House Committee Passes Bipartisan Federal Contractor Changes

By: Ann Sullivan, WIPP Government Relations

 

In its first major action of 2016, the House Small Business Committee approved changes to federal contracting which affect small companies who do business with the federal government. Acting in a bipartisan manner is relatively rare in Congress these days, but the Committee unanimously adopted the legislation, The Defending America’s Small Contractors Act of 2016, with over two-thirds of the Committee contributing content to the bill.

 

For the last three years, the House Small Business Committee has pushed for changes to the government’s buying rules and this week’s legislation was no exception. In our view, the following changes in the bill will prove to be significant to small contractors. One attacks an age-old problem – showing past performance without a government contract. The bill establishes a pilot program that enables contractors to receive a past performance rating by submitting a request to the contracting officer and/or prime contractor.  Second, the bill strengthens agency small business offices to recommend which small business set-aside programs should be used for each contract at their agency.

Anne CrossmanThird, WIPP’s recommendations were incorporated in the legislation, including one made by Anne Crossman, a member of WIPP’s Leadership Advisory Council, in her testimony before the Committee. Anne took the opportunity to highlight WIPP’s “if you list us, use us” policy for prime contractors’ subcontracting plans. This bill incorporates WIPP’s recommendations to clarify the role of commercial market representatives (CMRs) in encouraging prime contractors to work with small businesses. Lastly, the bill takes the first step toward getting a better handle on the actual amount set aside for small businesses by requiring agencies to divulge awards counted toward multiple small business goals.

An amendment offered by Rep. Takai scored a victory for women entrepreneurs by allowing Women’s Business Centers (WBCs) to provide procurement assistance to women participating in the DOD mentor-protégé program. Rep. Takai’s statement on the amendment is available here and includes WIPP’s statement of support.

These improvements set the stage for a productive year of improvements for small contractors. The bill, which passed unanimously, will now be considered by the full House of Representatives. The House Small Business Committee is off to a great start. We can’t wait to see what they do next.

“Fair Pay” Rules Just Aren’t Fair

women comp

By John Stanford, WIPP Government Relations

Women Impacting Public Policy (WIPP) recently submitted comments on proposed regulations that would require federal contractors to disclose labor violations from the past three years. This blog accompanies those comments as a summary of WIPP’s position. For more details or if this impacts your business, I encourage you to read the full comment here.

Last summer, President Obama issued an Executive Order with the goal of barring bad companies from winning federal contracts. WIPP, along with most in the contracting community, agrees that companies that follow the rules should not have to compete against companies that break them for federal contracts.

In May, the Labor Department and the FAR Council (overseers of contracting rulebook, “the FAR”) proposed how the President’s order would be implemented. It turns out, as with most things, the devil is in the details.

The proposed regulations require federal contractors and subcontractors to disclose violations of 14 federal labor laws and equivalent state laws from the previous three years. Exemptions were provided for companies with contracts valued less than $500,000. As proposed, prospective federal contractors would need to declare if they had labor violations in the previous three years when submitting an offer. During an initial evaluation, contracting officers would 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.

WIPP responded to the regulation during the public comment period expressing concerns with the new system and how it could negatively impact women-owned businesses, including those who had no history of unsafe or unfair work practices.

Notably, the proposals were incomplete as 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 – the reason for comments– when missing significant portions.

What was in the proposals, however, was equally concerning. WIPP’s comment discusses how, 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.

The comment also considers burdens on subcontractors who similarly must report violation history, and the lack of resources the government may face to answer questions about weighing different labor violations. Moreover, the onus to collect and judge subcontractor violations falls to primes, a strategy the Labor Department itself questions.

WIPP’s final concern is that this rule 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 are expected to come later this year. These make contracting with the federal government more onerous, particularly for women entrepreneurs seeking to enter the market.

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 proposals commented on will not achieve this goal. Instead, they will make it harder to be a contractor – pushing the innovative products and services of women-owned businesses out of the federal market.

Bonds: An Important Weapon In Any Contractor’s Arsenal

It is vital that construction contractors, regardless of tier or trade, understand the basic principles of contract surety bonds. An understanding of how bonds are used in construction; and, importantly, how the surety company prequalifies the contractor is critical.   Surety Bonds are mandated by various federal, state and local laws, but may also be required by the private sector as well. Recently, as part of WIPP’s Give Me 5 webinar series, bonding specialist Ellen Neylan, along with construction counsel, Jennifer M. Horn and Maria Panichelli, discussed these issues in detail. Below are some highlights of the discussion.

The Performance Bond secures the contractor’s promise to perform the contract in accordance with its terms and conditions, at the agreed upon price, and within the time allowed. The Payment Bond protects certain laborers, material suppliers and subcontractors against nonpayment. Since mechanic’s liens cannot be placed against public property, the payment bond may be the only protection these claimants have if they are not paid for the goods and services they provide to the project.

In order to obtain a bond, the contractor must be prequalified. Sureties should not bond a contractor that does not meet their prequalification standards. The surety company’s pre-qualification process carefully analyzes the contractor’s entire business operation, much like a bank, because the surety is backing the promise that the contractor will perform the contract. The surety determines the contractor’s ability to meet current and future contract and financial obligations.

The parameters of bonding on a project are often dictated by the law. For example, the Federal Miller Act requires surety bonds for the “construction, alteration, or repair of any public building or public work of the United States for an amount greater than $100,000.” When filing surety claims against Miller Act bonds, subcontractors should be aware that timing is critical. Even though no notice is required, first tier subcontractors must wait 90 days from non-payment to give the bond principal a chance to make payments. In addition, all suits must be filed within one year of last work performed or materials supplied. It’s very important that the claim notice clearly state the amount being claimed, the name of the party to whom labor or supplies were provided, and that the subcontractor is making a formal claim against the bond principal.

The Surety will not pay claims without regard to their merits, but it should be expected to respond to claims promptly and, if denying a claim, offer an explanation. Finally, the Surety, with the aid of legal counsel, can assert all defenses of its bond principal, unless precluded by bond or contract language. Examples of defenses might include: breach of contract; recoupment/setoff; and failure to mitigate damages.

For more detailed information about this important topic, tune in to the recent webinar:

Give Me 5 Logo

Give Me 5: Construction Unit – Bonding and Liens 

As a federal contractor in the construction industry, it is imperative that you obtain proper bonding – but this is a highly complicated subject that could end up costing you an incredible amount of money if you don’t fully understand the nuances and ramifications. This webinar unravels the most important aspects of bonding and liens providing you with important guidelines for success.

Course Instructors: Jennifer Horn, Partner, Cohen Seglias Pallas Greenhall & Furman PC & Maria Panichelli, Associate, Cohen Seglias Pallas Greenhall & Furman PC and Special Guest: Ellen Neylan, Founder, Surety Bonds Associates

Listen to the Podcast | View the Presentation