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SBA Updates Small Business Size Standards and Amends WOSB-Eligible NAICS Codes

October 13, 2017
Join Us For the Federal Government Contractors New (Fiscal) Year Soiree!
The Amadeo Law Firm is pleased to be a sponsor of the Federal Government Contractors New (Fiscal) Year Soiree, organized and hosted by our good friends at Jennifer Schaus & Associates.  The event will be held at the Kennedy Center on October 23, 2017, beginning at 5:30 pm.  For more information about the event and to register, go here!  
Mark Amadeo

 
SBA UPDATES SMALL BUSINESS SIZE STANDARDS AND AMENDS WOSB-ELIGIBLE NAICS CODES

SBA Updates Small Business Size Standards

Two weeks ago, on September 27, 2017, the U.S. Small Business Administration (SBA) issued a final rule that adopted proposed revisions to its small business size standards.  Specifically, the final rule implements the U.S. Office of Management and Budget’s (OMB) changes to the North American Classification System (NAICS), which is used by the SBA to set size standards - by industry category - for purposes of determining when businesses are considered small businesses.

OMB’s changes to NAICS (NAICS 2017 Changes) created twenty-one new industry categories by reclassifying, combining and splitting the existing twenty-nine industry categories. The NAICS 2017 Changes changed the 6-digit NAICS code for eight industry categories without changing their definitions or titles, and amended the title of one industry category without changing its six digit NAICS code.  As a result of the SBA’s implementation of the NAICS 2017 Changes, the SBA’s small business size standard increased for six industry categories and part of one industry category and decreased for two industry categories.  And for one industry category, the measurement for determining whether a company is small was changed from a measurement based on average annual receipts to a measurement based on the number of employees.  The final rule, which can be downloaded here, contains a table that shows the changes to the industry categories made by the NAICS 2017 Changes.  The updated size standards are effective as of the beginning of the fiscal year - October 1, 2017.

SBA Amends WOSB-Eligible NAICS Codes

More recently, on October 11, 2017, the SBA issued a Notice updating the NAICS codes for industry categories used under the SBA's Woman-Owned Small Business (WOSB) Program for set-asides and sole source procurements.  Under the WOSB Program, contracting officers can set aside procurements for WOSB’s as long as (1) the acquisition is for a good or service in an industry - as represented by its corresponding NAICS industry category code - in which WOSB’s are substantially underrepresented; (2) there is a reasonable expectation that at least two WOSBs will submit bids; and (3) the award will be made at a fair and reasonable price.  Sole source awards, moreover, are permitted if only one WOSB can perform the contract at a fair and reasonable price.  Similarly, Economically Disadvantaged Women-Owned Small Businesses (EDWOSBs) in NAICS industry codes in which SBA has determined that WOSBs are underrepresented, rather than substantially underrepresented, can also receive set-asides and sole source awards.

In order to align the WOSB Program with the NAICS 2017 Changes (described above), the SBA issued the Notice to amend the NAICS codes that are eligible for use under the WOSB Program.  That is because the NAICS 2017 Changes reduced the number of four-digit industry groups that are eligible for WOSB set-aside procurements from 113 to 112 (which resulted after NAICS groups 5171 and 5172 were merged into NAICS group 5173).  In addition, the NAICS 2017 Changes reduced the number of eligible six-digit NAICS industry category codes for WOSB set-asides from 365 to 364, while leaving the eligible six-digit NAICS industry category codes for EDWOSBs the same.  The reduction in six-digit industry codes was the net result of changes set forth in the Notice and described below to several of six-digit industry category codes that are eligible for WOSB set-asides.

First, NAICS industry category codes 333911 and 333913 were merged into NAICS industry category code 333914, and NAICS industry category codes 512210 and 512220 were merged into NAICS industry category code 512250.  

In addition, in two instances involving industry categories eligible for WOSB set-asides, the six-digit NAICS industry category codes were revised without any change in definition or titles: NAICS industry category code 517110 was changed to 517311; and NAICS industry category code 517210 was changed to 517312.  EDWOSBs are eligible to pursue sole source contracts or set-aside contracts under NAICS industry category code 517311, while WOSBs are eligible to pursue sole source contracts or set-aside contracts under NAICS code 517312.

Lastly, new industry categories were created by splitting two industry categories into two parts with one part of each industry category defined as a separate industry category and combining other parts of the two industry categories to form a separate new industry category.  As a result of this change, NAICS industry category code 541711 now corresponds to 541713 and 541714, while NAICS industry category code 541712 corresponds to 541713 and 541715.

The Notice, which can be downloaded here, includes tables that illustrate the changes to the four-digit group codes and six-digit category codes that were implemented by the 2017 NAICS Changes.

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

Taking A Deep Dive Into Lost Creek: The SBA’s Curtailment of the Ostensible Subcontractor Rule & Joint Venture Doughnut Holes

September 10, 2017
TAKING A DEEP DIVE INTO LOST CREEK: THE SBA'S CURTAILMENT OF THE OSTENSIBLE SUBCONTRACTOR RULE & JOINT VENTURE DOUGHNUT HOLES

Recently, the SBA's Office of Hearings and Appeals issued a decision sustaining, in part, a protest over the SBA's size determination of a purported ostensible subcontractor joint venture.  In this edition of The GovCon Bulletin,™ we take a deep dive into the decision, which as we explain below, is particularly informative to small business government contractors since the SBA chose to announce during the protest proceedings its intent to revise its regulations to curtail the application of the "ostensible subcontractor rule."

In Size Appeal of Lost Creek Holdings, LLC, Lost Creek Holdings LLC (Lost Creek) protested two awards made by the Florida Army National Guard (ANG) to LifeHealth LLC (LifeHealth) under two separate Requests for Quotation (RFQ’s) for Women-Owned Small Business (WOSB) set-aside acquisitions.  ANG’s Contracting Officer (CO) referred both protests to the SBA Area Office (Area Office), which then issued size determinations that LifeHealth was an eligible small business.  Lost Creek then appealed the Area Office’s size determinations to the SBA’s Office of Hearings and Appeals (OHA).

Lost Creek largely made the same arguments in its opposition to both awards during the proceedings before the Area Office and OHA.  Apart from arguing unsuccessfully that LifeHealth and its subcontractor, Dentrust Dental International, Inc. (Dentrust), each individually were not small businesses, Lost Creek insisted that LifeHealth and Dentrust were “affiliates.”

As we noted in our complimentary primer on joint ventures, Using Joint Ventures To Capture Federal Government Contracting Opportunities, Second Edition (sign up to receive our free primer here), a finding of “affiliation” between two or more businesses triggers a particular and sometimes fatal kind of treatment for purposes of determining whether a business meets a small business size standard for a contract.  Specifically, under 13 CFR 121.103(a)(6), in determining the size of a business, the SBA aggregates or counts all revenues or employees of a business and all of its affiliates.  Consequently, a finding of affiliation between a contractor and any other entity or entities will cause the contractor to be ineligible for a small business contract if, collectively, the contractor and its “affiliates” exceed the small business size standard of the contract.  The SBA’s regulations, moreover, set out several grounds on which businesses may be found to be affiliates.  Indeed, in the proceedings before the Area Office and OHA, Lost Creek argued that LifeHealth and Dentrust were affiliates based on several of those grounds.

First, Lost Creek argued that the businesses were affiliated under the SBA’s "ostensible subcontractor rule."  13 CFR 121.103(h)(4) states that a contractor and its “ostensible subcontractor” are treated as joint venturers, and therefore affiliates, for size determination purposes.  The SBA regulation goes on to state that an ostensible subcontractor is a subcontractor that is not a similarly situated entity and performs primary and vital requirements of a contract, or of an order, or is a subcontractor upon which the prime contractor is unusually reliant.  Lost Creek argued that LifeHealth was unusually reliant on Dentrust to perform the contract and that Dentrust is not a women-owned small business.

Lost Creek also argued, alternatively, that LifeHealth and Dentrust should also be considered affiliates based on their “identity of interests.”  SBA regulations state that affiliation may arise among two or more entities with an identify of interest, including “firms that are economically dependent through contractual or other relationships.”  13 CFR 121.103(f).  Lost Creek argued that LifeHealth and Dentrust shared an identity of interest because LifeHealth, in awarding 25 subcontracts to Dentrust, was economically dependent on Dentrust, which also performed on 34 of LifeHealth's contracts that constituted 82% of LifeHealth's revenues.

Lastly, Lost Creek argued that LifeHealth and Dentrust were “de facto” or “implicit” joint ventures that did not meet the requirements for the application of any of the joint venture exceptions to affiliation.

As we explain in our joint venture primer, under 13 CFR 121.103(h)(2) joint venture partners are generally deemed to be affiliated with each other for purposes of the size standard under a contract, unless their joint venture falls within one of three joint venture categories excepted from affiliation.  In addition, under 13 CFR 121.103(h), all joint ventures must comply with certain prerequisites to remain eligible for any of the joint venture exceptions to affiliation, including these four prerequisites cited by Lost Creek: (i) they must put their joint venture arrangement in writing; (ii) they must do business under the name of the joint venture; (iii) they must identify the joint venture in SAM; and (iv) they must meet the “3-in-2” contract award rule.  Under that rule, a joint venture may not be awarded more than three contracts over a two-year period, without the partners to the joint venture being deemed affiliated for all purposes.  Although the same parties are permitted to enter into multiple joint ventures, the SBA’s regulation cautions against sustained, long-term serial joint ventures by providing that “at some point...a longstanding inter-relationship or contractual dependence between the same joint venture partners will lead to a finding of general affiliation between and among them."  13 CFR 121.103(h).

Lost Creek argued that the LifeHealth and Dentrust joint venture should be subject to affiliation because it failed to comply with the four prerequisites for any exception to affiliation and, alternatively, comprised a longstanding inter-relationship or contractual dependence among joint venture partners.

Ostensible Subcontractor Joint Ventures Are - For The Time Being - Not Eligible For Joint Venture Affiliation Exceptions Under 13 CFR 121.103(h)(3)

Addressing Lost Creek’s assertion of an ostensible subcontractor relationship, OHA rejected arguments by the Area Office and the SBA’s General Counsel over the interaction between the regulations concerning one of the three categories of joint ventures excepted from affiliation – namely joint ventures made up of small businesses – and the ostensible subcontractor rule.

As stated above, 13 CFR 121.103(h)(4) provides that “[a] contractor and its ostensible subcontractor are treated as joint venturers, and therefore affiliates, for size determination purposes.” Meanwhile, under 13 CFR 121.103(h)(3)(i), a joint venture of two or more businesses “may submit an offer as a small business for a Federal procurement, subcontract or sale so long as each concern is small under the size standard corresponding to the NAICS code assigned to the contract.”  

In issuing its size determinations, the Area Office side-stepped the issue of whether LifeHealth was, in fact, unusually reliant on Dentrust and thus in an ostensible subcontractor relationship. Rather, it concluded that Dentrust was a small business and that even if LifeHealth and Dentrust were affiliated as joint venturers under the ostensible subcontractor rule, the joint venture would be considered a small business under 13 CFR 121.103(h)(3)(i). Consequently, the Area Office decided an ostensible subcontractor analysis was unnecessary.  

On appeal to OHA, the SBA’s Office of General Counsel filed agency comments in support of the size determinations.  In support, the SBA followed a “kitchen sink” approach pointing first to its regulation under 13 CFR 125.8(b)(1) stating that joint ventures do not have to be in any particular form to qualify as a small business.  The SBA insisted this regulation extends to prime-subcontractor arrangements that are treated as joint ventures under the ostensible subcontractor rule. The SBA also cited again the affiliation exception under 13 CFR 121.103(h)(i) for joint ventures among small businesses, and pointed to recent regulation changes that lifted limitations on small business contractor subcontracts with other small businesses.

The SBA’s last-ditch effort to support the Area Office's size determinations is most revealing for the future of the ostensible subcontractor rule.  In the face of the rule’s clear and explicit instruction that ostensible subcontractors and their primes would be treated not only as joint ventures but also “as affiliates,” the SBA argued that in its recent revisions to the affiliation regulations it “should have changed” not only the ostensible subcontractor rule, but also the regulation under 13 CFR 121.103(h)(2).  That regulation provides a clear and explicit general rule that businesses submitting offers as joint ventures will be deemed affiliated during contract performance, and specifies only one place to go to for any exception to the general rule.  Specifically, it points to paragraph (h)(3), which sets forth the three categories of joint ventures excepted from joint venture affiliation.  The SBA argued that retaining the general joint venture affiliation rule and the ostensible subcontractor rule in their present form “was merely an oversight,” that they should be disregarded as “vestiges” of a prior regulatory scheme, and that the SBA intended to delete the provisions in the “near future.”  The SBA further stated that it intends that all joint ventures in which each venturer is small will be treated as small for any small business procurement.

OHA, however, would have none of it.  Finding that the ostensible subcontractor rule and 13 CFR 121.103(h)(i) were issued in the same rule-making, OHA rejected the argument that one negates the other.  OHA also pointed to the ostensible subcontractor rule’s specific and explicit instruction that prime contractors and subcontractors in an ostensible subcontractor relationship are affiliated for size determination purpose.  Moreover, OHA reminded the SBA that nothing in the Administrative Procedure Act permits an agency to ignore its own regulation by declaring it a vestige.  OHA ultimately concluded that that the ostensible subcontractor rule remained in full force and effect and that the Area Office erred in not conducting an ostensible subcontractor analysis.

Nevertheless, small business subcontractors should look out for changes in the affiliation regulation under 13 CFR 121.103(h) that the SBA has signaled are coming.  Specifically, it appears that the SBA will, at a minimum, curtail the application of the ostensible subcontractor rule so it does not apply to prime-subcontractor relationships between small businesses. 

The Key Question For Identity of Interest Affiliation Based On Economic Dependence: How Does The Money Flow?

OHA rejected Lost Creek’s argument that the number of subcontracts between LifeHealth and Dentrust made them affiliated based on the economic dependence prong of the identity of interest rule under 13 CFR 121.103(f).  In doing so, OHA essentially turns a factor that gives rise to a presumption of economic dependence in certain circumstances into a threshold for determining economic dependence in all instances.

The SBA’s regulation on affiliation based on identify of interest under 13 CFR 121.103(f) states that affiliation “may arise” when entities have an identity of interest.  The SBA regulation elaborates further that businesses that have identical or substantially identical business or economic interests may be treated as one party with their interests aggregated, and sets forth examples of such interests, including when firms “are economically dependent through contractual or other relationships.”  

Additionally, the regulation provides that the SBA may “presume” an identity of interest based on economic dependence if a “concern in question” derives 70% or more of its receipts from another concern over the prior three years.  Pointing mainly to this presumption’s requirement that the “concern in question” obtain receipts from the entity it is alleged to be affiliated with, OHA concluded that under the regulation any finding of an identity of interest based on economic dependence “requires a revenue stream...to flow” from an alleged affiliate to the protested contractor.

Thus, under OHA's ruling, no matter how many times a small business teams up with another business in a prime-subcontractor relationship, including with a large business, the SBA cannot deem the small business to be economically dependent on the other business as long as federal government money flows down from the small business as prime contractor to the other business as subcontractor.

The Perpetual Ostensible Subcontracting Doughnut Hole

As stated, Lost Creek argued that LifeHealth and Dentrust should be deemed to be affiliated because the extensive contracting between them violated the "3-in-2" rule, and alternatively, comprised a longstanding inter-relationship or contractual dependence among joint venture partners.  In response, the Area Office stuck to formality and concluded that the "3-in-2" limitation only applies when the offeror has submitted an offer "as a joint venture."  (Never mind that the affiliation exception for joint ventures among small businesses relied on by the Area Office to find the LifeHealth/Dentrust joint venture was a small business also applies only when parties submit offers as a joint venture.)  The Area Office's response prompted Lost Creek to argue on appeal that the Area Office's decision not to apply the "3-in-2" rule to an ostensible subcontract joint venture created a "doughnut hole" that nullified the prerequisites for the application of the joint venture affiliation exceptions under 13 CFR 121.103(h), including the requirement that the joint venture agreement be in writing and the joint venture be identified separately and registered in SAM.  

Although OHA did not address the issue in detail, in remanding the case to the Area Office on the issue of whether an ostensible subcontractor relationship exists, OHA instructed it to "also" consider Lost Creek's contention that LifeHealth and Dentrust were engaged in a longstanding inter-relationship or had developed a contractual dependence.  OHA's decision implies, therefore, that ostensible subcontractor joint ventures must comply not only with the rule against longstanding perpetual joint ventures, but also the "3-in-2" rule and as well as each of the remaining other prerequisites under 13 CFR 121.103(h) for the application of any joint venture exceptions to affiliation.

To read the Lost Creek decision go here.  To read other articles from The GovCon Bulletin™ go here.

SBA’s Agenda Anticipates Significant Rule Changes To WOSB, SDVOSB, And HUBZone Programs

September 1, 2017
SBA’S AGENDA ANTICIPATES SIGNIFICANT RULE CHANGES TO WOSB, SDVOSB, AND HUBZONE PROGRAMS

Last week the SBA published its semiannual Regulatory Agenda (the “Agenda”), which is a summary of current and projected regulatory actions and completed actions.  The Agenda (which can be downloaded here) highlights several anticipated changes to regulations that impact small business government contractors, including women-owned small businesses (WOSB’s), service-disabled veteran owned small businesses (SDVOSB’s) and HUBZone small businesses. Below are several of the anticipated changes that government contractors should look out for in the very near future.

WOSB & EDWOSB Certification Procedures

As we wrote about in a prior edition of The GovCon Bulletin™ (here), the National Defense Authorization Act for Fiscal Year 2015 (NDAA 2015) imposed several mandates on the SBA’s WOSB program, including a requirement that a firm be certified as a WOSB or economically-disadvantaged women owned small business (EDWOSB) under one of four options: By a federal agency, by a state government, by the SBA, or by a national certifying entity approved by the SBA.  The SBA subsequently issued an advanced notice of proposed rule-making on December 18, 2015, again described in the same edition of the The GovCon Bulletin,™ in which the SBA raised several pointed questions and sought public input on each of the four proposed certification options.  The comment period ended on February 16, 2016 and now the SBA intends to issue a new rule that will propose certification standards and procedures.  In addition, the new rule will revise procedures for continuing eligibility, program examinations, protests and appeals.  Although not much is known about the specific changes, the SBA did make clear that the new certification procedures will include an electronic WOSB and EDWOSB application and certification process.

NDAA 2016 & 2017 Mandated Rules

The Agenda also anticipates that in the near future the SBA will implement a variety of rule changes required under the National Defense Authorization Act for Fiscal Year 2016 (NDAA 2016) and National Defense Authorization Act for Fiscal Year 2017 (NDAA 2017), including requirements concerning SDVOSB ownership and control, a pilot program granting past performance ratings to subcontractors, and subcontracting report compliance.

1. SDVOSB Ownership And Control Rules

The Agenda indicates that the SBA will issue a proposed rule establishing a uniform definition of a “small business concern owned and controlled by service-disabled veterans” that will be used for SDVOSB procurements by both the Veterans Administration (VA) and by non-VA agencies.  Before NDAA 2017, the definition for purposes of VA SDVOSB procurements was contained in VA statutes under former 38 U.S.C. 8127(l), while a different definition for non-VA procurements was contained in SBA legislation under 15 U.S.C. 632(q)(2).  Meanwhile, regulations fleshing out the SDVOSB definitions for purposes of VA procurements are under the VA’s regulations in 38 CFR Part 74 and, for purposes on non-VA procurements, under the SBA regulations in 13 CFR Part 125.

NDAA 2017, however, requires a government-wide uniform definition by amending 38 U.S.C. 8127 to refer back to 15 U.S.C. 632 for one controlling definition.  Moreover, NDAA 2017 clears the way for the SBA to provide the sole and definitive guidance on what it means to be owned and controlled by a service-disabled veteran by prohibiting the VA from issuing regulations relating to either small business status or the ownership and control of a small business.

As for the new uniform definition of “small business concern owned and controlled by service-disabled veterans,” NDAA 2017 provides three categories of businesses that will meet the definition:

First, a small business concern (i) not less than 51 percent of which is owned by one or more service-disabled veterans or, in the case of any publicly owned business, not less than 51 percent of the stock (not including any stock owned by an ESOP) of which is owned by one or more service-disabled veterans; and (ii) the management and daily business operations of which are controlled by one or more service-disabled veterans or, in the case of a veteran with permanent and severe disability, the spouse or permanent caregiver of such veteran;

Second, a small business concern (i) not less than 51 percent of which is owned by one or more service-disabled veterans with a disability that is rated by the Secretary of Veterans Affairs as a permanent and total disability who are unable to manage the daily business operations of such concern; or (ii) in the case of a publicly owned business, not less than 51 percent of the stock (not including any stock owned by an ESOP) of which is owned by one or more such veterans; and

Third, a small business concern that met either of the two requirements described above immediately before the death of a service-disabled veteran who was the owner of the concern, the death of whom causes the concern to be less than 51 percent owned by one or more service-disabled veterans, if (i) the surviving spouse of the deceased veteran acquires such veteran's ownership interest in such concern; (ii) the veteran had a service-connected disability rated as 100 percent disabling by the VA or such veteran died as a result of a service-connected disability; and (iii) immediately prior to the death of such veteran and during the period it is otherwise an SDVOSB the small business concern is included in the VA’s VetBiz database.

A surviving spouse in the third category can only continue to operate the SDVOSB until the tenth anniversary of the veteran’s death, the date he or she remarries, or the date he or she relinquishes ownership, whichever comes first.  As for the small businesses in the first two categories, small business owners should take note of the exclusion of stock owned by an ESOP in the determination of whether ownership requirements are met for a publicly owned business.

2. Pilot Program For Qualified Subcontractors To Obtain Past Performance Ratings

NDAA 2017 also authorized the SBA to establish a pilot program that would enable first tier small business subcontractors without any past performance rating to, nevertheless, obtain past performance ratings for work done as subcontractors.  Under the proposed pilot program a subcontractor must submit to a designated official an application for a past performance rating for work done under a government contract within either 270 days of the completion of the subcontractor’s work or 180 days after the completion of the prime contractor’s work, whichever is earlier.  The subcontractor is required to include with the application evidence of the past performance factors that it seeks to be rated on, as well as its own suggested past performance ratings.  The designated official must then forward the application to the covered contract agency’s Office of Small and Disadvantaged Business Utilization (OSDBU), as well as to the prime contractor.  Thereafter, the OSBDU and the prime contractor must submit a response to the subcontractor’s application.  NDAA 2017 provides procedures if there is agreement or disagreement over proposed past performance ratings, as well as a procedure for a small business subcontractor to respond to any disagreements by the OSDBU or a prime contractor over proposed past performance ratings.

3. Failure To Act In Good Faith In Submitting Timely Subcontracting Reports Will Be A Material Breach Of The Contract

NDAA 2017 also makes changes to the Small Business Act that makes a failure to act in good faith in providing timely subcontracting reports a material breach of a government contract. NDAA 2017 requires the SBA to provide examples of activities that would be considered a failure to make a good faith effort to comply with requirements.

Comprehensive Changes To The HUBZone Program

Lastly, the SBA Agenda anticipates significant changes to the SBA’s HUBZone program.  Although short on any specifics, the Agenda indicates that “comprehensive” revisions will be made to the HUBZone program and regulations under Part 126 of the SBA’s regulations. The SBA indicates that its focus will be to make it easier for participants to comply with program requirements and to maximize program benefits, to determine if regulations should be modified, streamlined, expanded or repealed to make the HUBZone program more effective and/or less burdensome on small business concerns, and to maintain a framework that identifies and reduces waste, fraud, and abuse in the program. 

The SBA has invited the public to comment on any aspect of its Agenda.

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

Taking A Closer Look At The House’s 2018 NDAA Bill

July 28, 2017
TAKING A CLOSER LOOK AT THE HOUSE'S 2018 NDAA BILL

Earlier this month, the House passed its bill authorizing $696 billion in Department of Defense (DoD) spending for the 2018 fiscal year. The Senate Armed Services Committee recently completed markup of the Senate’s version of NDAA 2018, and now that healthcare legislation is off the calendar, the Senate should begin consideration of its bill shortly.

Getting back to the bill that passed the House, though, certain aspects of the authorization have already attracted significant attention, including a proposed establishment of a Space Corps, which would be a distinct military service within the U.S. Air Force. Other noted aspects of the bill include provisions that prevent a new round of base realignment and closures, that reauthorize the Women’s Business Center program, that provide significant resources to hiring and training acquisition personnel on acquisition of commercial items, and that establish a program for acquiring commercial products from “online marketplaces” widely used in the private sector. Whether these or other House provisions survive after a Senate bill is passed and conflicts worked out remains to be seen.

Nevertheless, for DoD contractors, the House bill certainly reflects the priorities of agency and industry constituencies vocal enough to have their spending priorities expressed in the proposed legislation. Indeed, to the extent the House bill represents a wishlist of defense spending, it may offer a glimpse, albeit hazy and imperfect, of potential opportunities that may someday materialize in future DoD solicitations and Broad Agency Announcements. Consequently, even at this stage contractors - particularly technology innovators and small business subcontractors - wishing to make predictions on which way DoD budgetary winds will blow may want to take a close look at the House bill.

The bill, for example, includes authorizations for typical expenditures such as aircraft, submarine and destroyer acquisitions. Of greater interest to construction contractors and subcontractors, perhaps, the House bill also includes authorizations for approximately $10 billion in military construction projects, land acquisition, and family housing projects for the Army, Navy, Air Force, National Guard and Reserve, and defense agencies.

The bill also points to new and intriguing defense systems that may drive future technological innovation. For example, in addition to authorizing expenditures for ground-based missile defense systems, the House bill also authorizes DoD to develop a space-based “sensor layer” for detection and tracking of ballistic and hypersonic missiles, as well as a space-based “intercept layer” for targeting and intercept of ballistic missiles. And an interesting, if not sobering, glimpse of the kinds of threats DoD may arm against in the future is offered in provisions that established the “Commission to Assess the Threat to the United States from Electromagnetic Pulse Attacks and Events,” which is supposed to assess and make recommendations with respect to the threat to the U.S. from electromagnetic pulse attacks and events. In connection with the establishment of the space-based missile programs and the electromagnetic pulse attack commission, the bill requires DoD agencies to examine and report on both mature technologies and technologies requiring further research and development, as well as the feasibility and cost of solutions. Consequently, any public reports that come out of these programs should be of interest to companies pursuing emerging technologies.  

To view or download the House's version of 2018 NDAA, go here.

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