Senator Claire McCaskill (D-Mo.), chair of the Senate Contracting Oversight Subcommittee, is pressing forward in her efforts to investigate the effectiveness of the Alaska Native Corporation (ANC) program. McCaskill has expressed on numerous occasions her concerns over the unique government contracting preferences for ANCs and will soon introduce legislation to treat ANCs equal to other small, disadvantaged businesses seeking government contracts.  Senators in Alaska are expected to strongly oppose this legislation.

If enacted, her legislation would:

• Eliminate the ability of ANCs to receive sole-source contracts exceeding the caps applicable for other 8(a) participants of $3.5 million for services or $5.5 million for goods;
• Eliminate the automatic designation of ANCs as socially disadvantaged business enterprises, requiring ANCs to demonstrate their social disadvantage by providing evidence of "racial or ethnic prejudice or cultural bias within American society because of their identities as members of groups";
• Eliminate the automatic designation of ANCs as economically disadvantaged, requiring any ANC seeking to participate in the 8(a) program to demonstrate that corporation's economic disadvantage upon entering the program;
• Require ANCs to count all affiliates and subsidiaries in size determinations for 8(a) eligibility, which shall be limited to no longer than nine years, as is required for other 8(a) participants;
• Require ANCs who choose to participate in the 8(a) program to own a majority interest in only one 8(a) subsidiary at any one time;
• Require ANCs who choose to participate in the 8(a) program to be managed by individuals who qualify as socially and economically disadvantaged under the program, as other 8(a) participants must do; and
• Prohibit ANCs who chose to participate in the 8(a) program from operating as pass-throughs to non-Native companies that do not qualify under the 8(a) program.

Following an investigative series published by the Washington Post in October, Senator McCaskill also called on the Small Business Administration's inspector general, the agency's independent auditor, to investigate the claims made in the articles and asked that the inspector general report back to Congress and if necessary, refer its findings to the Department of Justice.

AGC is currently conducting a review of this legislation and its potential impact on government contracting.

To view of copy of Senator McCaskill's letter to the SBA IG, click here.  To view a summary of Senator McCaskill's proposed legislation, click here.

On September 27, President Obama signed the Small Business Jobs & Credit Act of 2010, enacting numerous tax breaks for small businesses and several significant contracting reform provisions that will have a wide-reaching impact on federal contractors.

First and foremost, the legislation puts an end to the uncertainty over parity in the small business program by re-establishing equality among each of the small business subcategories that competes for government contracts. The legislation now states that a contracting officer "may" - instead of "shall" - award contracts based on limited competition to HUBZone small businesses as a first option. Numerous Government Accountability Office and the U.S. Court of Federal Claims decisions in recent years determined that using "shall" unambiguously established a preference for HUBZone firms. AGC argued that in order to preserve the concept of free and open competition, even within the small business program, there must be parity within the program.

There are other provisions in the legislation designed to improve the contracting process, including:

• Directions for SBA to establish a mentor-protégé program to assist small businesses owned by women, service-disabled veterans and those operating in HUBZones. The initiative would be modeled after the 8(a) mentor-protégé program.
• Requiring OMB's Office of Federal Procurement Policy to establish a government-wide policy for contract bundling — a process in which several small contracts are consolidated and awarded to one firm, often out of the reach of small businesses. Prior to bundling a contract, procurement officials would be required to conduct market research and to have a senior acquisition official sign off on the decision. The rationale for bundling then would be publicly disclosed.
• Requiring small businesses to recertify their size status annually. The law also establishes a government-wide policy for prosecuting companies that fraudulently proclaim themselves to be a small business.

Finally, there are two provisions that could make substantial changes to the prime-subcontractor relationship. One provision requires a prime to "make a good faith effort to acquire articles, equipment, supplies, services, or materials, or obtain the performance of construction work from the small business concerns used in preparing and submitting to the contracting agency the bid or proposal, in the same amount and quality used in preparing and submitting the bid or proposal," and "provide to the contracting officer a written explanation if the offeror or bidder fails to acquire articles, equipment, supplies, services, or materials or obtain the performance of construction work as described in clause." A second provision governing payment to subcontractors could put prime contractors at undue risk for a poor performance evaluation if there is a dispute over timing or amount of payment to a subcontractor. AGC is greatly concerned that these provisions could lead to a form of bid listing and is pushing Congress to explain in more detail their intent of this provision.

AGC also will be deeply involved in the regulatory process as the rules are promulgated to implement this legislation.

Two new rules came out of the Office of Management that affect contractors who perform work on projects that are federally-assisted (i.e. projects funded in whole or in part through grants, loans, or financial assistance from the federal government such as the EPA's State Revolving Loan Fund, or the DOT's Highway Trust Fund). This is yet another example of direct-federal contracts rules being applied to federally-assisted work performed by private contractors, a policy shift AGC strongly opposes.

Under the first new rule, recipients of these grants, loans, or financial assistance (such as State and local governments) must now report every first-tier subaward (such as a prime contract) over $25,000 to usaspending.gov. As part of this reporting, subaward recipients (i.e. contractors) who meet certain triggers will have to report the total compensation of their top five executives. These triggers are:

• The contractor must have received 80 percent or more of its annual gross revenue in the preceding fiscal year from federal money (grants, loans, financial assistance, or direct-federal contracts)
• The contractor must have received $25,000,000 or more in annual gross revenues in the preceding fiscal year from federal money (grants, loans, financial assistance, or direct-federal contracts)
• The contractor does not already have to report compensation information through period reports filed under the Securities Exchange Act or the Internal Revenue Code

All three conditions must be met to trigger the total compensation reporting requirement. If your company does trigger the requirement, it will have to report to the state or local entity recipient the total compensation of its top five officers, managing partners, or any other employees in management positions.

A second rule requires contractors to obtain a Data Universal Numbering System (DUNS) number. This nine-digit number can be obtained from Dun & Bradstreet, Inc. at no cost either by telephone (866-705-5711) or online (by clicking here). While earlier versions of this guidance would have required a contractor to also maintain a current registration in the Central Contractor Registration (CCR) database, OMB has decided not to enact that requirement at this time. If a contractor fails to provide a valid DUNS number, the contractor could be determined to be not qualified to receive a contract award.

Read the rule requiring reporting of executive compensation here.

Read the rule requiring use of a DUNS Number here.

Once again, the U.S. Army Corps of Engineers (USACE) initially required that a contractor submit an executed project labor agreement (PLA), this time on an Army Reserve project in Los Alamitos, California.  Over the past week, AGC members and staff made inquiries to the Louisville District Command in charge of the project, demanding justification for including a PLA mandate in a solicitation. Like previous efforts, the inquiries questioned how it determined that the conditions listed in President Obama's executive order on PLAs were present. On September 1, USACE informed potential bidders that the requirement had been removed. 

AGC pointed out that the executive order leaves the agency free to refrain from requiring a PLA on the Patrick Air Force Base project and that it permits the agency to require a PLA only if the USACE has determined that all of the following conditions exist:

1.    The project will cost the federal government $25 million or more;
2.    Use of a PLA on the project will advance the federal government's interest in achieving economy and efficiency in federal procurement;
3.    Use of a PLA on the project will advance the federal government's interest in producing labor-management stability;
4.    Use of a PLA on the project will advance the federal government's interest in ensuring compliance with laws and regulations governing safety and health, equal employment opportunity, labor and employment standards, and other matters; and
5.    Use of a PLA will be consistent with law.

This is the latest of AGC's continuing efforts to educate government agencies about PLA issues and implications.  While AGC neither supports nor opposes PLAs in general, AGC strongly opposes government mandates for PLAs on publicly funded construction projects.  AGC is committed to free and open competition in all public construction markets and believes that publicly funded contracts should be awarded without regard to the lawful labor relations policies and practices of the government contractor.

Solicitations requiring bidders on certain U.S. Army Corps of Engineers (USACE) construction projects to submit an executed project labor agreement (PLA) prompted AGC to write and call agency officials expressing strong concern.  On August 18, the agency called AGC to announce that it was withdrawing the PLA requirement and to thank AGC for educating them on the issue.

On August 12, AGC sent a letter to the USACE's Mobile District demanding information about the agency's justification for including a PLA mandate in a solicitation for the construction of an Air Force Technical Applications Center at Patrick Air Force Base in Florida. The letter questioned how it determined that the conditions listed in President Obama's executive order on PLAs were present. The requirement, along with similar mandates by other contracting agencies and information about pressure from higher in the Administration, also prompted AGC to send a letter calling on President Obama to protect contracting officers from such political pressure, and to send an "unmistakable and public" message that political appointees should not cross the line between politics and procurement.

Read more here.

AGC has compiled a new resource for all things Buy American on its website. The new page describes the differences between "Buy American," "Buy America," and the Recovery Act Buy American provisions.

The page also catalogues AGC's standing policy of opposition to expansion of the Buy American Act, a description of the Recovery Act rules and regulations governing the Recovery Act Buy American provisions (both for direct-federal and federal-aid work), AGC's analysis of several key provisions of the rules and regulations, and a catalogue of waivers guidance from agencies that have construction portfolios. This valuable new comprehensive resource is located at www.agc.org/buyamerican and will be updated on an ongoing basis as new information is released from the agencies.

AGC submitted comments this week on an advance notice of proposed rulemaking (ANPR) issued May 13, titled Enhancing Contract Transparency. The rule presupposes that, given the direction the administration is moving with the president's Freedom of Information Act (FOIA) memo, Transparency and Open Government memo, andOpen Government Initiative, as well as the Attorney General's new FOIA Guidelines and the Office of Science and Technology Policy's Open Government Plan, a requirement is likely forthcoming to post the text of contracts, task orders, and delivery orders online.

In order to best be able to execute this future requirement, the rule asks for public comment concerning how best to implement a system of posting these documents online. AGC was pleased that the ANPR was concerned with facilitating the posting without violating statutory and regulatory prohibitions against disclosing protected information (belonging to either contractors or the government), but had serious reservations with the ANPR's conclusion that it may not be practical to apply full FOIA procedures in every case.

AGC requested in its comments that FOIA procedures for protection of information be applied as the minimum standard of protection for disclosure of any text of the documents. AGC also provided a non-exhaustive list of information that the construction contracting community expected to be protected (and the accompanying regulatory citations that guaranteed their protection). AGC will continue to monitor the progression of this rule and fight to protect against the disclosure of sensitive and important contractor information.

Three of the five rules from the Federal Acquisition Regulation Councils that govern the American Recovery and Reinvestment Act were released this week. Final versions of the rules governing GAO/IG access to contractors and their employees, whistleblower protections, and publicizing contract actions now permanently govern Recovery Act contracts.

AGC submitted comments on the GAO/IG Access rule. AGC requested that an IG provide reasonable advance notice to contractors and their employees before a review of contractor transactions, including when and where the review and interviews will occur; the topics to be covered; the employees affected; and the total amount of time required to conduct the review.

The FAR Councils disagreed, and stated that the purpose of the rule is to put contractors on notice that they may need to make their records and employees available in the event a review is requested. The Councils prefer to leave the exact review procedures that the Comptroller General or his authorized representatives use to execute such procedures and not detail them in the FAR. The two remaining rules, governing the reporting requirements and 'Buy American' regulations, have not yet been released in final form.

More progress on the Buy American front this week as yet another agency recognized the complex impact these Recovery Act rules have on projects. The Indian Health Service (IHS) issued a nationwide di minimis waiver for incidental components of sanitation facilities construction projects funded by ARRA.

As with the di minimis waivers in place from EPA and USDA, the waiver covers components that are incorporated into the project, yet cumulatively comprise no more than a total of 5 percent of the total materials used in a project. For many of these incidental components, the country of origin and the availability of alternatives is not always readily or reasonably identifiable prior to procurement in the normal course of business; for other incidental components, the country of origin may be known but the miscellaneous nature of the products in conjunction with their low cost (both individually and procured in bulk) characterize them as incidental to the facility or project.

The majority of the services sanitation facilities projects are in remote locations. The service argued that a disproportionate cost and delay would be imposed on projects if they did not issue this waiver.  IHS said it would be inconsistent with the public interest to apply the Buy American requirement to incidental components.  AGC last year urged agencies like HIS to issue di minimis waivers to avoid costly delays caused by the stimulus' Buy American provisions.

Also on the Buy American front is a pair of new waivers from the EPA. These waivers are unique in that they are retroactive, applying to materials that were already put in place, rather than requesting a waiver for the purposes of moving forward with construction. Waivers for two cities in Washington State, Richland and Bridgeport, were requested under the public interest section of the waiver authority. Neither waiting for domestic suppliers nor pulling out previously installed goods was deemed in the public interest because of unacceptable delays and cost overruns on these projects. AGC supports the waivers and will continue to monitor progress on this front.

An Advance Notice of Proposed Rulemaking (ANPR) was issued May 13 seeking input on how the government can best implement a policy of posting government contracts online. FAR Case 2009-004, Enhancing Contract Transparency, notes that while no policy mandating the online posting of contracts exists yet, the Councils anticipate that one could be coming soon.

They point to the general tone of several of President Obama's memoranda (including the Freedom of Information Act Memorandum and the Transparency and Open Government Memorandum) and other points of executive branch policy and conclude that given the shift to more open government, a requirement to post government contracts online is coming. The ANPR asks for suggestions for how best to revise the FAR to facilitate such posting without violating statutory and regulatory prohibitions against disclosing protected information that belongs to the government or to contractors.

AGC will closely monitor the development of this ANPR and will soon solicit ideas from contractors on how to proceed.