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DFARS Update: Comment Period Reopened For New SBIR Data Rights Rules

January 12, 2021
DFARS UPDATE: COMMENT PERIOD REOPENED FOR NEW SBIR DATA RIGHTS RULES

Last month, the Department of Defense (DoD) announced (see announcement here) that the comment period was reopened for its August 31 advanced proposed rulemaking under the Defense Federal Acquisition Regulation Supplement (DFARS).  The reopened comment period, extended until January 31, 2021, is intended to provide experts, the public, and the private sector with an opportunity to address anticipated changes to rules under DFARS concerning the rights of the federal government and contractors in data generated under SBIR and STTR awards.  DoD's announcement also scheduled a virtual public meeting to be held on January 14. 

As the public comment period draws to a close on January 31, we take this opportunity to take a quick look at the DFARS changes anticipated by DoD.

On August 31, 2020, DoD issued its advanced notice of proposed rulemaking under which DFARS will be amended in order to implement certain changes made by the Small Business Administration (SBA) to policy directives covering the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) Programs.  The anticipated changes are reflected in an initial draft of the DFARS revisions that DoD made available with its advanced proposed rulemaking.  A copy of the initial draft can be obtained here.

As we have noted previously in webinars and other resources on the SBIR and STTR programs, the rules that govern the two programs are largely set forth, not in federal regulations, but in policy directives published by the Small Business Administration (SBA).  One of the areas in which SBIR/STTR rules are not only reflected in policy directives but also codified in federal regulations concerns the rights of contractors and the federal government in SBIR/STTR data (i.e., data generated under SBIR and STTR projects).

In May 2019, DoD published a combined revised policy directive that covers both programs and that made significant changes, including changes to the SBIR/STTR data rights rules.  As we discussed in our webinar on the May 2019 Policy Directive Amendments (here), those changes included replacing the extendable SBIR/STTR data protection period (which under FAR is limited to four years and under DFARS is limited to 5 years) with a uniform non-extendable 20-year protection period.

Another change made by the revised policy directive concerns the rights in SBIR/STTR data that the federal government acquires once the SBIR/STTR protection period expires.  Under the revised policy directive, the government obtains “government purpose” rights, a departure from the “unlimited rights” the federal government acquires at the end of the SBIR/STTR protection period under the current DFARS regulation.

DoD’s proposed advanced rulemaking, thus, anticipates conforming the DFARS SBIR/STTR regulations to these and other changes made in the May 2019 Policy Directive.  In addition to incorporating the 20-year SBIR/STTR data protection period and the post-protection period “government purpose” data rights, the advanced rulemaking anticipates amending DFARS in order to adopt new rules under the revised May 2019 Policy Directive that apply when contractors omit restrictive markings on the SBIR/STTR data that they transmit to the federal government.

Existing DFARS regulations, as well as the old SBIR & STTR policy directives, are silent on the issue of what happens if a contractor fails to include a required restrictive marking on SBIR/STTR data that is transmitted to the federal government.  Under the May 2019 Policy Directive, however, contractors are given six months to request to have an omitted SBIR/STTR legend placed on the SBIR/STTR data.  DoD’s advanced rulemaking and the accompanying initial draft of the DFARS revisions anticipate amending DFARS to include the six-month window for contractors to request placement of omitted markings.  The draft of the DFARS revisions sets forth detailed procedures for contractors to follow when making the request.  If contractors do not place restrictive markings on their SBIR/STTR data or do not request placement of omitted markings, the anticipated revised DFARS rules incorporate the May 2019 Policy Directive’s instruction that unmarked data transmitted to the federal government will be subject to the federal government’s “unlimited rights.”

Lastly, DoD's notice of advanced rulemaking anticipates amendments to DFARS in order to refer to, and incorporate, new rules under the May 2019 Policy Directive for the handling of prototypes by federal agencies.  These new rules are intended to prevent reverse-engineering and potentially harmful disclosures of innovative technology. 

To read or obtain a copy of the advanced proposed rulemaking go here.

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FAR Update: Proposed Commercial Acquisition Rule Sets Out Newly Defined “Commercial Products” And “Commercial Services” Terms

December 10, 2020
FAR UPDATE: PROPOSED COMMERCIAL ACQUISITION RULE SETS OUT NEWLY DEFINED "COMMERCIAL PRODUCTS" AND "COMMERCIAL SERVICES" TERMS

On October 15, 2020, the Department of Defense (DoD), the General Services Administration (GSA), and the National Aeronautics and Space Administration (NASA) published a Proposed Rule that replaces the term “Commercial Item” in the Federal Acquisition Regulation (FAR) with two newly defined terms - “Commercial Product” and “Commercial Service.”  As the public comment period draws to a close on December 14, we take this opportunity to take a quick look at the FAR changes implemented by the Proposed Rule.

FAR Part 12 sets out the procedures that control federal government procurements for commercial products and services.  These procedures are supposed to more closely resemble acquisition practices in the general commercial marketplace.  So solicitations and contracts for commercial acquisitions typically contain fewer FAR clauses and mandatory flow-down clauses.  Moreover, subpart 12.6 sets out optional streamlined and abbreviated procedures that contracting officers can apply in order to simplify even further the solicitation and evaluation process.

Under existing FAR provisions, the rules for commercial acquisitions use the term “commercial item” when describing those things that are covered by Part 12.  As defined currently in FAR 2.101, “commercial items” are either “items” used by the general public or non-government entities for non-governmental purposes or “services” in support of such items or that are offered in the commercial marketplace.  Thus, the term encompasses both items and services.

The Proposed Rule, however, eliminates the term “commercial item” from FAR and replaces it with two new terms – “commercial product” and “commercial service.”  The Proposed Rule defines the new terms by splitting the current definition of “commercial item” so that the provisions relating to “items” now fall under the definition for the term “commercial product” (except that the term “item” is replaced with the term “product”) while the provisions relating to “services” now fall under the definition for the term “commercial service.”  The Proposed Rule also amends Part 12 by generally substituting the term "commercial item" with the term "commercial product and commercial service."  Consequently, since collectively the two newly defined terms largely mirror the term “commercial item,” for now at least, the scope of what is covered under Part 12 has not changed.

According to the preamble for the Proposed Rule, splitting the term “commercial item” into the two defined terms better reflects the significant role that commercial services play in government procurements and is supposed to provide more clarity to government acquisition personnel with the goal of encouraging greater engagement in the commercial marketplace.  It seems reasonable to anticipate that splitting the definition into two terms will inevitably result in future regulation amendments that (1) further refine what constitutes a “commercial product” and what constitutes a “commercial service,” and (2) set out diverging acquisition procedures under Part 12 that are more narrowly tailored to each kind of item.  Contractors that offer commercial goods or services to the federal government should remain on alert for any future developments.

To read or obtain a copy of the Proposed Rule go here.

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A Closer Look At The SBA’s Final Rule On WOSB Certifications

May 26, 2020
A CLOSER LOOK AT THE SBA'S FINAL RULE ON WOSB CERTIFICATIONS 

Earlier this month the U.S. Small Business Administration (SBA) published its long-awaited final rule covering the certification requirements for Women-Owned Small Business Concerns (WOSBs) and Economically Disadvantaged Women-Owned Small Business Concerns (EDWOSBs).  In that rule, the SBA also took the opportunity to make changes to align the dollar threshold for economic disadvantage under the 8(a) Business Development Program with the dollar threshold for economic disadvantage that applies to EDWOSBs.

WOSB Certifications

As we wrote about here, in September 2015, the SBA issued a final rule that implemented the 2015 NDAA changes to the Small Business Act granting contracting officers the authority to make sole source awards to WOSBs and EDWOSBs.  Although the 2015 NDAA changes also created a requirement that businesses be certified as a WOSB or EDWOSB by either a federal agency, a State government, the SBA, or a national third party certifier (TPC) approved by the SBA, the SBA did not implement this requirement in its 2015 final rule, believing that such implementation would delay implementation of WOSB sole source authority.

Nearly five years later, the SBA has now implemented the WOSB certification requirement into its WOSB regulations.  Under the final rule, any business wishing to compete for a sole-source or set-aside award under the Women-Owned Small Business Federal Contracting Program (WOSB Program), which is regulated by the SBA, must comply with this certification requirement.  Businesses that do not participate in the WOSB Program may continue to self-certify their WOSB status, may receive contracts outside the WOSB Program, and may be counted toward an agency’s goal for awards to WOSBs.

As for obtaining WOSB or EDWOSB certification by the SBA, small businesses can apply directly to the SBA under a free electronic application process.  According to the SBA, moving to a purely electronic application process - under which the certification application, correspondence, and all notifications are processed electronically - will reduce transaction costs and expedite certifications.

A business that is already certified by the U.S. Department of Veteran Affairs (VA) as a Service-Disabled Veteran Owned Business or a Veteran-Owned Business can be certified by the SBA as a WOSB or EDWOSB simply by submitting evidence that it is a women-owned and controlled small business or an economically disadvantaged women-owned and controlled small business.

Lastly, a small business can apply for WOSB or EDWOSB certification by a TPC and then submit evidence of its TPC certification with its WOSB or EDWOSB application to the SBA.  TPCs are permitted to charge a reasonable fee for their certifications but must alert applicants that the SBA offers certification for free.  Although the final rule anticipates that there may be some differences among the certification processes applied by TPCs and the SBA, the underlying eligibility requirements for WOSB or EDWOSB certifications should be the same.

Indeed, TPCs are required to enter into agreements with the SBA that specify requirements they must meet, and the SBA may terminate its agreement with a TPC if the TPC's eligibility requirements are not the same as those applied by the SBA or if a TPC certifies businesses that the SBA later determines are ineligible for certification.  To ensure that TPCs are meeting requirements, the final rule requires TPCs to submit monthly reports to the SBA and authorizes the SBA to conduct periodic reviews as well as a review every three years.

As for processing WOSB and EDWOSB applications, after the SBA has received a WOSB or EDWOSB certification application, it will advise applicants within 15 days whether the application is complete.  Once an application is complete, the SBA will make a determination within 90 days.  A business that has been declined for certification by the SBA or by a TPC may try again and seek certification within 90 days if it believes it has overcome the reasons for the decline.  After a WOSB or EDWOSB application is approved, a business must annually represent to the SBA that it continues to meet all WOSB/EDWOSB eligibility criteria.

Economic Disadvantage

The economic disadvantage net worth threshold for EDWOSBs is $750,000, which is the same economic disadvantage net worth threshold for continuing eligibility under the SBA’s 8(a) BD program, but higher than the $250,000 net worth threshold for initial eligibility under the 8(a) BD program.  To avoid confusion and inconsistency between the WOSB and the 8(a) BD programs, the SBA changed the 8(a) BD thresholds so that they are now all $750,000. 

Portions of the final SBA rule become effective on July 15, 2020, with the remaining portions becoming effective on October 15, 2020.  To read or obtain a copy of the final rule go here.

To read other articles from The GovCon Bulletin™ go here.

COVID-19 Update: Small Business Government Contractors Should Explore Local Stimulus Now

March 26, 2020
COVID-19 UPDATE: SMALL BUSINESS GOVERNMENT CONTRACTORS SHOULD EXPLORE LOCAL STIMULUS NOW 

Early this morning, the U.S. Senate passed a $2 trillion stimulus package intended to stabilize the economy from the shocks inflicted on it by COVID-19 and related shutdowns. It is reported that a $300 billion portion is ear-marked for small business and includes loans intended to keep employees on the payroll. Approval of the package is pending by the U.S. House of Representatives, but small business contractors can and should explore stimulus funding intended to address COVID-19 impacts that may be available right now at the state and local level. By way of example, the following illustrates the kind of stimulus that is currently available for small business contractors in Maryland, Virginia, and Washington, DC.

MARYLAND
The Maryland Department of Commerce offers $130 million in loan and grant funding through three programs for small businesses negatively impacted:

  • ​Maryland Small Business COVID-19 Emergency Relief Loan Fund - $75 million loan fund (for for-profit businesses only) offers no interest or principal payments due for the first 12 months, then converts to a 36-month term loan of principal and interest payments, with an interest rate at 2% per annum.

  • Maryland Small Business COVID-19 Emergency Relief Grant Fund - $50 million grant program for businesses and non-profits offers grant amounts up to $10,000, not to exceed 3 months of demonstrated cash operating expenses for the first quarter of 2020.

  • Maryland COVID-19 Emergency Relief Manufacturing Fund - $5 million incentive program to help manufacturers to produce personal protective equipment (PPE) needed by hospitals and health-care workers across the country.

Information about these programs can be found here: https://commerce.maryland.gov/fund/maryland-small-business-covid-19-emergency-relief-fund-programs

The Maryland Department of Labor also recently launched a COVID-19 Layoff Aversion Fund designed to support businesses undergoing economic stresses due to the pandemic, including by covering the cost of purchasing remote access (ex. computers, printers, etc.) equipment to allow employees to work remotely from home versus being laid off, the cost of purchasing software or programs that an employee would need to use from home, and the costs of cleaning/sanitization services. Information about the fund can be found here: http://www.labor.maryland.gov/employment/covidlafund.shtml

WASHINGTON, DC
The Office of the Deputy Mayor for Planning and Economic Development offers $25 million in DC Small Business Recovery Microgrants, which are grants to small, local businesses, independent contractors, self-employed individuals, and nonprofits to meet their short-term financial needs, including to cover employee wages and benefits, accounts payable, fixed costs, inventory, rent, and utilities. Information about the Microgrants can be found here: https://coronavirus.dc.gov/dc-small-business-recovery-grants

SBA DISASTER ASSISTANCE LOANS
Additional funding for COVID-19 impacts on small businesses in Virginia appears to come largely through loans that are now available under the U.S. Small Business Administration (SBA) Economic Injury Disaster Loan program. Virginia received a statewide Economic Injury Disaster Loan designation from the SBA and under the program, small businesses and non-profit organizations can now apply for a loan of up to $2 million from the SBA to pay fixed debts, payroll, accounts payable, and other expenses. Information about Virginia's response to COVID-19 can be found here: https://www.virginia.gov/coronavirus-updates/.  Maryland and Washington, DC also received approval by the SBA of their disaster declarations for purposes of the SBA's Economic Injury Disaster Loan program and information about those designations can be found here: https://govstatus.egov.com/md-coronavirus-business (Maryland) and https://coronavirus.dc.gov/SBAdisasterloans (Washington, DC).

We will provide updates when additional information about the federal stimulus package, once fully enacted, becomes available.

In the meantime, we hope all of you stay safe and healthy (and please wash your hands!)

To read other articles from The GovCon Bulletin™ go here.