Friday Flash, 6.29.12

1. Comment of the Week

On June 22, 2012, the Office of Management and Budget issued a Memorandum for the Heads of Executive Departments and Agencies entitled “Reducing Reporting and Paperwork Burdens.”  The memorandum states that

“Eliminating unjustified regulatory requirements, including unjustified reporting and paperwork burdens is a high priority of this Administration.”

It then directs agencies to take further steps to achieve that goal.  In addition, the memorandum provides nine examples of meaningful steps that agencies can take to reduce paperwork and reporting burdens.

The Coalition strongly supports this effort to reduce paperwork burdens on the American people and the private sector.  Unnecessary, burdensome paperwork reporting requirements increase costs, reduce competitiveness for American business, and, in particular, hamstring small businesses.   Fundamentally, unnecessary, burdensome paperwork collection and reporting requirements cost American jobs.

Consistent with OMB’s memorandum, there are a clear opportunities to address and reduce the costs associated with current federal procurement reporting requirements.  Given the current budgetary challenges, procurement reporting requirements must be strategic, efficient, and effective.  The Coalition suggests that the government consider taking the following meaningful steps to address burdensome procurement reporting requirements:

• Conduct a comprehensive inventory and review of current statutory, regulatory, and program-specific procurement reporting requirements with the goal of identifying redundant, duplicative requirements, and/or contradictory reporting requirements
• As part of that comprehensive inventory and review, also identify those data collection requirements that add no value to the government, yet increase contractor costs
• During the pendency of the inventory and review, freeze the issuance or enactment of any new procurement data reporting requirements
• Conduct an internal business process review to identify the data elements  necessary to support sound acquisition and program planning by the government
• Survey, identify, and, to the maximum extent practicable, adopt commercial best practices for data collection and use, and standardize procurement data reporting across the procurement system to the maximum extent practicable
• Require a review and approval by the agency head for new or supplemental data reporting requirements to be included in a proposed contract or contract vehicle
• Re-establish the long-standing paperwork review requirement that limits the collection and reporting of data by contractors when the data is already in the government’s possession

Collectively, these steps would provide a framework to apply sound management discipline to the collection of procurement-related data.  Further, they would provide an opportunity to develop and to implement more efficient and cost-effective approaches to the collection, reporting, and maintenance of data by the government and contractors than exist today.  An efficient procurement data reporting system reduces operating costs for both government and contractors which, in the long run, benefits the taxpayer and the economy overall, but especially when budgets are tight.

On another data submission matter, the Coalition is seeking feedback regarding the current process for software licensing via the EULA.  We are interested hearing in your experiences with GSA and EULAs.  In essence, this is a status update request for our members.  Please follow up with Roy Dicharry at rdicharry@thecgp.org

2. CGP Developing MAS Pricing Recommendations

The MAS Pricing Policy Working Group met this week.  The Group includes 15 Coalition members that have expressed interest in improving current MAS policies and practices.  The Working Group will develop a White Paper that examines existing obstacles to successful negotiations.  The White Paper will develop recommendations aimed at eliminating obstacles and including commercial best practices.  We anticipate that consideration of the Price Reduction clause will be an important part of this effort.  If you would like additional information about this project feel free to contact Carolyn Alston, calston@thecgp.org.

3. Off the Shelf Interview with OASIS Jim Ghiloni

This week, Roger Waldron hosted Jim Ghiloni, OASIS program manager, on Off the Shelf to discuss the development and direction of the program for complex professional services. According to Ghiloni, OASIS will give contracting officers more flexibility at the task-order level to procure professional services that span multiple professional service disciplines and involve significant IT components.  The goal is to streamline the acquisition process with a broad, easy to use contract, similar to FABS, MOBIS and LOGWORLD, as agencies continue to increase use of complex professional services. To date, the OASIS team has decided to offer management and consulting, logistics, engineering and financial services under the new contract vehicle. However, other aspects of the program, such as the definition of professional services, the contract’s scope, and the number of awards, have yet to be determined. GSA estimates that these details will be released by the end of this summer in the draft RFP.  Currently, GSA is soliciting feedback from industry about the development of the contract. The OASIS team has received 10 white papers and is continuing to receive input through the OASIS Industry Community on GSA Interact. According to Ghiloni, GSA hopes to release the final RFP by the end of the calendar year. Listen to the full interview here.

4. Federal Real Estate Bill Passes Senate Committee

The Senate Committee on Homeland Security and Governmental Affairs passed the Federal Real Property Asset Management Reform Act Wednesday, during a mark-up. The purpose of the bill is to streamline the government’s ability to dispose of underused or unused property. The bill would establish an expedited process to sell government real estate and a Federal Real Property Council that would create an asset management plan for agencies.  The Council would consist of senior property officials, the deputy director and controller of OMB, and any other personnel the council chair deems necessary. During Wednesday’s markup, a provision in the substitute amendment was added to allocate 2 percent of all federal property sales to the Department of Housing and Urban Development for grants to assist the homeless.  Sen. Susan Collins (R-Maine) stated in the hearing that the bill would save taxpayers $5 billion over 10 years.

5. Legal Corner

Proposed Rule Would Create SBIR and STTR Opportunities For Investment Companies

Guest Bloggers: Richard Oliver and Agustin Orozco, McKenna Long & Aldridge LLP

The Small Business Administration (“SBA”) recently issued a proposed rule which, for the first time, would allow venture capital operating companies, hedge funds and private equity firms (“investment companies”) to meaningfully participate in the Small Business Innovation Research (“SBIR”) and Small Business Technology Transfer (“STTR”) programs.  This proposed rule would implement provisions of the National Defense Authorization Act for Fiscal Year 2012.  Specifically, the proposed rule would revise the affiliation rules for participants in the SBIR and STTR programs to permit participation by concerns that are majority-owned by multiple investment companies.  See 77 Fed. Reg. 28520-30, May 15, 2012.

Access to the SBIR and STTR programs would be a significant funding opportunity for small businesses that are largely owned by investment companies.  The SBIR and STTR programs were created to award federal research grants to small businesses.  Specifically, the purpose of the SBIR program is to stimulate technology innovation by strengthening the role of innovative small business concerns in federally-funded research and development.  Federal agencies may award up to $150,000 for a Phase I SBIR contract and up to $1,000,000 for a Phase II contract.  Agencies also will have discretion to exceed the SBIR contract award amounts by up to 50 percent and even to award a second Phase II contract.  Similarly, the STTR program requires certain federal agencies to enter into funding agreements with small business concerns that engage in a collaborative relationship with research institutions.

The proposed rule would allow investment companies to participate in the SBIR and STTR programs, as long as no single investment company owns more than 50 percent of the concern.  The proposed rule would modify the affiliation rules solely for the SBIR and STTR programs.  Currently, such concerns would not be eligible, because the concern would be considered to be affiliated with not only the investment companies, but also the other companies owned by these investment companies.  SBA’s general principles of affiliation state that if two or more persons own, control or have the power to control less than 50 percent of the concern’s voting stock, but the blocks of stock are equal or approximately equal in size, the SBA presumes each person to control the business concern.  By contrast, SBA’s proposed rule provides that where an SBIR or STTR applicant’s voting stock is widely held or where two or more persons (including investment companies) hold large blocks of voting stock but no one person owns more than 50 percent of the stock, the board of directors controls the applicant.  The investment companies, therefore, would not be affiliated with the SBIR or STTR applicant.

The proposed rule would also amend the current affiliation rules with respect to an investment company’s portfolio companies.  Under the proposed rule, an SBIR or STTR applicant would not be affiliated with a portfolio company of an investment company solely on the basis of shared investors.  Additionally, the proposed rule states that if an investment company is determined to be affiliated with an SBIR or STTR applicant, the applicant will not be affiliated with a portfolio company of the investment company, unless: (1) the investment company owns a majority interest in the portfolio company; or (2) the investment company holds a majority of the seats of the board of directors of the portfolio company.

There are several aspects of the proposed rule that may be addressed during the public comment period.  While the proposed regulation references stock ownership by “multiple” investment companies, it does not address the allowable percentage amount of minority ownership.  Thus, two investment companies could each own 49 percent of the concern.  The proposed rule also does not require that the multiple investment companies not be affiliated.  Two “sister” investment companies could each own 49 percent of the stock, with the small business being 98 percent owned by two related investment companies.

In order to participate in the SBIR and STTR programs, these small businesses must qualify as a “domestic business concern.”  The proposed rule would revise the definition of domestic business concern in anticipation of the participation of small businesses owned by multiple investment companies.  The new definition would continue to use the SBA’s definition of “business concern or concern,” however, it would also require the business concern to be created or organized in the United States, or under the law of the United States or of any State.

The proposed rule would amend the time at which SBA makes size and eligibility determinations for SBIR and STTR contracts.  Currently, size and eligibility are determined at the time of award for both Phase I and Phase II awards.  The proposed rule, however, would require the SBIR or STTR applicant to meet the size and eligibility requirements both at the time of submission of the application and at award.

Finally, with respect to certification, the proposed rule would require concerns that are majority-owned by multiple investment companies to register with SBA on or before the date they submit a response to an SBIR solicitation.  In addition, these concerns would be required to indicate in their SBIR proposals that they have completed this registration.

Comments on the proposed rule are due on or before July 16, 2012.

LA:17954701.3

6. OMB to Further Reduce Regulatory Burdens

On June 22, the Office of Management and Budget released new guidance on reducing agencies’ regulatory burden and “[decreasing] paperwork and reporting burdens on the American people, including small businesses.” In a blog post, Cass Sunstein, Administrator of the Office of Information and Regulatory Affairs, wrote that the new guidance comes in response to the President’s Executive Orders 13563 and 13610. Both Executive Orders seek to reduce the paperwork and regulatory burdens by reviewing existing regulatory requirements and prioritizing “initiatives that will produce significant quantifiable monetary savings or significant quantifiable reductions in paperwork burdens.”

This new guidance expects to achieve results through the following steps:

1. Eliminating redundant and unnecessary collections.
2. Using simplified and shorter forms.
3. Exempting or streamlining reporting requirements on small business.
4. Using electronic communication and “fillable fileable” forms.
5. Reducing frequency of information collection.

The guidance states that consistent with the Paperwork Reduction Act and Executive Order 13579, independent agencies are requested, in connection with their own efforts to eliminate unjustified regulatory requirements, to take meaningful steps to reduce paperwork and reporting burdens on the American people.

7. GAO Reviews DoD Late-Payments

On June 26, the Government Accountability Office (GAO) released a report in response to a Senate Armed Services Committee inquiry filed last year. The inquiry asked the GAO to look into DoD’s history of late-payment penalties to determine if the Department had or had not taken full advantage of prompt-payment discounts. This latest report from the GAO sought to-

1. Determine whether DoD’s process for monitoring and reporting on its late-payment penalties and discounts lost accurately reflected the extent of such penalties paid and discounts lost, and
2. Report on any causes DoD identified for incurring late-payment penalties and forgoing prompt-payment discounts.

The GAO found that while the DoD has a system in place to monitor and report on late-payment penalties, the system has “significant flaws and omissions that result in incomplete and inaccurate data.” GAO recommends that DoD established procedures for identifying all DoD systems that process commercial payments, validating completeness and accuracy of late-payment penalty metric data, and monitoring discounts lost. In sum, the GAO recommends the following measures to address the deficiencies in DoD’s monitoring process:

Identify all DoD systems that process commercial payments and assure that the late-payment penalties metric data are compiled from the complete population of commercial payments subject to the Prompt Payment Act,

Validate the accuracy and completeness of the data compiled and reported as DOD’s late-payment penalties metric.

Monitor discounts lost DoD-wide based on periodic risk assessments.

 8. Interim Rule on Veteran-Owned Small Business

On Wednesday, June 27, the Department of Veterans Affairs (VA) posted an interim final rule to the Federal Register concerning Veteran-Owned Small Business Verification Guidelines. The notice implements a portion of the Veterans Benefits, Health Care, and Information Technology Act of 2006.  The bill requires the VA to verify ownership and control of veteran-owned small businesses (VOSB), including service-disabled veteran-owned small businesses (SDVOSBs) so that these firms can participate in VA acquisitions set-aside for SDVOSB/VOSBs. The notice requires a re-verification of SDVOSB/VOSBs status every two years instead of every year. The purpose is to reduce the administrative burden on veteran-owned firms.

9. SBA Rulemaking on Multiple Award Contracting

The Small Business Administration (SBA) issued a notice of proposed rulemaking on May 16 implementing the Small Business Jobs Act of 2010.  The proposed rule further encourages the use of set-asides and reserves under multiple award contracts and task and delivery orders to increase small business opportunities in the federal market.  The rule-

1. Further defines partial set-asides, contract reserves, and order set-asides and puts processes in place for agencies to utilize these tools,
2. Encourages agencies to use “Section 1331 tools” which provide agencies with the discretion to issue set-asides against multiple award contracts,
3. Allows agencies to assign multiple NAICS codes with corresponding size standards to multiple award contracts so that coding for orders more accurately reflects the size of the business for the work being performed,
4. Discourages the use of consolidated contracts by prohibiting agencies from consolidating contract requirements unless the senior procurement executive or chief acquisition officer identifies the negative impact on small business and justifies the consolidation by demonstrating that the benefits of doing so exceed the benefits of other acquisition approaches,
5. Increases transparency on bundled contracts by encouraging agencies to post a list of bundled contracts on a public website and their rationale before soliciting offers.

The Coalition is interested in hearing member feedback or concerns regarding the rule.  If you have any input for the Coalition’s comments, please contact Aubrey Woolley at awoolley@thecgp.org by Friday, July 6. We will submit comments by July 16.