Weekly Update for Government Contractors and Commercial Businesses – March 1, 2023

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BUSINESS & TRANSACTIONS

PilieroMazza Client Xcelerate Solutions Completes Investment Transaction, 02.23.23, Jon Williams, Cy Alba, and Katie Burrows
PilieroMazza—a business law firm serving the legal needs of government contractors and commercial businesses—congratulates our client Xcelerate Solutions for successfully completing an investment transaction to drive continued growth for the company. “We were proud to assist Xcelerate Solutions through this significant transaction,” said Jon Williams, a partner from PilieroMazza’s Government Contracts Group who served on the team with fellow partners Cy Alba and Katie Burrows. Read more here.

GOVERNMENT CONTRACTS

Veterans Affairs Imposes Increased Cybersecurity Rules on Government Contractors, 02.22.23, Kevin Barnett and Daniel Figuenick
The U.S. Department of Veterans Affairs (VA) released a final rule, effective February 24, 2023, amending the VA’s Acquisition Regulation (VAAR) to impose new cybersecurity procedures and processes to protect sensitive VA data and health information. Although much of the recent cybersecurity buzz has centered around the Department of Defense’s (DOD) Cybersecurity Maturity Model Certification (CMMC) framework, the VA did not want to be left out. These VAAR additions will force affected contractors at all tiers to implement internal controls to properly handle sensitive information for VA systems and impose unreasonably short reporting requirements for breaches. Both prime contractors and subcontractors handling sensitive information on VA contracts need to observe the following new duties and obligations to avoid costly penalties. Read more here.

Recovering Bid Preparation and Proposal Costs for Government Contractors: ARxIUM Provides Helpful Guidance, 02.21.23, Katie Burrows and Eric Valle
Filing a bid protest and ultimately recovering bid preparation and proposal costs after winning may not be a primary concern for contractors as they pursue a new contract. However, a recent Court of Federal Claims decision provides useful, but often overlooked, guidance for government contractors hoping to recover costs in such situations. This blog summarizes the Court’s decision in ARxIUM, Inc. v. United States and suggests best practices for contractors to maximize cost recovery and improve bid preparation processes in the future. Read more here.

DOD Aims to Boost Small Business Involvement in Nation’s Defense
Farooq A. Mitha, Director of the Defense Department’s (DOD) Office of Small Business Programs, recently spoke at a Professional Services Council event. He told representatives of small businesses about his office’s most recent efforts to make it easier for the nation’s small business community to become more involved in providing goods, services, technology, and research in support of the nation’s defense, including DOD’s newly released Small Business Strategy. Read more here.

GSA Contract Vehicle Looks to Solve the ‘Valley of Death’ Problem
The General Services Administration is continuing its market research for a potential new multi-award indefinite delivery / indefinite quantity contract vehicle centered on a research and development funding program. Tentatively dubbed the Research, Innovation & Outcomes, or RIO, program, the proposed contract vehicle would offer agencies technology funded from Small Business Innovation Research Phase III grants. The proposed contract vehicle means to achieve twin goals of making innovative tools available for governmentwide acquisition while also helping technology funded by federal research bridge the gap between prototype and production—what’s known in procurement circles as the “valley of death.” Read more here.

SBA Semiannual Regulatory Agenda
The Small Business Administration (SBA) published its semiannual Regulatory Agenda, which serves as a summary of its current and projected rulemakings and completed actions. The summary information is intended to enable the public to be more aware of, and effectively participate in, SBA’s regulatory activities. Accordingly, SBA invites the public to submit comments on any aspect of its agenda. Read more here.

DOD Semiannual Regulatory Agenda
The Department of Defense (DOD) published its semiannual regulatory agenda, which announces the regulatory actions DOD plans to take in the next 12 months and those regulatory actions completed since the publication of the spring 2022 Unified Agenda. DOD’s agenda includes regulatory actions that support the Administration’s regulatory priorities, the Secretary of Defense’s top priorities to defend the Nation, take care of our people, and succeed through teamwork, as well as those priorities of the National Defense Strategy. These actions include efforts to promote the country’s economic resilience, including addressing COVID-related and other healthcare issues; support underserved communities and improve small business opportunities; promote competition in the American economy; promote diversity, equity, inclusion, and accessibility in the federal workforce; support national security efforts, especially safeguarding federal government information and information technology systems; support the climate change emergency; and address military family matters. Members of the public may submit comments on individual proposed and interim final rulemakings. Read more here.

Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council Semiannual Regulatory Agenda
The Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council published their semiannual regulatory agenda, which provides summary descriptions of regulations they have in development. The agenda is being published to allow interested persons an opportunity to participate in the rulemaking process. The Regulatory Secretariat Division has attempted to list all regulations pending at the time of publication, except for minor and routine or repetitive actions; however, unanticipated requirements may result in the issuance of regulations that are not included in this agenda. Read more here.

Technology Modernization Fund Announces Targeted Investments to Improve Cybersecurity
The Technology Modernization Fund announced new investments that will build and improve cybersecurity and digital services at the Social Security Administration, the Department of the Treasury, and the U.S. Agency for Global Media. Read more here.

Education Acquisition Regulation
The Department of Education published a proposed rule that would modify the Department of Education Acquisition Regulation to revise aspects of those regulations that are out-of-date or redundant with other Department of Education policies and procedures and to accurately implement the current Federal Acquisition Regulation and Department of Education policies. Comments are due April 3, 2023. Read more here.

Small Business Size Standards: Manufacturing and Industries with Employee-Based Size Standards in Other Sectors Except Wholesale Trade and Retail Trade
The Small Business Administration (SBA) published a final rule that increases its employee-based small business size definitions (commonly referred to as “size standards”) for North American Industry Classification System (NAICS) sectors related to:

• Mining, Quarrying, and Oil and Gas Extraction (Sector 21);
• Utilities (Sector 22);
• Manufacturing (Sector 31-33);
• Transportation and Warehousing (Sector 48-49);
• Information (Section 51);
• Finance and Insurance (Sector 52);
• Professional, Scientific and Technical Services (Sector 54); and
• Administrative and Support, Waste Management and Remediation Services (Sector 56).

Specifically, in terms of industries defined under the NAICS 2022 revision, SBA is increasing 144 and retaining 268 employee-based size standards in those sectors. SBA is also retaining the current 500-employee size standard for Federal procurement of supplies under the nonmanufacturer rule. This rule is effective March 17, 2023. Read more here.

HSAR: United States Coast Guard Contract Termination Policy
The Department of Homeland Security published a final rule that amends the Homeland Security Acquisition Regulation to implement a new subpart and new contract clause to establish contract termination policies for the United States Coast Guard (USCG) and amend a clause to address the applicability of USCG’s contract termination policy to commercial items. The rule is effective March 17, 2023. Read more here.

Federal Acquisition Circular 2023-02
The Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council published several final Federal Acquisition Regulation (FAR) rules:

• Accelerated Payments Applicable to Contracts with Certain Small Business Concerns
  This final rule provides for accelerated payments to contractors that are small businesses and to small business subcontractors by accelerating payments to their prime contractors. It may have a positive impact on small entities, but it is not expected to have a significant economic impact on a substantial number of small entities. The rule is effective March 16, 2023. Read more here.
• Small Business Program Amendments
  This final rule amends the FAR to align with the Small Business Administration’s (SBA) regulations related to several topic areas. It clarifies that SBA determines size status as of the date of initial offer for a multiple-award contract, whether or not the offer includes price, or the price is evaluated. Additionally, in accordance with FAR 19.301-2(b)(2), the “ostensible subcontractor rule” (a small business must not be unduly reliant on a nonsimilarly situated small business subcontractor or have such a subcontractor perform the primary and vital requirements of the contract) is implemented in this rule as a new ground for socioeconomic status protest. The rule also clarifies that contracting officers will not be able to exercise options past the fifth year of long-term 8(a) contracts if the 8(a) contractor no longer qualifies for the 8(a) program. Lastly, the rule clarifies the size standard for the information technology value added resellers under North American Industry Classification System code 541519 is 150 employees, not 500 employees. The rule is effective March 16, 2023. Read more here.
• Technical Amendments
  Administrative change is made at FAR 2.101. This rule is effective February 14, 2023. Read more here.

A summary of the final rules is available here. A related small entity compliance guide is available here.

NASA Federal Acquisition Regulation Supplement: NASA Mentor-Protégé Program
The National Aeronautics and Space Administration (NASA) published a proposed rule that would amend the NASA Federal Acquisition Regulation Supplement (NFS) to reflect updates to NASA’s Mentor Protégé Program (MPP) including: the requirement of Small Business Specialists’ concurrence on the signed letter of endorsement; requirements associated with credit received towards subcontracting goals; the change of the MPP reporting requirement from semi-annually to annually; identified the NASA Mentor Protégé Program Office; and clerical, semantic improvements. NASA is also proposing to amend the NFS language to reflect the annual negotiation of its small business percentage goals. Lastly, NASA is proposing to amend the NFS to emphasize collaboration amongst representatives from the Office of Small Business Programs, Office of Procurement, and Program Offices to reduce barriers to entry and to opportunities for all small business concerns and Historically Black Colleges and Universities or Minority Institutions. Comments are due April 17, 2023. Read more here.

DFARS: Small Business Innovation Research Program Data Rights
The Department of Defense (DOD) published a proposed rule on December 19, 2022, seeking public input on a proposed revision to the Defense Federal Acquisition Regulation Supplement to implement the intellectual property (e.g., data rights) portions of the Small Business Administration’s Small Business Innovation Research Program and Small Business Technology Transfer Program Policy Directive. The deadline for submitting comments is being extended to provide additional time for interested parties to provide inputs. Comments are now due March 20, 2023. Read more here.

OIG Finds Oversight Issues With GSA’s Performance-Based Contracts
The General Services Administration (GSA) is failing to properly manage performance-based service contracts while struggling to resolve longstanding contract administration challenges, according to a recent inspector general’s audit. The report claims GSA contracting personnel are not adequately fulfilling performance-based contract oversight, which could result in underperforming contractors and wasted government funds. Read more here.

When It Comes to Cybersecurity, the Biden Administration Is Getting Much More Aggressive
President Biden is about to approve a policy that goes much farther than any previous effort to protect private companies from malicious hackers—and to retaliate against those hackers with our own cyberattacks. The 35-page document, titled “National Cybersecurity Strategy,” differs from the dozen or so similar papers signed by presidents over the past quarter-century in two significant ways: First, it imposes mandatory regulations on a wide swath of American industries. Second, it authorizes U.S. defense, intelligence, and law enforcement agencies to go on the offensive, hacking into the computer networks of criminals and foreign governments, in retaliation to—or preempting—their attacks on American networks. The strategy also looks to shift the responsibility of system security from small to large businesses. Read more here.

GSA Continues Support for Service-Disabled Veteran-Owned Small Businesses through Key Governmentwide Acquisition Contract (VETS 2)
The General Services Administration announced that the five-year option for the VETS 2 Governmentwide Acquisition Contract has been exercised for 45 contract holders. This will allow federal agencies to continue acquiring state of the art information technology services while supporting service-disabled veteran-owned small businesses. Read more here.

GSA Seeks Commercial Procurement Data Solution
The General Services Administration has released a request for information for the development of a Federal Procurement Data System. The requested system will be responsible for data monitoring, reporting, and validation. Responses to the request must be submitted by March 16 at 5:00 pm EST. Read more here.

DHS’ Courtney: FirstSource III Will Include On-Ramp Opportunities
The Department of Homeland Security expects to make its first awards for the FirstSource III contract by the end of 2023. The $10 billion small business IT products and software contract was issued in April 2021, and while no additional awardees will be added, the program is looking at options to provide an on-ramp down the road for new vendors to enter the program. Read more here.

Agencies to Increase Diversity in Federal Contracting through New Entrants and Small Business Preferences
The Office of Management and Budget (OMB) released a memo on the need for action from agencies to develop a diverse and resilient federal marketplace. Citing the President’s Management Agenda goal of allocating 15 percent of Federal dollars to small, disadvantaged businesses, the memo provides a common definition of the terms “new entrant” and “recent entrant” into the federal marketplace. A new entrant is an entity of any size that has received a prime Federal contract award over the micro-purchase threshold for the first time or after having not received an award in the previous five fiscal years. A recent entrant is an entity of any size that has received a prime Federal contract award over the micro-purchase threshold during the 3-year period following the fiscal year in which it is a first-time entrant. According to the memo, “while agencies should seek to increase overall new entrant and recent entrant participation, they are expected to focus their attention on small businesses and the four socio-economic small business categories recognized in the Small Business Act: small disadvantaged businesses, women-owned small businesses, service-disabled veteran-owned small businesses, and small businesses in HUBZones.” Read more here.

Upcoming Government Contracts Presentations

EVENT: Federal Acquisition Regulation (FAR) and Government Contracting Overview, March 3, Cy Alba. Read more here.

WEBINAR: Government Contract Claims: Top 10 Things to Know About the Contract Disputes Act, March 7, Lauren Brier and Dozier Gardner. Read more here.

WEBINAR: Past Performance: How to Use Yours, Benefit from Others’, and Defend It from Attacks, March 7, James Rhodes. Read more here.

WEBINAR: Understanding and Avoiding Affiliation for Small Business Government Contractors, March 21, Peter Ford. Read more here.

LABOR & EMPLOYMENT

Proposed Ban on Non-Compete Agreements May Affect Government Contractors’ Ability to Win Recompetes, 02.15.23, Sarah Nash and Kirby Rousseau
In January 2023, the Federal Trade Commission (FTC) issued a proposed rule to ban the use of non-compete clauses in employment agreements. The rule follows President Biden’s July 9, 2021, executive order encouraging the FTC to engage in rulemaking restricting the “unfair use of non-compete clauses and other clauses or agreements that may unfairly limit worker mobility.” The FTC invites the public to comment by March 20, 2023. In this blog, we discuss important considerations related to the FTC’s proposed nationwide ban on non-compete agreements and potential implications for government contractors and their ability to retain staff and safeguard confidential information connected to federal contracts. Read more here.

DOL Semiannual Regulatory Agenda
The Department of Labor’s published a semiannual regulatory agenda, which includes only those rules that are likely to have a significant economic impact on a substantial number of small entities. Read more here.

DOL Issues Final Rules on Changes to 2023 Form 5500, Form 5500-SF Employee Benefit Plan Reports
The Department of Labor, Internal Revenue Service, and Pension Benefit Guaranty Corporation released Federal Register notices that announce changes to the 2023 Form 5500 Annual Return / Report of Employee Benefit Plan and Form 5500-SF Short Form. These changes are estimated to reduce overall filing costs for employee benefit plans by $95 million annually. Read more here.

Upcoming Labor & Employment Presentations

WEBINAR: OFCCP and EEO for Federal Contractors, March 9, Sara Strosser. Read more here.

WEBINAR: What’s New in OFCCP Compliance? Important 2023 Updates for Government Contractors, March 14, Sara Strosser. Read more here.

LITIGATION & DISPUTE RESOLUTION

Spacelabs Healthcare, LLC Agrees to Pay $2.5 Million to Settle Allegations It Overcharged Federal Agencies for Patient Monitoring Equipment
Spacelabs Healthcare, LLC has agreed to pay $2.5 million to resolve False Claims Act allegations that it overcharged the United States for patient monitoring equipment sold to the Department of Veterans Affairs and the Department of Defense. Read more here.

Upcoming Litigation & Dispute Resolution Presentations

WEBINAR: 2022 FCA Year in Review and Emerging Trends for 2023, March 8, Matt Feinberg and Annie Hudgins. Read more here.