Testimony of STATEMENT OF THE HONORABLE DANIEL I. GORDON ADMINISTRATOR FOR FEDERAL PROCUREMENT POLICY OFFICE OF MANAGEMENT AND BUDGET BEFORE THE COMMITTEE ON THE BUDGET UNITED STATES SENATE JULY 15, 2010

Our current fiscal challenges underscore the importance of maximizing the effectiveness of every tax dollar we spend. With approximately one of every six of these dollars going to contractors, it is imperative that federal contracts provide the best value for the taxpayer.

In March 2009, the President directed agencies to become more fiscally responsible in their contract actions and to take immediate steps to achieve real and sustainable improvements. He charged agencies with saving $40 billion by Fiscal Year (FY) 2011 and reducing the use of high-risk contracts. The President’s mandate has instilled a new sense of fiscal responsibility in agencies, which has slowed the unsustainable contracting cost growth rate of the past decade, from an average annual growth rate of 12 percent between FYs 2000 and 2008 to just four percent between FYs 2008 and 2009. Read more…

According to Jack Lew is the Director of the Office of Management and Budget.

“Buying less” and “buying smarter” are simple ideas to understand, but history tells us that these basic principles of fiscal responsibility are not as easy to implement as one might think.  Since 1997, and in 18 of the past 20 years, total spending by the federal government on contracts has increased – and at a near break-neck pace of 12 percent per year between 2000 and 2008.  During this eight-year period, annual procurement budgets grew from $200 billion a year to more than $500 billion a year.

This Administration is doing what has been so elusive in the past:  cutting wasteful spending on contracts and getting better value for the taxpayer dollar.  For the first time in 13 years, we have reduced spending on contracting and agencies have stopped the costly upward spiral in contract growth.  In FY 2010, agencies spent nearly $80 billion less than they would have spent had contract spending continued to grow at the same rate it had under the prior Administration.

A new sense of fiscal responsibility is taking hold.  Agencies are thinking more carefully about what they buy and how they buy it. They are ending contracts they cannot afford or no longer need.  They are taking greater advantage of buying strategies that are more appropriate for the world’s largest purchaser – pooling their buying power to negotiate better prices and deeper discounts.  And, after years of inattention, they are rebuilding the capacity and capability of the acquisition workforce to achieve and sustain better acquisition outcomes and improved government performance.

In his State of the Union address, President Obama said that, “we can’t win the future with the government of the past.” Instead, he said we must reform the way we do business in Washington and give the American people a government that’s not only more affordable, but also more effective and more efficient. This principle has been the cornerstone of our work on contracting and across the Accountable Government Initiative. From reforming and cutting costly IT systems, implementing unprecedented transparency and reporting efforts, buying in bulk, establishing a government-wide Do Not Pay list, or moving toward electronic government payments, we’re making real progress in changing the way government does business.

Here is more information about how we are saving money, cutting waste, and getting better results from our acquisitions. We are turning the tide, but there is still more to be done. OMB’s Office of Federal Procurement Policy will continue to work closely with agencies to build on their accomplishments to date and explore new opportunities for saving so that every taxpayer dollar is spent wisely.

Watson & Associates overturns SBA Size Determination / Affiliation Decisions

Call our size protest lawyers for immediate help – 1-866-601-5518. 

Size Appeal of Argus and Black, Inc, SBA No. SIZ-5204 (2011)(overturns Area Office’s size determination and finding of affiliation through economic dependence because it was based only on one, small contract and did not satisfy the conditions for such a finding).

In this case, the SBA made clear error of fact or law in concluding that the protested concern is affiliated with a large concern though economic dependence. The Area Office concluded that this convoluted chain of address demonstrates that there is no clear line of fracture between Appellant, TSI and TSII. The Area Office emphasized that the address given on Appellant’s website is the same as TSI’s registered office address.

Watson & Associates argued the common elements of OHA’s precedents on economic dependence are the length of the relationship between the firms, the substantial amount of revenues generated as a result of the relationship between the firms, and that there are usually multiple relationships between the firms.

Watson also  argued the contract here lasted for only four months, generated less than $11,000 in revenue, and that this contract is the only contract between the firms. In the size determination appeal, the law firm argued that its relationship with TSI does not reach the level of economic dependence required for a finding of affiliation. The firm’s lawyers further asserts that it has recently developed other sources of revenue.

On appeal, Watson further argued that a finding against it would have a “chilling effect” on start-up firms, who would be required to avoid contracting with large firms in the start-up phase of operations.

The court ruled that “Further, it is simply not true that one small contract, regardless of what proportion it represents of Appellant’s revenues at the time, actually renders one firm dependent upon the other. In order to survive and prosper, Appellant must obtain a number of other contracts. If, over time, the great majority of these are with TSI or TSII, then a finding of economic dependence might be warranted. But here, where the contract by itself is not enough to sustain business operations, a finding of economic dependence based upon it is not warranted.

 The court held that in a case such as this, where the challenged firm has only recently begun operations either initially or after a period of dormancy, and is dependent upon its alleged affiliate for only one small contract of short duration, which by itself could sustain a business, that a finding of economic dependence is not warranted. Accordingly, the court found that the Area Office erred as a matter of law in finding Appellant economically dependent upon, and thus affiliated with, TSI, based upon its contract with TSI.

At the appeal, the court found that Watson & Associates, on behalf of Appellant has met its burden of proving that the Area Office committed clear errors of law based upon the record before it. Accordingly, this appeal is GRANTED, and the Size Determination is REVERSED. Appellant is an eligible small business for the applicable NAICS code 611699.

See also

Size Appeal of Accent Service Co., SBA No. SIZ-5237 (May 26, 2011) (Master Subcontracting Agreement did not establish joint venture and did not establish that one firm was ostensible subcontractor of the other; the fact that contested firm often awarded subcontracts to another firm did not establish economic dependence, if anything it made the other firm dependent on contested firm).

For immediate representation or defense in an SBA size determination protest, contact Watson & Associates, LLC lawyers online or call toll free 1-866-601-5518.

Service Disabled Veteran Government Contracts

 Avoid Common Pitfalls & Save Your SDVOSB Contract Awards.

Over the years, federal contracting agencies have struggled to meet small business goals for Service Disabled Veteran-Owned Small Businesses (SDVOSB) and Veteran-Owned. Government contract law had since changed to allow set-asides and very rare sole sourcing availability. President Obama has now launched a new incentive to strengthen sole sourcing power for SDVOSB across the country.

Executive Branch Blesses Sole Sourcing To SDVOSB Companies

The President finalized acquisition rules through Executive Order to clarify that a contracting officer can award a sole-source contract to a service-disabled, veteran-owned small business (SDVOSB), even if there is more than one company that can perform the work.

The contracting officer can make the sole source award to that SDVOSB, as long as the officer expects to receive no bids from another SDVOSB, according to the amendment to the Federal Acquisition Regulation. The new rule was published in today’s Federal Register.

Gain Control in Service Disabled Contracts Awarded to Your Firm

If you are a federal contractor seeking to take advantage of your service disabled status, you must also be aware of the land mines that await you. On of the first lessons is that when involved in teaming agreements with large businesses, you must establish total control over any federal contract that you recieve.  You want to seriously consider hiring a government contract attorney that is well-versed in small business programs.

The Small Business Administration is flooded with Size Protests concerning prime contractors that fall prey to the Ostensible Contractor Rule. As a result, many SDVOSB companies end up losing their contracts.

Government contracts for SDVOSB will more than likely soar given this new initiative. If you are a SDVOSB, you should seeking competent advice and not fall prey to ethical violations and FAR violations. Contact the attorneys at Theodore Watson & Associates, LLC for more information or call 1-866.601-5518.