It's been a very interesting past few months for the Small Business Administration. After a high-profile article was released by the New York Times on June 12th highlighting the state of the Agency's lending and small-business-support goals in the wake of Steven C. Preston's departure, the SBA has experienced heightened scrutiny of its practices. The most notable talking points, as outlined in the article, are the waning flow of SBA loans, the shortfall in meeting woman-owned business goals, and the much-criticized reality of large businesses receiving contracts that are earmarked for small businesses.

The SBA maintains that it is an Agency in transformation. Jovita Carranza, the Acting Administrator of the SBA, stated in his subsequent Letter to the Editor that the Times' article was "stunning in its omission of letters and proclamations of support for the agency's turnaround from industry groups and legislators."

Indeed, it does seem that a turnaround is taking place, and that major changes are not far afield at the SBA. This seachange is reflected in the increased, self-administered scrutiny in reporting that the contracting community is witnessing at the SBA.

In a preliminary assessment of SBA's 2007 numbers, which will be released in August, Kent Hoover, the Washington Bureau Chief at Bizjournals.com, says that the Agency will not be meeting its goal of 23% allocation of government procurement dollars to small businesses (SB). However, at the same time, some interesting figures jump out:

• $436 billion in total prime contracts (more money than 2006)
• SB prime contract dollars decreased to 22.1% from 22.8% in 2006
• $1 out of every $3 went to DC metro area firms

This downtick was likely attributable to the fact that small business acquired by large businesses no longer counted toward Agencies' small business goals. Additionally, for the first time ever this year, Agencies were required to certify the accuracy of their contracting data: in theory, this means fewer size standard and codification errors, and more transparency surrounding small business contracting processes, which will hopefully allow small businesses targeting government business to breathe a sigh of relief and rest assured that their concerns are being addressed.

Although all the back and forth between critics and the SBA has done much to increase scrutiny of the numbers, the actual reality of small business concerns in the contracting world remains relatively static. Relationships still matter, quite a bit, and although this has never been a surprise in the contracting arena, it is surprising to just what degree such increased access still informs government procurement. With so many new programs of such a high profile at stake:

• PACTS, the $1.5 billion DHS vehicle which touts support-service set-asides for Service-Disabled, Veteran-Owned businesses
• Army's ITS-SB , which sets aside $400 million of its IT Services contracts for small businesses
• 8 NETCENTS II small business set-aside programs – Air Force will spend a portion of the $10 billion ceiling for contracts involving SOA Enterprise, Software Services, Infrastructure and Support Engineering

It's very important that the SBA and the contracting community work together, reconcile differences and stave off post-award outcry, which only creates further hindrances and expense to the procurement process.

Perhaps the best way to move forward is to assimilate the input of small businesses themselves, to ensure visibility and support for all policies; it seems as though increased oversight in this direction, however slowly, provides targeted growth and greater opportunities. One thing is for sure - there is always progress to be made.

INPUT welcomes the feedback of its members. Are you sensing a change on the horizon for small business concerns, and the government's commitment to meeting its goals? Or are we just conducting business as usual?

A recent INPUT blog discussed the advantage that small businesses within the Washington DC area have for winning federal contracting dollars. It turns out that not all of those small businesses are on the up and up.

Recent GAO testimony identified substantial deficiencies in SBA's application and monitoring process, specifically as it relates the HUBZone program (designed to provide opportunities to small businesses in economically depressed areas). HUBZone small businesses raked in about $8 billion in contracting money in FY2007, but some of them were not actually eligible for HUBZone status. GAO asserts that SBA, at least within their area of investigation, failed to verify even the most basic information of small businesses applying for HUBZone certification.

GAO's report highlighted 10 case studies of HUBZone-certified small businesses in the DC metro area that were not eligible, but had earned $105 million in prime federal contracts since 2006. They either had "virtual" principal offices that held no employees and minimal equipment, provided addresses that were not in HUBZones (e.g., McLean, VA was not in a HUBZone the last time I checked), or failed the employee HUBZone residency requirement. In a scenario rivaling Dateline NBC's "To Catch a Predator," GAO investigators also set up four phony small businesses and submitted applications to SBA for HUBZone status. They created bogus employees, addresses, and documentation, and in all cases their applications were approved within weeks. One of the addresses belonged to a Starbucks located in a HUBZone, and two others were rented P.O. boxes (which as explicitly disallowed according to SBA's own rules).

This is disheartening for the thousands of eligible and legitimate small businesses struggling to find federal opportunities. Organizations like the American Small Business League work to prevent fraud and abuse when it comes to size certifications and improper government awards, but perhaps they should widen the net to include companies among their own ranks that are claiming special status unfairly.

Interestingly, the Small Business Administration is tasked with monitoring and tracking federal agencies' small business contracting, but it seems that some of that monitoring and tracking needs to be directed internally.

I honestly spent Tuesday trying to process my thoughts past "you've got to be kidding." But, I didn't get very far.

The Small Business Administration (SBA) announced on Monday that an agreement has finally been reached to allow the Department of the Navy (DoN) the authority to set-aside Seaport-e requirements for 8(a) certificate holders. After four years of debating, the last lone set-aside has been thrown into the whirlpool that is the Seaport contract vehicle. What current Seaport primes may or may not know, any requirement that fits within the scope of the 22 functional categories that comprise Seaport, must utilize that vehicle for procurement (according to DoN policy). I have a strange feeling that I'm witnessing the end of most full and open competition.

Tim Foreman, Navy's Director of the Office of Small Business Programs, was quoted as saying "This is good for the Navy, it's good for the SBA, but more importantly, it's good for the small disadvantaged businesses that participate in the 8(a) program." That's when I started wondering - "huh?" I can understand this being good for the Navy; using an existing contract vehicle will obviously save them money throughout the procurement process. In addition, the SBA has the advantage of no longer spending time and manpower operating as a middle-man in many DoN procurements. How this is good for 8(a) participants is not as clear. If a requirement could be reserved as an 8(a) set-aside, it was, regardless of the Command's desire to use Seaport or not. Now, 8(a) participants will have two obstacles: are they Seaport primes already and do they have enough time to respond to the Task Order solicitations?

Currently there are 292 Seaport primes that are participating in the 8(a) program. With the SBA announcement, those 292 vendors are the only competitors for 8(a) set-asides for the next two years. The 2008 Seaport rolling admissions have already closed; awards were announced in late May. NAVSEA previously announced its intent to refrain from re-opening admissions in 2009 and will wait until 2010 to hold another open-admission. How many potential participants have just been weeded out because they no longer have access to the requirements they previously targeted?

I've heard strong criticism from the market regarding Seaport --- mainly due to the fact that Seaport procurements can severely limit competition, even to the point of not allowing sufficient time for competitors to respond to solicitations. In a previous study of Seaport's efficiency and effectiveness, the acquisition timeline was reported to have been shaved from nine or twelve months down to a mere 67 days. Without the advantage of performing the work on a current contract, is it possible to adequately respond and win a Task Order in under 67 days? How about defining, posting, competing, evaluating and awarding? More importantly, do "the small disadvantaged businesses that participate in the 8(a) program" have the resources to respond successfully in that short a time limit?

In the long run, I question the ratio between money saved and Task Orders awarded. In Navy's effort to streamline and cut costs, what kind of expectation are they setting for competitive responses?

Updated: In breaking news, NAVAIR has the ability to utilize the Seaport-e contract vehicle for the 8(a) set-aside category, and thus the use of Seaport-e as a fulfillment mechanism is likely for NAVAIR's Program Management task orders totalling $67.5 million in requirements.

For more analyst insights on the newest addition to Seaport, please visit INPUT's Blog on the Government Marketplace.

Original Blog text as it was posted last week:

It's amusing to me when two completely unrelated things spontaneously crash together and make perfect sense. Case in point: Homer's Odyssey and NAVAIR's Program Management MAC follow-on. Don't worry, I'll explain.

There is a trial in The Odyssey in which poor, tired Odysseus has to steer his men and his boat in between the three-headed monster Scylla and the whirlpool Charybdis. Scylla is certainly frightening but, if you're quick, you may be able to dart out of the way of those razor-toothed jaws. Charybdis, on the other hand, must be watched constantly and kept at a distance or else you'll be sucked in and there's no chance to escape. Nine task orders from the PM MAC follow-on have just become Odysseus and his men, desperately trying to keep their distance from the whirlpool Seaport.

The current trend in procurement seems to be multi-award contracts (MACs). Everyone wants to be on a MAC because that's where all the work is going. Recently, however, it seems that the MACs have taken on a life of their own, spiraling out of control and consuming everything vaguely similar in scope. Navy service requirements have created Charybdis, I mean Seaport. NAVAIR Patuxent River has chosen to re-compete 31 task orders awarded under the original program management MAC. 22 of those task orders are already swirling around Seaport because they fit the scope. The remaining 9 are clinging to their 8(a) set-asides, the only life-raft they have that will keep them out of Seaport. At least for now.

I believe the general feeling within the market is that, if Navy can funnel procurements to Seaport, they will. Surprisingly enough, however, not everyone is happy with the frequent use of this streamlined competition--rightly so, as how "streamlined" can it be with approximately 1700 competitors? The 8(a) designation may become more and more appealing, simply because it is the only way a requirement can avoid being awarded as a task order underneath yet another MAC. Even that life-raft is sinking, as NAVSEA pushes to include 8(a) competitions within Seaport as well.

Everyone has their opinion to the advantages and disadvantages of MAC competition. But while NAVSEA campaigns to include 8(a)s in Seaport and NAVAIR dances on the border of open solicitations and MAC competitions, I'm left thinking one thing: Charybdis grows.

This week the GAO released a report detailing their review of CBP's Secure Border Initiative (SBI) project. Specifically, CBP has awarded Boeing approximately $1.15 Billion in task order awards. However, the GAO was not only reviewing the task order awards but also the program's planning and performance. In the 15 categories reviewed, CBP's SBI satisfied 7 categories, partially satisfied 7 and failed to satisfy 1 altogether. SBI failed to "Describe how activities will further the objectives of SBI, as defined in the SBI multi-year strategic plan and how the plan allocates funding to the highest priority border security needs."

As a result, we must adhere to the old adage: "Follow the Money." Congress approved roughly $2.7 billion for SBI in FY2005-2008 and the President's FY2009 budget calls for another $775 million. However, according to the report:

• "Satisfying the [remaining] conditions is important since the Fiscal Year 2008 Consolidated Appropriations Act required an expenditure plan that satisfies the 15 conditions summarized above to be submitted to and approved by the House and Senate Appropriations Committees before the agency could obligate $650 million of the approximately $1.2 billion appropriated for CBP fencing, infrastructure and technology."

Meanwhile

Many in Congress and the media have been focused on the success or failure of SBInet's Project 28, which accounts for two task orders totaling $28 million, yet Boeing was awarded more than $850 million for tactical infrastructure projects. While the pedestrian and vehicle fencing has been the most expensive portion, only $122 million accounts for the fencing project; the remaining $733 million was used to provide the supply chain management solutions related to pricing, locating, fabricating and transporting the raw materials (particularly steel) to the Southern border.

Meaning, the focus and marketing of SBInet has been the "virtual fence" component; the majority of the money has been spent on supporting and building actual fences. By following media reports and Congressional inquiries, it seemed Project 28 – the virtual fence - was Boeing's entire SBInet project. Turns out, Project 28 covered 28 miles and cost approximately $28 million. The tactical infrastructure (TI) which did garner some local constituent and environmental concerns did not receive nearly as much attention and now turns out to be the majority of the program.

In short, CBP and Boeing must show the satisfying conditions to receive this further funding beyond the already awarded $1.15 billion. Despite all the previous analysis and press of Project 28, the size of SBI brings Boeing business from all angles, including the North, where it's likely much of this SBI technology is headed next.

According to the Georgia Technology Authority (GTA), the Georgia Infrastructure Transformation 2010 Project (GAIT 2010) is one step closer to being awarded. The GTA stated that proposals for Information Technology Infrastructure Outsourcing Services (Stream 1) and Information Technology Managed Network Services (Stream 2) are currently under evaluation. Requests for Proposals for each stream were released in April 2008.

Currently, evaluations for both streams are being conducted by teams made up of GTA and agency staff. Business relationship, finance, human resource, and terms and conditions teams will be evaluating proposals for both RFPs, while individual technical teams will be assigned to each RFP.

At this point, evaluations are in the first phase, consisting of reading and carefully scoring each RFP. The teams will then schedule solution walkthroughs to take place in July, where service providers will respond to inquiries compiled by the evaluators. After the walkthroughs in July, potential service providers will then modify their proposals, which will be reviewed and scored again at a later date. GTA is currently estimating that evaluations will be completed in August 2008. The GTA is anticipating that if the timeline stays on track, contract negotiations should be completed in September or October 2008, while a contract for each opportunity is anticipated to be signed by October or November 2008.

While the evaluations of Stream 1 and Stream 2 are GTAs priority at this time, the agency states that there is a potential for a Stream 3, although the requirements of the stream, as well as a potential release date, are currently unavailable.

The GAO talked today by upholding Boeing's Protest filed on March 11, 2008 against the Air Force's award to Northrop Grumman and EADS for the Aerial Refueling Tanker. The Northrop Grumman and EADS team won the contract to build the KC-X aerial refueling tankers on February 29, 2008, which has a $35 Billion potential ceiling value.

The GAO report claims the Air Force "had made a number of significant errors that could have affected the outcome of what was a close competition between Boeing and Northrop Grumman." The GAO recommends that the Air Force reopen discussions with the firms, collect revised proposals, re-evaluate those proposals, and make a new source selection decision.

The Air Force's Course Correction

The GAO's decision does not use light language regarding a number of perceived flaws during the procurement process. Currently, INPUT anticipates the Air Force has three options:

1. Allow the two teams to resubmit proposals and enter into the Source Selection phase anew, the most likely per GAO recommendations.
2. Re-open competition to all market participants, unlikely given vast delays in requirement fulfillment.
3. Re-entering into the source selection phase with the current proposals, yet, considering the number of errors found by the GAO, this is also an unanticipated alternative.

Shortly after the GAO decision, the Air Force Contracting Office stated it would be a few weeks before a final verdict is reached regarding how to proceed. During this time government officials will be evaluating the GAO's recommendations and weighing the various options.

War Ramifications

It's no secret this is one of the hottest issues right now, not only for contracting, but also politically. Local politicians have been vocal about the award to Northrop Grumman and EADS, a foreign company. Politicians alluded to an increase in U.S. government funded work shifting abroad, regardless of Northrop's on-going rebuttal that the manufacturing of the plane's bodies will take place in Mobile, AL and generate up to 25,000 jobs at home.

Yet, although few are discussing it, the largest short-term ramification of this decision is an increase delay in obtaining new refueling tankers.

The Acquisition Improvement and Accountability Act of 2007, approved as part of the 2008 Defense Authorization Act's Section 843, provides for key changes to task and delivery order contracts. Contractors who've battled to win a spot on a task order contract vehicle only to be shut out of task order competition will be interested in these changes, which went into effect on May 26.

Fair opportunity to compete

Old rule: Agencies were required to provide contractors with a "fair opportunity to be considered" for task/delivery orders over $3,000. However, "fair" was not well-defined and many task/delivery orders were awarded before all eligible contractors were even aware that it existed.

New rule: "Fair opportunity" is better defined as providing contractors with a notice of the task/delivery order with a statement of needs; a "reasonable" period for them to provide a proposal in response; disclosure of significant factors/subfactors; a written statement documenting the basis for best value awards; and an opportunity for a post-award briefing.

Single source awards

Old rule: Multiple task/delivery contract awards were preferred.

New rule: The new statute reinforces the preference for multiple awards, and prohibits agencies from awarding task/delivery order contracts over $100 million to a single source. Any exceptions must be justified in writing by the agency head.

Task/delivery order protests

Old rule: Contractors could only protest task/delivery orders on the grounds that "the order increases the scope, period, or maximum value of the contract under which the order is issued."

New rule: Contractors can protest large task/delivery orders on any grounds, and allows for protests for any task/delivery order over $10 million.

These changes are likely to have some significant ramifications, both good and bad. The use of task order vehicles has increased dramatically over time, and now represents nearly 30% of all federal IT spending. But it's not easy to compete on these contracts. Countless times I've heard contractors complain about how difficult it is to win task orders. We know that winning a spot on a task order vehicle is simply a license to hunt, but many times task orders were awarded before most of the eligible contractors knew that it was hunting season. Section 843 is designed to provide a better playing field by ensuring that everyone is aware of the opportunities. It also gives contractors a better shot at some of the larger task orders. However, the game-changer is the ability for contractors to protest task orders awards.

Because a big chunk of contracting happens behind the task order veil, this could have a significant impact on the acquisition environment. As it stands now, there were 6.3% more protests in FY2007 than FY2006 (see the Exhibit 1). While there has been only been an overall 4% increase in protests from FY2003 to FY2007 (with fluctuations in growth and decline), the percentage of protests sustained by GAO has climbed steadily over that time.

Exhibit 1

Bid Protest Statistics, FY2003-FY2007

Will we begin to see a much higher volume of protests now that task orders can be protested? That remains to be seen, and I think it depends primarily on the vehicle. For example, only 96 of more than 6,000 task orders on the NETCENTS vehicle were more than $10 million in value (see Exhibit 2).

Exhibit 2

However, for DHS' EAGLE contract vehicle (Exhibit 3), 34 of the 157 task orders (21.6%) were above the $10 million mark.

Exhibit 3

In some cases, it's possible that a $10 million+ task order award would be worth protesting, simply because they don't come along that often.

Whatever the case, we could begin to see some agencies keeping their task orders below $10 million to avoid protest risk. Agencies could mitigate some of that risk by sticking to the "fair opportunity to compete" rules, but that's no guarantee that task order protests won't be part of their future.

The Concept:

Trusted Internet Connections (TIC) one of the Federal Government's newest initiatives, is moving forward and formalizing a process to consolidate all internet gateways Government-wide (over 1000) to around 50 secured connections. The implementation would help create a much more robust, secure perimeter by establishing standardized processes for the Government, specifically DHS, to monitor internet connections going in and out of its networks.

The Plan of Action:

DHS has been hard at work putting together the definitions of what this will entail and how it can best be implemented, and GSA has been working with its Networx vendors to find how they can best be utilized to aid in this implementation. The idea would be to find out which Networx vendors (5 total) would be interested in establishing Contract Line Item Numbers (CLINs) under their existing contracts. From there, each participating Networx vendor would setup a competitive fixed price from which agencies could choose a vendor best suited for implementing their requirement. Essentially there would be no task order competition; agencies would just have to select the best vendor. The current milestone is to get TIC compliant services onto the participating vendor's contracts by November 15, 2008.

Collaboration Rising:

This initiative as part of the Information Systems Security Line of Business (ISS LoB) has strong ties to reducing security risks Government-wide and seems to have a high priority to get implemented as quickly as possible. In doing so, GSA and DHS are overseeing the early stages of this initiative - the procurement and requirement respectively. It is Office of Management and Budget (OMB) which has the oversight on making TIC a reality. TIC represents several agencies working together to provide the standards of a requirement, the mechanism to obtain a solution and turning the pressure back on other agencies to make a decision. Once TIC compliant services are established with the Networx contracts, agencies will then need to decide if Networx is the optimal choice or if procuring this need on their own is the smartest option.

Questions Looming:

With three major players in this and no real competition in the works, is this method of acquisition of solutions really the best answer? Or are time constraints driving this project? By adding TIC solutions to the Networx contract vehicle, GSA is implying those vendors are best positioned to supply a quality solution. It is unclear at this time which primes will opt to join the TIC CLIN but it is clear that teaming with other businesses, both large and small, is likely. But what we do know is that Federal Government is working towards fulfilling this serious security concern through a means (not competitive) that could end up being more efficient and less time consuming than a lengthy, protest-riddled procurement. Whether or not Federal Agencies decide to use Networx or obtain a solution on their own, the bottom line is the Government is well on its way to improving network security.

The Office of Personnel Management issued a press release on May 29, 2008 stating that they have suspended a portion of the so-called RetireEZ contract. The contract was awarded to Hewitt Associates for Retirement Systems Modernization (RSM) on May 3, 2006 to the tune of $290M over 10 years. OPM issued a Stop Work Order and a Show Cause Notice to Hewitt Associates with a 10 day response period.

According to Federal Acquisition Regulation (FAR) Part 42.1303, Hewitt Associates response will be reviewed to determine which of the following three options will be pursued:

1. Contract termination
2. Cancel the stop-work order (requires the same approvals as issuing the order)
3. Extend the response period if the government agrees more time is needed

Can OPM afford to terminate the contract?

Of the three main components of the RetireEZ program, only the calculation engine is affected by the stop work order, the other two components (data conversion and change management) will continue being developed. It is unlikely the OPM will cancel the Hewitt contract. The Government is committed to this much needed modernization project and it is estimated that termination will be used as a last resort.

In addition, RSM has the support of the FY2009 Exhibit 300 Business Case and a positive assessment by the Government Accountability Office (GAO). The Exhibit 300 documents call it "a strategic objective." In a recent assessment, the GAO recognized the importance of implementing this program despite concerns earlier this year about meeting the first planned increment.

According to GAO Report titled OPM Improvements Needed to Ensure Successful Retirement Systems Modernization:"To its credit, OPM has undertaken the RSM program to expedite retirement processing for civilian federal employees and the agency reported that it has met key program goals. Further, the agency has improved its management processes for selecting contractors, defining system and security requirements, managing risks, planning organizational change, and providing program executive oversight. Nevertheless, much remains to be accomplished before the program is effectively positioned to deploy its first planned increment of new technology..."

Business goes on

The current concern over the RSM program seems limited to Hewitt Associates. Accenture, who is providing business transformation and information technology support services and products for the initiative is continuing contract execution. The Accenture contract was awarded in May, 2006 for a total ceiling value of $40M.