little academic or policy study has been dedicated to the tax challenges women business owners face and whether small business tax incentives favor men.

But how could the tax code discriminate against women? It can’t see the difference between male and female any more than it can play the piano or skip rope. Well, let’s look at some details of the tax code’s inception:

  • The income tax code was written in 1913.
  • Women didn’t get the right to vote until 1920.
  • Women weren’t able to fully access credit until 1974.

Women business owners weren’t even a footnote as our nation’s tax code was being written and developed. Simply because the tax code is supposedly gender neutral does not mean it impacts people equally.

We plan to analyze the federal budget implications of annual small business tax expenditures in relation to how many women-owned firms claim them.

We recently announced our project at WIPP’s Annual Leadership Meeting in Washington, D.C. As part of the study, Kogod will partner with WIPP to survey women business owners to determine how they view the tax code and its impact on their business, so watch your inbox and make sure to participate so we can use your experience and voice in our study!

Given the enormous role women entrepreneurs play in our economy, answering these questions will determine whether they are playing on a level field and could lead to positive policy changes that help the economy overall by boosting women’s entrepreneurial output even more.

The time has come to review the tax code and determine whether the specific tax provisions are serving women entrepreneurs so they can fully unleash their economic potential.

 

If you have questions about our research, want to help support the Kogod Tax Policy Center with a gift or would like to participate in the survey, contact Caroline Bruckner at cbruck@american.edu.

Interview with NDC’s Jane Campbell, President of WIPP

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jane-campbell1.Can you shortly describe your professional background? Is there any achievement/lessons learned that you are most proud of or would like to share with us?

I started my career in neighborhood development with the Volunteers in Service to America program (VISTA), worked with women’s advocacy organizations for many years, returned to neighborhood economic development and then ran successfully for the Ohio House of Representatives. My path as an elected official included 12 years in the legislature, 5 on the Cuyahoga County Commission and a 4 year term as Mayor of Cleveland. After serving as Mayor, I started my own business doing economic development consulting including advising Goodyear in the financing of their new Headquarters in Akron, OH. I also served as a fellow at the JFK School of Government at Harvard University. The real estate crash sent me back into the public sector as Chief of Staff to Sen. Mary Landrieu (D-LA) and Staff Director for the Senate Small Business Committee.  Now I lead the Washington office of the National Development Council (NDC), an extremely creative nonprofit dedicated to bringing capital into underserved communities to create jobs, build affordable housing and create communities. NDC provides small business lending especially to women and minorities in underserved areas.

In every position that I’ve had the opportunity to hold I worked to be sure that women were full participants, that low income and minority communities were well served and that public private partnerships between government, business, and local community leaders were key to the engagement.

The most important lesson I’ve learned is that collaboration is vital to success and that women are incredibly hard workers.

2. When did you hear about WIPP for the first time and what resonated with you the most?

I learned about WIPP when I was Sen. Mary Landrieu’s chief of staff.  Sen. Landrieu chaired the Senate small business committee and we found WIPP to be one of the most effective coalitions on Capitol Hill. Later when I was the Staff Director of the Senate Small Business Committee under the leadership of Sen. Maria Cantwell I saw WIPP in action when several hundred women appeared to advocate for greater federal contracting opportunities.

3. What shaped your decision to become WIPP President?

The partnership that we are creating between the National Development Council(NDC) and WIPP is a new frontier of creative engagement.  For over 40 years NDC worked to bring capital into underserved communities by providing training in economic development finance, technical assistance to communities and economic development entities, the creation of Public private partnerships and lending to small businesses – especially those businesses owned by women and minorities. Our work with WIPP will strengthen both organizations as we pursue access to capital for women entrepreneurs, creating the strongest voice for women whose businesses are creating jobs and futures for key populations. 

I took the role as President of the WIPP coalition to strengthen this partnership and to provide the leadership needed for WIPP to move into the future while staying fully committed to my work as director of the NDC Washington office.  Knowing that Roz Alford is there as Managing Director to lead the day to day work of the office allowed me to say yes.

4. Do you have any particular vision for WIPP?

Our Coalition of businesses and associations can emerge from its already strong position to be clearly the voice of women entrepreneurs.  By building a strong national network of women in business and advocates for women in business the WIPP Coalition should be able to enhance opportunities by connecting policy makers and women business owners to craft meaningful policy that will enhance access to capital, improve contracting opportunities and create a fair tax code.

5. Do you have any message for WIPP members? 

The strength of the WIPP Coalition is the active engagement of our members – please join in our work!

You Need to Know: Court Rulings that Impact Federal Contracts

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By: Debbie Kobrin, WIPP Government Relations

 

While most federal contract changes happen through Congressional action and agency rule-making, the constitutionality of small business contract practices has been subject to debate over the past several years. Below are two recent cases you should know about.

Rothe Development, Inc. v. U.S. Dept. of Defense et al.,

The U.S. Court of Appeals DC recently upheld the constitutionality of the SBA 8(a) program, designed to help individuals who are socially and economically disadvantaged compete on equal footing  with others in the U.S. economy . To meet that goal, the program provides qualifying small businesses with technical assistance, financial assistance, and assistance in awarding government contracts. The case addressed the programs definition of “socially disadvantaged” as a racial class that violates the right to equal protection under the Constitution. According to Rothe, when the government sets-aside a contract for an 8(a) firm, it unfairly prevents those who are not minority-owned from competing for the opportunity.

While the 8(a) program is colloquially referred to as the minority program, it is open to all socially and economically disadvantaged individuals. However, non-minority individuals must meet a different standard of eligibility.  While the law references specific groups, it does not do so, “as a floor for participation”. Rather, specific groups were mentioned to indicate the “kind of social disadvantage Congress had in mind: individuals’ experience of having suffered racial or ethnic prejudice or cultural bias because of their identity as a member of a group without regard to their individual qualities.”

 

WHAT IT MEANS FOR WOSBs

While the 8(a) program withstood the Rothe challenge, it is not expected to be the last. The WOSB program was structured to only include industries where women-owned firms are underrepresented in order to ensure it could withstand legal challenges. While having a set-aside program based on specific industries may appear limiting, the structure is designed to stand up to this type of legal challenge.

 

Kingdomware v. United States

Earlier this summer, a  unanimous decision by the U.S. Supreme Court in Kingdomware v. United States, requires the U.S. Department of Veterans Affairs (VA) to give a preference to veteran-owned small business for VA contracts. This is contingent upon having two or more small businesses that can meet the requirements — also known as the “rule of two.” This is a big win for all small contractors because the Court made clear that agency contract goals are a floor, not a ceiling. WIPP has advocated for many years for agencies to exceed the five percent goal. This case shows the power of small business goals.

 

WHAT IT MEANS FOR WOSBs

While the decision only applies directly to Veteran-Owned Small Businesses at the VA, SBA is conferring with the Department of Justice, other agencies, and the Federal Acquisition Regulatory (FAR) Council to discuss if further changes to regulations are needed. In the first small contracting case taken up by the Supreme Court, the message to agencies was loud and clear. The “rule of two” is a powerful tool for all small businesses seeking contracts in the federal marketplace and this decision lays the groundwork to ensure WOSBs are given a fair shot on schedule contracts.

Can Small Business Cope with New DOL Rules?

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By Elizabeth Sullivan, WIPP Government Relations

In a string of Executive Orders recently taken by the President and executed by the Department of Labor, the House Small Business Committee examined the effects of these regulations on small businesses. In a hearing titled, “The Cumulative Burden of President Obama’s Executive Orders on Small Contractors,” three out of the four witnesses agreed these new regulations hurt more than help small businesses. Witness Dr. David Madland, from the Center for American Progress Action Fund, disagreed. The Executive Orders under scrutiny include Fair Pay and Safe Workplaces, Minimum Wage for Contractors, and Establishing Paid Sick Leave for Federal Contractors, just to name a few.

You might ask why (almost) everyone is crabby, considering the titles for the orders seem pretty straightforward. Everyone should be paid fairly, right? Yes, argued Donna Huneycutt – testifying on behalf of the National Defense Industrial Association – but the actions don’t fit the description. As WIPP’s formal comment pointed out, the proposed system would unload extra paperwork requirements on contracting officers and place burdens on small business contractors. “Several small business contractors have expressed to the AGC that they are strongly considering or plan to walk away from the federal construction market,” voiced Jimmy Christianson, testifying on behalf of the Associated General Contractors of America (AGC). This concern echoed throughout the hearing, with potential job loss cited abundantly as an effect of the regulations.

And it’s not just jobs that small businesses are worried about. To ensure compliance, contractors will also be emptying their pockets. Mr. Christianson highlighted that many small businesses do not have in-house counsel or teams of attorneys on staff. As a result, these businesses have to hire compliance experts or counsel at an average cost of about $400 an hour, which deters many small businesses from seeking federal contracts.  Small business construction contracting companies typically pay for about 20 hours of guidance – you do the math.

Singing a very different tune, Dr. Madland noted studies that highlighted the positive effects of general wage and standard increase. “The state of Maryland found that more companies wanted to do business with the state after they raised standards.” The other three witnesses, representing various groups with small business members, disagreed. Congressman Hanna acknowledged the report’s outcome, but questioned it by citing the three other “real life” panelists that point out they are burdensome, overcomplicated and discouraging people from entering the marketplace.

Overall, Congressman Hanna and other panelists brought up a good point. The commotion is not just coming from the regulations themselves, but that the small businesses they impact are barely considered in the process. Our voices need to be amplified.

Summer Telecom round-up: How events from this summer will affect your phone and Internet service

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There was a mixed bag of news this summer involving the Federal Communications Commission and actions affecting our phone, TV and broadband service.

Among the best news was the Commission’s unanimous vote in July to open nearly 11 gigahertz of high-frequency spectrum for wireless broadband. This will spur better and faster mobile service, including advances in online healthcare and education. Reuters has a good analysis.

Also, last month, the Commission and industry leaders announced a joint effort to curb robocalling.  A new industry task force, will work with the Commission to solve this growing problem.

In another hopeful development, a growing chorus of public and Congressional condemnation appears to be giving the FCC second thoughts on its ill-advised effort to regulate cable TV set-top boxes. Independent programmers and content creators continue to express concern, and leading voices in the African-American and Latino communities blasted the proposal this summer, as did dozens in Congress, including Representative Yvette Clarke and Senators Harry Reid and Pat Leahy. We at WIPP expressed our own concerns about how the proposal could specifically harm women and minority programmers in the media marketplace.

Last month, the U.S. Copyright Office voiced grave concerns over the proposal’s legality and potential to promote piracy.

Unfortunately, it’s not all blue skies. In contrast to the cooperative effort on robocalling, FCC Chairman Tom Wheeler seems insistent on pushing a unilateral and expensive Federal overreach on Internet privacy and business broadband.  Both are unfortunate examples of Federal “solutions” that are much worse than any perceived problem.

On privacy, the Commission seeks to carve out Internet Service Providers for new regulations, while exempting entire classes of other online companies.  The Internet’s ongoing mergers and agreements, coupled with the growth of encryption, show how backwards-looking this approach really is. The Harvard Business Review has a good summary.

Chairman Wheeler’s proposed updated regulations to special access services (also known as “business data services”) is even more problematic.  He’s pushing to reinstate rules that the FCC itself scrapped as unnecessary back in 1999. Rather than resurrecting these outdated rules, a smarter and more obvious solution would be to facilitate new forms of broadband deployment.  For an analysis of the likely economic damage from Chairman Wheeler’s proposal, click here.

The Courts: Wise policy goes 1 for 2
Not all the important telecom news occurred at the FCC.  Two court decisions this summer deserve attention:

  • Internet regulation. In June, a three-judge panel for the DC Court of Appeals upheld the FCC’s 2015 order giving itself expanded powers over our Internet service. The judges upheld the FCC’s authority to use a 1934 law to regulate both wired and wireless broadband.  This case is being appealed to the full DC Court of Appeals. Among many problems, the new regulations are likely to delay better broadband services as the FCC flexes its oversight authority and broadband companies confront expensive legal uncertainties.

 

  • Municipal broadband. On a more hopeful note, taxpayers can breathe easier thanks to a ruling from the Sixth Circuit Court of Appeals.  On August 10, a unanimous three-judge panel nixed the FCC’s attempt to overturn municipal broadband laws in North Carolina and Tennessee.

 

The real issue in this case wasn’t the ability of localities to deploy their own broadband.  They had the right to do that before and still do.  But state officials did not want their localities using tax dollars to fund deployment outside their areas.  The FCC’s objection to this was so convoluted that the U.S. Justice Department would not even defend it.  FCC Chairman Wheeler has announced that the Commission will not appeal.  Daniel Lyons at TechPolicyDaily has an excellent summary.

WIPP National Partner of the Month – September 2016

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WIPP National Partner of the Month – September 2016

angela-harpalaniAngela Harpalani, CEO of Dimensional Concepts, LLC

We sat down with Angela to hear a little bit more about her business and her relationship with WIPP.

1.Tell us a little about Dimensional Concepts and its mission.

Dimensional Concepts, LLC (DCL) provides solutions and services in Business Intelligence, Data Analytics, Data Integration, Policy Analysis, and Resource Management Support.

Our mission is to empower our customers with actionable knowledge to achieve their organizational goals.

2. How have your company got into the Federal Contracting? What is the biggest lesson learned working with the Federal Government?

Dimensional Concepts got into Federal Contracting as a subcontractor to Northrop Grumman at Centers for Medicare and Medicaid Services (CMS). We have been a contractor to them for over 8 years. Before Northrop Grumman our work was commercial – CareFirst Blue Cross Blue Shield, World Bank and TD Ameritrade. Later we teamed with another Veteran Owned firm to win some work with the Department of Defense and then team with another woman business to win CMS Sparc.

The biggest lesson learned is to not become a SBA 8(a) firm until you have an in-depth understanding of government contracting and have developed an extensive list of contacts within the agencies that you are targeting.

3. Do you have any tips you would like to share with other women pursuing Federal Contracts?

My tips would be to make sure that you understand how acquisitions work for your target agencies because they are somewhat different when it comes to how they buy.  And building relationships will be key in building your business.

4. Have you encountered any challenges you had to overcome as a professional business woman and if so, what have you learned from them?

One challenge that I see is women don’t always help each other like men do for other men. I think that our goals should be to team with other women businesses and to support each other in growing our leadership skills and businesses.

5. Do you have a success story that you are particularly proud of? Tell us about it!

Most of the time when we win a contract, we call the local shelter or a veteran organization to see if there are families or individuals that we can support by paying their first month rent and deposit fees. We have done 5 families and 2 individuals so far and hope to do 1-2 more this year. We usually work with Cornerstones’ Embry Rucker Community Shelter in Reston, VA because of their tag line, Hope for Tomorrow Today.

6. Tell us about your experience as a WIPP member. What resources/value has WIPP provided that has been helpful to you and your company?

As a WIPP member, the organization has given me a better understanding how politics play into regulations that effect our businesses. I appreciate WIPP’s support in going to our politicians to represent the concerns of women businesses.

Why Federal Contractors Will Probably Be Working This Labor Day

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By John Stanford, WIPP Government Relations

The Department of Labor and FAR Council issued final regulations that require federal contractors to disclose labor violations from the past three years. This blog updates an earlier edition with what you need to know. For more details or if this impacts your business, I encourage you to read official guidance here.

Ahhhh, Labor Day. The unofficial end of summer. A century-old government-granted day off to squeeze in another day at the pool, buy the last of the school supplies (who really needs a protractor anyway?), see the grandparents, and now – for federal contractors – an opportunity to review your company’s legal history.

It doesn’t sound quite right, does it? But for thousands of federal contractors, that is exactly what newly finalized regulations mean. I will get into to the details and timeline of the new requirement in a moment, but first, a little history on a change WIPP has watched closely.

In 2014, President Obama issued an Executive Order with the goal of barring bad companies from winning federal contracts. The following summer the Labor Department (DOL) and the FAR Council (overseers of contracting rulebook, “the FAR”) proposed how this could be achieved. Last week, final rules were published – and contractors nationwide let out a collective groan.

You see, excluding companies with a history of bad acts from winning government work – a generally universally accepted idea – is not easy. WIPP said just that in our formal comment last year. We agreed that companies that follow the rules should not have to compete against companies that break them for federal contracts. But the proposed system would place burdens on women-owned contractors and dump paperwork requirements on contracting officers.

Our comment, along with hundreds from individual business owners and other trade groups, did little to sway the government from moving forward. The new requirement detailed below goes into effect on October 25, 2016.

The regulation requires federal contractors and subcontractors to disclose violations of 14 federal labor laws and the equivalent state laws from the previous three years. Exemptions were provided for companies with contracts valued less than $500,000. Prospective federal contractors will need to declare if they had labor violations in the previous three years when submitting an offer. During an initial evaluation, contracting officers will see that declaration (a simple “yes” or “no”), without any additional detail or explanation.

Later, if a contractor were likely to win an award, the contracting officer would have to decide if the contractor is a responsible company (a requirement of all government contracts already). It is in this phase that details like appeals, remediation, or mitigating factors could be explained. Contracting officers will attempt to identify companies with “serious”, “willful”, “repeated”, and/or “pervasive” violations and not award them contracts. Companies with minor violations could still be considered responsible and win contracts.

In what the government views as a compromise since their initial proposal, the system will be phased-in over the next two years. The DOL released the following timeline:

Phased-In Implementation Schedule

  • Week of September 12, 2016:Preassessment begins, through which current or prospective contractors may come to DOL for a voluntary assessment of their labor compliance history, in anticipation of bids on future contracts but independent of any specific acquisition.
  • October 25, 2016: Thefinal rule takes effect. Mandatory disclosure and assessment of labor law compliance begins for all prime contractors under consideration for contracts with a total value greater than or equal to $50 million. The reporting disclosure period is initially limited to one (1) year and will gradually increase to three (3) years by October 25, 2018.
  • January 1, 2017: The Paycheck Transparency clause takes effect, requiring contractors to provide wage statements and notice of any independent contractor relationship to their covered workers.
  • April 25, 2017: The total contract value threshold for prime contracts requiring disclosure and assessment of labor law compliance is reduced to $500,000.
  • October 25, 2017: Mandatory assessment begins for all subcontractors under consideration for subcontracts with a total value greater than or equal to $500,000.

 

Needless to say, our concerns remain. And before I go into a few of them, I would point out that the $50 million threshold sounds like a lot. It includes, however, companies on a multiple award contract with a ceiling amount above $50 million. Meaning a company that wins a BPA or IDIQ valued above $50 million, though not necessarily the amount of work the company will actually perform, will face the October 2016 deadline.

On a broader level, the rule simply is not ready for primetime. The Labor Department and FAR Council chose not to include what state labor law violations must be reported. It is impossible to gauge the impact of a regulation when missing significant portions.

What is in the rule, however, is equally concerning. In some cases, violations that require reporting will not be be fully adjudicated. That is, companies would have to report decisions against them that may ultimately be overturned – as nearly a third of NLRB decisions have been.

This is compounded by WIPP’s worry that simply having violations on record will “blacklist” companies without providing any opportunity to offer explanation. With limited resources and time, contracting officers may elect to avoid companies with any disclosed violations, despite the intent of the order to only bar violations of a certain severity.

Burdens on subcontractors are also being created. They must report violation history as well – directly to DOL. This was a notable change in the final rule, by making the subcontractor and the Labor Department engage each other, and not put the responsibility on the prime contractor.

At the same time the government has admitted it lacks the resources to answer all questions about weighing different labor violations from hundreds of thousands of subcontractors. Ultimately, this change could be the most damning, as many of these companies are unaware of the new requirements because they never sought business with the government in the first place.

Finally, the Fair Pay and Safe Workplaces requirement is one of many in a disconcerting trend of new regulations that specifically target federal contractors. Earlier this year, regulations raised the minimum wage solely for workers on federal contracts. New requirements regarding sick leave were also released. These make contracting with the federal government more onerous, particularly for women entrepreneurs seeking to enter the market. At a time when we want more competition and innovation in government, policies impacting only federal contractors put up barriers for entry.

Without question, WIPP supports efforts by the federal government to rid the contracting environment of businesses with a history of abusive and neglectful violations. In doing so, the government levels the playing field for the millions of businesses playing by the rules. But the government already has those tools and this rule will not achieve this goal. Instead, it will be harder to be a contractor, pushing the innovative products and services of women-owned businesses out of the federal market.

So to the federal contractors out there gearing up for a warm holiday weekend, fire up those grills, wear that final white outfit, and head into the office – it’s going to be a busy day.

 

John Stanford is part of WIPP’s Government Relations team in Washington, D.C., specializing in federal procurement and healthcare policy. When not bothering lawmakers about needed changes, he can be found in the woods at local golf courses.

And Then There Were None!

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The number of small businesses winning federal contracts is declining. Many attribute the decrease to the growing practice of using large “multiple awards contracts” or MACs, which pick 10-100 businesses to compete for billions of dollars of work. The government has called this effort a number of names over the last two decades – Federal Supply Schedules, Strategic Sourcing, Category Management – all reflecting the same buying philosophy.

The rationale driving these changes is buying smarter; it is the taxpayer’s money after all. The problem, however, is that these policy proposals limit the ability of women-owned businesses and all businesses to compete for and win government contracts.

It is for that reason that last week, WIPP submitted public comments on a proposed rule that will encourage federal agencies to do more strategic sourcing. For years, WIPP has consistently raised concerns around categorizing diverse solutions into narrow groups under the Federal Strategic Sourcing Initiative (FSSI), Category Management, or any other policy that limits the ability for women-owned businesses to bring their innovations and services to the federal market

As WIPP member Gloria Larkin informed the House Small Business Committee in 2013, “WIPP opposes the implementation of Strategic Sourcing methods without adequate consideration and protection of small business concerns. We recognize that increased consolidation and bundling of contracts are symptomatic of this Strategic Sourcing initiative.”

This proposed rule would require contracting officers when purchasing services or supplies offered under FSSI, but when FSSI is not used, to document on the contract file why FSSI has not been utilized. The documentation must include a comparative value analysis of price and non-price factors between the supplies and services offered under the FSSI, and what has been offered from the outside source being used for the purchase.

While the rule does not require use of FSSI, requiring an overworked contracting officer to to produce additional documentation is not in their best interest. Therefore, the clear result of this rule will be much broader use of strategic sourcing and will have an even more harmful impact on the small business community, including the women entrepreneurial community, than it already has.

Acquisition policies like FSSI and Category Management risk eroding our nation’s small business industrial base by maximizing short-term savings through large contract vehicles. Actions taken over the past several years to consolidate contracting have decreased the number of small businesses engaging in federal contracting. While a select few small business benefit from these large contract vehicles, it comes at a high price.

Women entrepreneurs continue to struggle with access to federal markets and greater use of strategic sourcing will set women business owners back, by making it harder to compete. WIPP is committed to working against broader strategic sourcing and the full comments can be found here.

Federal Contracting Success Story of Mickey Swortzel’s New Eagle Consulting Company

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Interview with Mickey M. Swortzel, CFO of New Eagle Consulting

M Swortzel

  1. Tell us a little about your company and its mission.

Mickey Swortzel: We are a engineering services and product distribution company that also develops products used for control systems. Those are found in multiple applications; we focus largely on commercial vehicles, trucks, vans, and most often fleet vehicles. We are looking to provide efficiency in the fuel areas by focusing on alternative, electric, and hybrid vehicles to make them more efficient and less pollutant.

Our mission is making the world a cleaner place to live.

We are also helping our customers by providing the expertise of our engineers in customized hardware and software solutions.

  1. Have you always planned on doing business with the federal government?

Mickey Swortzel: Yes, we’ve always wanted to do business with the federal government since our founding in 2008. However, it took quite some time until we managed to score our first contract in 2014.

  1. What shaped your decision to start pursuing Federal Contracts?  

Mickey Swortzel: My husband and I cofounded the business and we grew up in Dayton, Ohio which is a home for Wright-Patterson Air Force Base. The industry was always prevalent in the local economy so we’ve seen the value that government contracts can provide to the city. It’s sort of in our DNA.

We also knew that we had a solution that they needed and it was just a matter of getting noticed as we are a small business.

As mentioned above we were pursuing federal contracts for 6 years until we managed to get the first one. During that time, we were working on developing relationships, we listened to what they needed and, most importantly, we worked on getting validated as a business.

How has this shaped your business?

Mickey Swortzel: It dramatically changed our business for the better. We have engaged 2 different consultant experts who helped us a lot in the process. We also became DCAA compliant and one of the consultants helped me to pass the audit.

In general, we were doing everything we needed before as well. We just needed to put it into the federal government language and present it in a way they could understand. That’s where the consultants were very helpful.

  1. How do you think ChallengeHER and the Women-Owned Small Business (WOSB) program help women business owners in the process?

Mickey Swortzel: Going through the WOSB certification process helped us to position our unique value. One of our consultants told me: “You have an incredible value proposition. You just need to make sure you get known and recognized for it.” That’s the area where educational events like ChallengeHER can be very helpful to spread this message among WOSBs. On top of that the educational portion is incredibly important especially the DCAA lessons which is a fundamental part of being successful as a federal contractor.

Although being WOSB certified hasn’t helped us to get the current contract, we are definitely better positioned now to get additional contracts in the future.

  1. How has it helped your business?

Mickey Swortzel: WIPP in general helped me to put a Capability Statement together and get through the required registrations. All of the educational portion has really helped me to understand the value that we have and channel it to get heard.

  1. What percentage of your revenue comes from government contracts?

Mickey Swortzel: About 25%. We want to stay diversified but we certainly want to increase that proportion in the future.

  1. What contracts are you currently working on? What have you worked on in the past?

Mickey Swortzel: We are currently working on a Phase 2 contract for the Department of the Air Force which will take about 18 months in total to complete. We are also working for DOE as a subcontractor however we prefer focusing our energy on prime contracts.

  1. Does your business export?

Mickey Swortzel: Yes, we are exporting our engineering consulting services and electronic hardware around the globe.

  1. What would you recommend to other WOSBs doing business with the federal government?

Mickey Swortzel:

  • I would absolutely recommend utilizing WIPP educational resources. Going through the website and being in touch with the team has been the quickest and most efficient way to find information as I started this process.
  • Business owners should also recognize that it takes a long time to get federal contracts and don’t give up.
  • The stronger the business is the more attractive it is for government contracts. You are not wasting your time even when you don’t win the contract. You are building a strong business which you need in order to ultimately win contracts.
  • Realize the WOSB opportunities and take advantage of them. Getting WOSB certified is very important and it’s worth whatever time and energy is required.