On October 5, 2023, the Information Security Oversight Office issued Joint Notice 2024-01: Joint Ventures and Entity Eligibility Determinations (Joint Notice) with the Small Business Administration (SBA) and in coordination with the Department of Defense (DoD) to provide government contractors with additional guidance concerning joint ventures (JVs) seeking access to classified information (an Entity Eligibility Determination (EED) or Facility Clearance (FCL)). Among other things, this Joint Notice clarifies that companies should not rely on the SBA’s regulations for the proposition that a small business JV will never need to hold an EED.
Michael Samuels is a counsel in Crowell & Moring's Government Contracts Group. His practice involves counseling and representing government contractors on a wide range of issues.
On October 4, 2023, Deputy Attorney General (DAG) Lisa O. Monaco announced the Department of Justice’s (DOJ) new safe harbor policy for voluntary self-disclosures made in connection with mergers and acquisitions (Safe Harbor Policy). Following other announcements from DOJ over the past two years aimed at encouraging voluntary self-disclosures, the Safe Harbor Policy was adopted because DOJ does not want to “discourage companies with effective compliance programs from lawfully acquiring companies with ineffective compliance programs.” Through this new policy, DOJ is aiming to incentivize acquirers to timely disclose misconduct discovered during the M&A process (including pre-closing diligence and post-closing integration).…
The Small Business Administration has begun outreach to current participants in its 8(a) Business Development Program regarding the impact of the U.S. District Court for the Eastern District of Tennessee’s July 19, 2023 decision enjoining SBA from applying a rebuttable presumption of social disadvantage to individuals of certain racial and ethnic groups.
For 8(a) Participants whose program eligibility is based upon one or more individuals that relied upon the presumption of social disadvantage based on their membership in one of the identified groups (such as Asian Pacific Americans, Black Americans, Hispanic Americans, Subcontinent Asian Americans, and Native Americans), such participants will be required to establish their individual social disadvantage by completing a social disadvantage narrative. No new 8(a) contracts can be awarded to these entities until SBA affirmatively determines that the individual(s) upon whom eligibility is based has established personal social disadvantage. …
On June 23, 2023, a coalition of companies, including venture capital firms like Kleiner Perkins, General Catalyst and Founders Fund, and start-up defense technology companies, published an open letter to the Department of Defense (DoD), addressed to Secretary Lloyd J. Austin, petitioning DoD to consider procurement reform to help “overcome barriers to innovation.” The group asserts these barriers create “antiquated methods for developing requirements and selecting technologies that have drastically limited” DoD’s access to “the best commercial innovation.” In particular, the coalition endorsed adopting four recommendations pulled from a report by The Atlantic Council, a non-partisan international affairs think tank.
First, the letter suggests that DoD modernize to align with the 21stcentury industrial base. The letter acknowledges that DoD has already taken a strong step in this direction by establishing the Defense Innovation Unit (DIU), which reports directly to Secretary Austin and whose mission is to accelerate the adoption of commercial technology. The coalition also encouraged DoD to provide DIU with additional staffing and resources to tap into the non-traditional defense industrial base, reinforce “buy before build” commercial practices, and help DoD speed up validation and approval of needs and funding.
On June 27, 2023, the Small Business Administration (SBA) Office of Inspector General (OIG) reported its estimate that SBA disbursed over $200 billion of potentially fraudulent COVID relief, including Economic Injury Disaster Loans (EIDL) and Paycheck Protection Program (PPP) loans. These possibly fraudulent loans represent at least 17% of all EIDL and PPP funds—or 21%…
On January 23, 2023, in AttainX, the Government Accountability Office (GAO) sustained the protest of an award to an 8(a) joint venture based on, among other reasons, a finding that the agency’s evaluation of the joint venture’s experience was inconsistent with the Small Business Administration (SBA) regulations concerning joint ventures (JVs), citing 13 C.F.R. § 125.8(e) and 13 C.F.R. § 124.513(f).
The protest involved a General Services Administration (GSA) solicitation for IT services to maintain and modernize the USDA Farm Loan Programs systems and applications. The solicitation required offerors to submit a description of their “similar experience” on other contracts. In response, an 8(a) joint venture (MiamiTSPi) submitted two experience examples:
- One experience example had been performed by both the 8(a) managing venturer, MTS, and the small business minority venturer, TSPi, but as a different 8(a) certified joint venture, MTSPi LLC.
- The second experience example had been performed by only TSPi, the non-8(a) small business minority venturer.
GSA evaluated MiamiTSPi as Acceptable under the “similar experience” factor and ultimately made award to MiamiTSPi. Disappointed offeror AttainX protested, arguing, among other things, that even though GSA had only rated MiamiTSPi as Acceptable under “similar experience” as opposed to a higher rating, GSA unreasonably neglected to evaluate the risk associated with the fact that the experience examples submitted by MiamiTSPi were not performed by the joint venture proposed as the prime contractor nor performed individually by the “managing member” of the joint venture.…
On December 19, 2022, DoD issued a DFARS proposed rule that seeks to (1) implement the data-rights portions of the May 2, 2019 Small Business Innovation Research Program and Small Business Technology Transfer Program Policy Directive (SBIR/STTR Policy Directive), and (2) impose significant changes to technical data and computer software marking requirements. The SBIR/STTR portion of the proposed rule follows DoD’s advance notice of proposed rulemaking issued on August 31, 2020 (see 85 FR 53758) and incorporates the eight written public comments that DoD received. The proposed changes to marking requirements go beyond the SBIR/STTR Policy Directive and respond to the Federal Circuit’s decision in The Boeing Co. v. Secretary of the Air Force, 983 F.3d 1321 (Fed. Cir. 2020).
On December 1, 2022, Department of Defense (DoD) Secretary Lloyd J. Austin III announced the establishment of the DoD Office of Strategic Capital (OSC). The mission statement of the OSC is to build an “enduring technical advantage” for the United States by helping partner contractors with private investment to develop national security critical technologies, including those related to advanced materials, next-generation biotechnology, and quantum science. OSC will coordinate with existing organizations such as the Defense Advanced Research Projects Agency (DARPA) and the Defense Innovation Unit (DIU), which promotes acceleration of the military use of commercial technologies.
The OSC intends to offer what it characterizes as “patient” extended-term capital to help contractors obtain financing between the early laboratory-testing and prototyping phases and the full-scale development of products that can be used by the DoD warfighter. In addition to traditional vehicles like contracts and grants, this investment will likely take the form of loans and loan guarantees.
On September 30, 2022, President Biden signed the SBIR and STTR Extension Act of 2022 (the Act), reauthorizing the Small Business Innovation Research (SBIR), Small Business Technology Transfer (STTR), and six pilot programs for three years, until September 30, 2025. The Act includes new due diligence and reporting requirements, award restrictions, and clawback provisions related to national security risks—particularly regarding firms with ties to China, Russia, North Korea, and Iran—and increased minimum performance standards for multiple SBIR/STTR award winners. The passage and signing of the Act averted a potential lapse of these programs, which were set to expire the day of the reauthorization.
On January 12, 2022, the U.S. Attorney’s Office for the District of Colorado announced a $1.15 million civil settlement in a case implicating misuse of the Small Business Administration’s (SBA) Mentor-Protégé Program. The settlement is to be partially paid by both the SBA-approved mentor and protégé relating to conduct associated with winning and performing two set-aside awards.
Native American Services Corp. (NASCO) was the mentor to Mirador Enterprises, Inc. (Mirador), a small business and participant in the SBA’s 8(a) Program. The contracts at issue in this settlement were two Army set-asides for construction projects at Fort Carson—one set-aside for small businesses and one for 8(a) participants. At the time that Mirador submitted offers as a prime contractor for each of these procurements, Mirador qualified both as a small business and as an 8(a).
The problem, as alleged by DOJ, was that NASCO prepared the bids with the intent that NASCO would primarily perform the contracts. DOJ further alleged that, after the Army made award to Mirador, NASCO took the lead in the performance of these two contracts and provided assistance that far exceeded what was permitted under the Mentor-Protégé relationship.
Once the government raised concerns about NASCO’s “improper level of involvement,” the parties purportedly doubled down and took steps to conceal how they were actually performing. As laid out in DOJ’s press release:
- The parties tried to make it appear that NASCO was transferring employees to Mirador, but these employees remained under NASCO’s control;
- NASCO provided information to Mirador employees to make them appear more involved or knowledgeable about the contracts than they actually were; and
- NASCO drafted correspondence for Mirador’s signature, to be submitted to the government.
Of the $1.15 million civil settlement, NASCO will pay $750,000 and Mirador $400,000.
There are two takeaways from this settlement.…