Practical Government Contracts

Parity Amendment Dropped

The amendment to the Department of Defense Authorization Act that replaced "shall" with "may" in the part of the Small Business Act relating to HUBZones was dropped from the final version of the Act.  This means that the HUBZone set-asides remain mandatory under the Small Business Act.  The Department of Justice has issued a memo that HUBZone set-asides are not mandatory, but dropping the amendment strengthens tha argument that Congress intended HUBZone set-asides to be mandatory and have priority over 8(a) and Veteran's set-asides.  The decision to drop the parity language as disappointing to the  sponsors of the amendment who said this would not be the end of the attempt to bring parity to the three programs.  See article here.

Unfortunately this leaves the priority of HUBZOne set-asides undecided, with GAO saying they are mandatory and the Obama administration saying they are not mandatory.  Because there are two Federal court cases interpreting the "shall" in the Act as making HUBZone set-asides mandatory, it will take another suit challenging the failure to use the HUBZone set-aside by a contracting agency to settle this issue for now. 

Senate Amendment to Give Parity to HUBZone, 8(a), and SDVOB Set-Asides

The Senate passed an amendment to the Defense Authorization Act (S 1390) that changes the language in the Small Business Act 15 U.S.C. 657a(b)(2)(B) from "shall" to "may".  This was the language relied upon in the Contract Management cases I litigated and the recent GAO decisions to find the HUBZone program mandatory and to have a preference over other small business set-asides.  If this amendment remains in the final bill sent to the President it will give parity to the three programs consistent with SBA's current regulations.

HUBZone Set-Asides Mandatory or Not?

Since the decisions in the Contract Management cases I believe HUBZone set-asides are mandatory in certain circumstances.  I have advised HUBZone concerns to assert their right to have a requirement set-aside for HUBZone participation when those circumstances are met.  With the OMB memo and SBA changing its popsition taken in the Contract Management decision, it is now confusing to contractors, and I am sure contracting officers, when a HUBZone set-aside is mandatory. 

OMB says it is looking into the mandatory requirement and will issue another memo in 30 days. If OMB keeps its present position then it seems only further federal court litigation will settle the issue.  Unfortunately this is one of those issues where there seems to be no easy way to get a determination.  The Federal courts and GAO have ruled on the issue but OMB and SBA refuse to follow their clear direction.   I will address this issue in more depth in an article to appear on my websites, powerlawoffice.com and hubzonehelp.com.  Let me and others know what you think about this issue and file a comment.

GAO Says Mandatory HUBZone Decisions Correct

In a decision issued on July 6, 2009, GAO refused to reconsider its earlier decisions that the HUBZone program is mandatory and takes precedence over other set-aside programs.  It cites the district court and appeals court decisions in Contract Management which I linked to in my earlier blog entry.  I was the attorney for Contract Mangement and agree with GAO that those court decisions held that the Small Business Act, not SBA nor FAR regulationss, make the HUBZone set-asides mandatory. 

Ironically, SBA argued to GAO in seeking reconsideration, that GAO's ruling would negatively impact the 8(a) and Veteran's set-asides.  When I argued in Contract Management that finding the HUBZone program mandatory could result in HUBZone set-asides taking away possible 8(a) set-asides, SBA rejected that argument pointing out the small number of HUCZone set-asides then being used.   

HUBZone Not Mandatory Says OMB

In a memo release on July 10, 2009 the Office of Management and Budget ordered executive agencies to ignore two recent GAO decisions holding the HUBZone set-aside mandatory and entitled to preference over 8(a) and Veteran owned business set-asides.  OMB ordered the agencies to follow "parity" regulations from SBA giving wqual treatment to all three programs.  In doing so OMB relied only upon the GAO decisions and ignored, or was simply unaware of, the Hawaii district court and Ninth Circuit Court of Appeals decisions predating the GAO decisions in declaring the HUBZone set-aside as mandatory and entitled to a preference.  The OMB memo can be seen here.  Download District Court HUBZone decision. Court of appeals decision Download Cmiccafc.

I was involved in the Hawaii case and the SBA argued, contrary to its "parity" position that the HUBZone set-aside was mandatory under the Small Business Act.  That position was upheld by the Ninth Circuit Court of Appeals.  As a mandatory program under the Small Business Act, OMB and SBA do not have authority to change this to a program that is equal to 8(a) and SDVOB, no matter how beneficial those programs are.  If there is a change, it has to come from Congress. 

Office of Advocacy, Small Business Administration

The 2009 edition of The Small Business Economy documents the 2008
recession’s effects on small business as well as their role in the 2008
economy. The report includes chapters focusing on the state of small business
(with brief subsections on small business challenges such as health care and
globalization, as well as contributions in job creation and innovation) and
financing. Appendices include additional data on small firms and a summary of
Advocacy research published in 2008.

• Small businesses in most industries, especially in the construction industry
hard hit by the housing market downturn, saw declines in employment.

• Average unincorporated self-employment fell from 10.4 million in 2007 to 0.1
million in 2008 and averaged 9.6 million by November and December 2008.

• Incorporated self-employment remained steady at 5.8 million on average
over the 2007-2008 period.

• Some surveys found small firms expressing less willingness to expand, hire
new workers, invest in new plant and equipment, or borrow money, at least in
the near term.

• Health care costs remain a major concern for small firms: according to the
Kaiser Family Foundation, the average annual cost of a family premium for
employer-sponsored health insurance increased 119 percent between 1999
and 2008, with a 5 percent increase in 2008 from the previous year.

• Real exports have risen steadily since 2005, outpacing the growth in
imports; the value of real exports increased 6.2 percent in 2008.

• Most small businesses faced a less accommodating credit market, especially
in the second half of 2008.

• Lenders exhibited widening interest rate spreads and tightening terms of
lending.

• Business borrowing plunged in the fourth quarter of 2008 to a low annual
rate comparable to the levels experienced in the 2001 recession.

• According to June 2007-June 2008 Call Report data, developments in the
financial markets had a limited impact on small business lending in the first half
of 2008.

• Despite the lack of very current financial data, a number of indicators
suggest that the flow of funds to small firms was much curtailed by the end of
2008.

A copy of The Small Business Economy: A Report to the President 2009 can be
found at http://www.sba.gov/advo/research/sb_econ2009.pdf .

Should you need further information, please feel free to contact Chad Moutray
at (202) 205-6533 or advocacy@sba.gov.

Are You Ready for E-Verify

The requirement to comply with E-Verify for employees is set for September 1, 2009.  E-verify will require many, if not most, Federal government contractors to use the E-Verify system to check the immigration status of some of their employees.  This requirement is a result of President Bush's Executive Order 13465 issued in June 2008.  See text here.

The Final Rule, with comments on the proposed rule along with the changes to the Federal Acquisition Regulation can be downloaded here. The total announcement with comments is 55 pages.  Download Everify

There is a discussion of the requirement by the National Immigration Law Center here.

Federal Biz Network on Linkedin Has Teaming and Job Contacts

Checking out Linkedin recently I realized that the group Federal Biz Network has several good discussions about teaming with other businesses, looking for teaming partners, and generally providing a good network of government contractors looking for ways to expand business.  There are discussions in different industries as well as both large and small businesses.  Another good group to check out.

Linkedin Provides Contracting Information

Linkedin, a social networking network for business and professions has several groups that are related to Federal government contracts.  These groups provide different viewpoints and there may be one (or more) that are helpful to you.  Register on Linkedin.com and search for government contracts groups.  Some are focused on teaming opportunities for federal contractors and some share information and insights.  One group, The Federal Contractor Network, has its own website at http://www.federalcontractor.us.  It is worth your time to check it out.

Power Law Office to Open Website to Support Veterans

Power Law Office will open a website in June whose purpose is to support veterans.  The new website, powerforveterans.com, will initially provide information on federal contracting programs supporting veteran owned business.  Later, information on VA veteran benefits will be provided.   You can make sure you receive information about when the new website will be up and running by subscribing to Power Law Office's newsletter at powerlawoffice.com and going to the subscribe page.