“Rule of Two” Cheat Sheet

Merle M. DeLancey Jr.

June 2021 marked the five-year anniversary of the Supreme Court’s Kingdomware decision[1], which is best known for broadly interpreting the so-called “Rule of Two” requirement flowing from the Veterans Benefits, Health Care, and Information Technology Act of 2006 (the “VBA”). The Rule has been criticized for delaying Department of Veterans Affairs (“VA”) procurements and increasing the prices the government pays for goods and services. However, the importance of the Rule’s purpose—to prioritize and increase the government’s use of small businesses owned by veterans—cannot be credibly challenged.

Over the past five years, the Federal Circuit, Court of Federal Claims, and Government Accountability Office (“GAO”) protest decisions have created some bright-line rules interpreting the VBA’s Rule of Two. After a brief summary of the Rule of Two, this post lays out these bright-line rules, and concludes with predictions regarding future VBA Rule of Two protests.

Continue reading ““Rule of Two” Cheat Sheet”

Paycheck Protection Program Audits Are Upon Us—Borrowers Prepare!

Merle M. DeLancey Jr., Craig Stetson*, and Jennifer A. Short

In our last post on this topic, we touched on how the acceptance, use, and forgiveness of Paycheck Protection Program (“PPP”) loans can be viewed in the context of a Defense Contract Audit Agency (“DCAA”) audit. This post focuses on audits and investigations involving PPP loans. Close scrutiny of PPP loans is not a prediction; it is reality. The Small Business Administration (“SBA”) has announced it will audit all PPP loans in excess of two million dollars following a lender’s submission of a borrower’s loan forgiveness application, and it reserves the right to “spot check” any PPP loan of a lesser amount at its discretion. The Department of Justice has already charged multiple individuals with PPP fraud. And this is just the beginning of what many think will be a tidal wave of enforcement activity involving PPP loans.

Overview of the PPP

The PPP is the largest relief measure for small businesses under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). The government has made available nearly one trillion dollars in PPP relief funds through four separate funding measures ($349 billion via the CARES Act; $310 billion via the PPP and Health Care Enhancement Act; $284 billion via the Consolidated Appropriations Act of 2021; and $7.25 billion via American Rescue Plan Act of 2021).

The PPP makes available guaranteed SBA loans to small business that meet certain eligibility requirements. In addition, PPP loans can be forgiven fully if used properly to cover specified business expenses such as payroll, rent, utilities, mortgage interest, and other limited uses. As of April 11, 2021, the SBA had approved more than 9.5 million loans totaling more than $755 billion using more than 5,400 lenders.

Continue reading “Paycheck Protection Program Audits Are Upon Us—Borrowers Prepare!”

Pivoting & Positioning Small Businesses for Dynamic (Full & Open) Growth

Dean S. Nordlinger*

Recently, I hosted the second session of Blank Rome’s new on-demand webinar series, “Strategically Speaking,” with featured guests Gilbert Dussek of Gunnison Consulting Group and Kevin Robbins of Blue Delta Capital Partners about the key issues that growing government contracts firms face in their business life cycle as they transform from small to “other-than-small” businesses. You are invited to watch the recording on demand here; I hope you find it helpful and informative.

Dussek has been a successful high-level operator on both large and small govcon platforms and in 2019 became CEO of Gunnison, a leader in software development, data analytics, and enterprise system testing for leading government customers. Robbins has served multiple roles as a consultant to and an owner/investor in govcon companies and is a co-founder of Blue Delta, a growth capital firm focused on the U.S. federal government services marketplace, particularly technology-enabled solutions and services companies.

Our session includes an informative and helpful discussion focused on:

  • Reviewing Blue Delta’s and Gunnison’s decision to team up:
    • Factors that went into Blue Delta’s decision to invest in Gunnison; and
    • The driving and differentiating attributes that Blue Delta looks for in “investable” target companies
  • Strategically growing from an SBSA to full & open govcon company:
    • Building, scouting, and acquiring talent; and
    • Competitively bidding on and winning, or acquiring, F&O contracts
  • Identifying and filtering acquisition targets and structuring acquisitions:
    • The roles of company culture, chemistry (of personnel), and vision; and
    • Sourcing and valuing target companies
  • Describing Gunnison-Blue Delta’s corporate growth strategy:
    • How Blue Delta thinks about portfolio company construction; and
    • Gunnison’s near-term and long-term visions and plans

*Dean Nordlinger is a partner in our Corporate practice whose new “Strategically Speaking” webinar series includes discussions with a variety of seasoned professionals and subject matter experts about critical and challenging issues that government contractors and other companies (and business owners) face throughout their life cycle.

Surviving Proposal Weaknesses after Discussions: What Not to Do

Albert B. Krachman

With apologies to Paul Simon, this is another in a series of articles on the 50 ways contractors can lose awards on federal contracts. These cautionary tales should inform anyone in a contractor organization with responsibility for authorizing, preparing, or negotiating competitive federal contract proposals.

Like the inverse of Steven Covey’s Seven Habits of Highly Effective People bestseller, the mistakes that lead to lost awards are well known and include: carelessness, greed, lack of attention to detail, procrastination, and cursory (or omitted) red-team reviews. This article highlights another surefire path to disaster: failing to adequately correct proposal weaknesses after discussions.

This lesson arises out of a clash between BNA and Lexis, legal search titans, over a U.S. Treasury contract. The combatants were seeking award of a contract for electronic research services for IRS staff, described in a GAO Bid Protest decision, LexisNexis, a Division of RELX Inc., B-418885; B-418885.2 (October 8, 2020).

Treasury’s solicitation required that offerors both describe their search solutions in technical proposals, and have a working computing solution, active for government testing. After initial proposal submissions and initial evaluations, the government advised offerors of weaknesses and deficiencies in their proposals and in their computing solutions. Treasury advised Lexis that its proposal suffered from a significant weakness due to Lexis’ computing solution’s return of erroneous search results. Discussions were opened and offerors were permitted to submit final proposal revisions. Offerors were also permitted to correct any deficiencies in their computing solutions before another round of government testing.

Continue reading “Surviving Proposal Weaknesses after Discussions: What Not to Do”

COVID Audits and Investigations: The Enforcers

Merle M. DeLancey Jr. and Craig Stetson*

This is the first in a series of blog posts concerning the audits and investigations related to the contracts and grants awarded, and relief funds provided, in response to the COVID-19 pandemic. As of February 2021, pursuant to the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which created the Paycheck Protection Program (“PPP”) and supplemental funding such as the Families First Coronavirus Response Act, the United States government has made available an estimated four trillion dollars in relief funds to businesses and individuals, and the Biden administration is proposing roughly two trillion dollars more.

In addition to the relief funds, the Government has easily awarded more than billions in pandemic-related contracts for everything from vaccines to PPE to hand sanitizers. These levels of funding and spending are unprecedented and have been made at breakneck speed (for the government). Based on these factors and lessons from the past, audits of relief recipients and contractors to confirm appropriate use of government funds are inevitable. And the government has said as much. Of course, if an audit reveals potential wrongdoing or malfeasance, relief recipients and contractors should expect follow-on investigations and enforcement activity.

This first post identifies the myriad of entities that are or will be reviewing—and potentially investigating—relief recipient and contractor representations made to obtain, and subsequent use of, government funds.

Continue reading “COVID Audits and Investigations: The Enforcers”

Stars III: Critical Proposal Issues Addressed by Industry Experts

On July 21, 2020, Blank Rome Government Contracts Partner Albert B. Krachman presented a webinar with PW Communications, Inc. Founder and CEO Phyllis Orenstein Bresler to address the recently released GSA STARS III Solicitation, a Multiple Award, IDIQ contract to provide information technology (“IT”) services and IT services-based solutions. The webinar addressed issues that potential offerors should consider when formulating a compliant, well-written, and compelling proposal response. The contract ceiling for STARS III is $50 billion over five years, with the potential to grow.

The recent cancellation of the Alliant 2 Small Business Contract positions STARS III as one of the premier acquisition vehicles for federal IT acquisitions.

The webinar:

  • Identified opportunity areas, risk issues, RFP ambiguities, open questions, and key concepts.
  • Addressed Solicitation Sections L and M and presented lessons learned from the trenches.

Click here to view a recording of the webinar, and here to view the presentation slides.

Adapting JV Proposal Strategies after GAO Downgrade Ruling

Albert B. Krachman

A recent U.S. Government Accountability Office decision involving a Small Business Administration-approved small business joint venture, or JV, suggests that JVs between large and small firms should adjust their proposal strategies to avoid downgrades on past performance when the small business JV member, and the JV itself, lack relevant past performance.

Background

Proposing on a set-aside contract as an SBA-approved JV between a small and large business has been an effective strategy for many years. A basic assumption of this approach—and a primary motivation for using a JV structure—has been that an agency evaluating the JV’s past performance would normally look at the combined past performance of the JV members.

In many respects, this evaluation assumption has been a main motivation for using the JV structure, in contrast to a prime-subcontractor structure.

Typically, the large business JV member will have greater and more relevant past performance than the small business. The thinking had been that the JV structure would allow both members to leverage the large JV partner’s past performance for evaluation purposes by imputing the large business’ past performance to the JV.

However, the recent GAO bid protest decision in ProSecure LLC calls this assumption into doubt, suggesting the need for adjustments to proposal strategies for large and small firms in JVs or that plan to use JVs.

To read the full article, please click here.

“Adapting JV Proposal Strategies after GAO Downgrade Ruling,” by Albert B. Krachman was first published in Law360 on June 17, 2020.

A Federal Contractor’s Five-Part Guide to the CARES Act

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law. This massive $2.2 trillion economic package provides a host of opportunities and resources for all varieties of federal contractors—from those who need financial assistance through the coronavirus pandemic to those who can leverage their resources to assist the federal government in its response.

The five timely posts below discuss discrete portions of the CARES Act, how they might affect federal contractors, and what federal contractors can do to take advantages of the many programs and opportunities offered under the Act. Please contact us for assistance with any of these, or other components, of the Act.

1. The CARES Act Provides Much Needed Financial Relief for Small Businesses

Michael Joseph Montalbano
This article discusses the expanded $349 billion loan program set aside for small businesses under the CARES Act.

2. CARES Act § 3610: An Immediate Lifeline for Qualifying Federal Contactors Displaced by COVID-19

Michael J. Slattery
This article discusses § 3610 of the CARES Act, which provides funds that federal agencies can use to alleviate disruptions to federal contractors caused by the coronavirus pandemic.

 3. CARES Act Grant Programs: Searching for Opportunity in the Coronavirus Relief Effort

Tjasse L. Fritz
This article discusses the wealth of grant programs available to federal contractors and other businesses under the CARES Act.

4. CARES Act: Significant Funds for Defense Department and Defense Contractors

Adam Proujansky
This article discusses the billions of dollars in loans, loan guarantees, and other financial assistance available through the Department of Defense to defense industry contractors.

5. New Contracting Authorities and Preferences Established under the CARES Act

Albert B. Krachman
This article discusses new contracting authorities delegated under the CARES Act as well as sole source opportunities available under the Act.

As COVID-19 issues permeate virtually all aspects of commerce nationally and internationally, we stand ready to help. Blank Rome’s Coronavirus (“COVID-19”) Task Force includes interdisciplinary resources across every business sector from insurance recovery to HR.

The CARES Act Provides Much Needed Financial Relief for Small Businesses

Michael Joseph Montalbano

On March 27, 2020, Congress passed, and the President signed into law, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”). The CARES Act is a massive $2.2 trillion law designed to stabilize the United States’ economy as the country deals with the novel coronavirus COVID-19.

One major component of the CARES Act is the $349 billion set-aside to provide relief for small businesses in the form of loans and other financial resources. Here we discuss the major components of this program that all small businesses need to know before deciding whether they should apply for one of these loans. Continue reading “The CARES Act Provides Much Needed Financial Relief for Small Businesses”

CARES Act § 3610: An Immediate Lifeline for Qualifying Federal Contactors Displaced by COVID-19

Michael J. Slattery

The recently enacted Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) provides $2.2 trillion to stabilize the American economy as the country deals with the novel coronavirus COVID-19. In addition to directly providing many American families with cash stimulus payments, the CARES Act provides federal funds, grants, loan guarantees, and other resources to a wide variety of entities to help them combat the virus and weather the storm of its effects. These include state, local, and tribal governments; hospitals and healthcare workers; law enforcement and first responders; scientific research institutions; small businesses; local schools and universities; and federal contractors.

While contractors should note that the relief window is not open ended and agencies can only provide relief up to September 6, 2020, for federal contractors, the CARES Act provides potential new business opportunities, and throws an immediate lifeline to qualifying firms whose workforce has been displaced by COVID-19 shutdowns.

Continue reading “CARES Act § 3610: An Immediate Lifeline for Qualifying Federal Contactors Displaced by COVID-19”