The COVID-19 battle will continue as a local issue. It is at the local level in which federal funding programs are enacted, grown and made part of the culture.
Small businesses within states or territories may apply for a disaster assistance loan. There will be dramatic roles for small business, not just in medically related fields but also in logistics to geospatial technology fields and others.
“TheU.S. Small Business Administration is offering designated states and territories low-interest federal disaster loans for working capital to small businesses suffering substantial economic injury as a result of the Coronavirus (COVID-19).
SBA’s Economic Injury Disaster Loans offer up to $2 million in assistance and can provide vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing.“
Release Number:20-24 SBA To Provide Small Businesses Impacted by Coronavirus (COVID-19) Up to $2 Million in Disaster Assistance Loans:
Our Agency will work directly with state Governors to provide targeted, low-interest disaster recovery loans to small businesses that have been severely impacted by the situation. Additionally, the SBA continues to assist small businesses with counseling and navigating their own preparedness plans through our network of 68 District Offices and numerous Resource Partners located around the country. The SBA will continue to provide every small business with the most effective and customer-focused response possible during these times of uncertainty.
Process for Accessing SBA’s Coronavirus (COVID-19) Disaster Relief Lending
• TheU.S. Small Business Administration is offeringdesignated states and territorieslow-interestfederal disaster loans for working capital to small businesses suffering substantial economic injury as a result of the Coronavirus (COVID-19). Upon a request received from a state’s or territory’s Governor, SBA will issue under its own authority, as provided by the Coronavirus Preparedness and Response Supplemental Appropriations Act that was recently signed by the President, an Economic Injury Disaster Loan declaration.
• Any such Economic Injury Disaster Loan assistancedeclaration issued by the SBA makes loans available to small businesses and private, non-profit organizations in designated areas of a state or territory to help alleviate economic injury caused by the Coronavirus (COVID-19).
• SBA’s Office of Disaster Assistance will coordinate with the state’s or territory’s Governor to submit the request for Economic Injury Disaster Loan assistance.
• Once a declaration is made for designated areas within a state, the information on the application process for Economic Injury Disaster Loan assistance will be made available to all affected communities.
• SBA’s Economic Injury Disaster Loans offer up to $2 million in assistance and can provide vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing.
• These loans may be used to pay fixed debts, payroll, accounts payable and other bills that can’t be paid because of the disaster’s impact. The interest rate is 3.75% for small businesses without credit available elsewhere; businesses with credit available elsewhere are not eligible. The interest rate for non-profits is 2.75%.
• SBA offers loans with long-term repayments in order to keep payments affordable, up to a maximum of 30 years. Terms are determined on a case-by-case basis, based upon each borrower’s ability to repay.
• SBA’s Economic Injury Disaster Loans are just one piece of the expanded focus of the federal government’s coordinated response, and the SBA is strongly committed to providing the most effective and customer-focused response possible.
For additional information, please contact the SBA disaster assistance customer service center. Call 1-800-659-2955 (TTY: 1-800-877-8339) or e-mail firstname.lastname@example.org.”
“Each SBIR Road Tour stop, hosted by a local organization, will provide attendees with an opportunity to hear directly from the participating federal agency program managers that administer over 5,500 new awards annually and to meet one-on-one with program decision makers.”
“ASmall Business Administrationrule implementing legislation that changes the calculations to determine small business size standards takes effect on Jan. 6, 2020.
The rule itself, which extends the period of average annual receipts from three years to five years for the purpose of determining size standards, was finalized Dec. 5.
“After this new size standard takes effect, small businesses will be able to make critical investments to grow their businesses without fearing that they will lose access to resources and contracting opportunities,” Sen. Ben Cardin (D-Md.), a sponsor of the Runway Extension Act legislation, said in a statement.”
These reactions are more sensational than accurate. The panel recommended creating a new way for the Defense Department to obtain competition, thus eliminating mandatory set-asides when using readily-available procedures. This change would not eliminate small business set-asides, nor would it eliminate the federal small business program. Under these procedures, DoD would still have the option to set-aside procurements for small business.
Some are concerned that implementing this recommendation would lead DoD to stop setting aside work for small business. A prominent real-world example shows that this is unlikely. Under the General Services Administration (GSA) Multiple Award Schedule (MAS) program, solicitations are frequently set-aside despite the fact that the “rule of two” is not applicable to these purchases. Agencies strive to meet their small business utilization goals, so they set-aside procurements when appropriate, even though they are not required to do so.
The panel’s recommended changes are necessary to put mission first, prioritize warfighter needs for state-of-the-art capabilities and break away from the current compliance-oriented acquisition culture. The panel believes many of the constraints in the current system can be removed while still meeting the broader public policy objective of acquiring supplies and services from small businesses through government contracts.
The panel’s Volume 3 Report states, “Many companies do not view DoD as a viable, much less a critical, business partner.”
Companies that do business with DoD, including many small businesses, may like it that way because it limits competition. They know how the system works, with all its quirks and inefficiencies, and can leverage that knowledge to get contracts. Under the panel’s recommendations, some of these incumbent small businesses will be challenged by additional competition from non-traditional small businesses that could offer better solutions for warfighters and better value for U.S. taxpayers. That would be a win for restoring true competition and enabling DoD to reap the benefits of innovation from a wider variety of small businesses.
The private-sector small businesses that drive the majority of innovation want nothing to do with the current DoD market. Many do not even know what FedBizOpps is and can’t wait a year to find out if they’ve won a contract. Others have tried to sell innovative technology to DoD, giving up after experiencing what feels like an endless business development cycle. These are often insurmountable hurdles for companies that endeavor to create and deliver innovation at speed.
The Air Force’s recent Pitch Day showed how one DoD organization is reaching out to industry and embracing small business by simplifying and accelerating the acquisition process. But much like Other Transaction Agreements and Middle Tier Acquisition, Pitch Day was a work-around to traditional practice orchestrated by bureaucracy hackers (kudos to them!). For long-term success, acquisition practices like this must be the norm, not the exception.
It is time to stop creating or expanding authorities for DoD to operate outside the acquisition system and deliberately implement changes that will make DoD’s acquisition system function in today’s private-sector-driven marketplace, establishing a system that meets warfighters’ needs in a way that provides agility and values time.
—Section 809 Panel Volume 3 Report
In Volume 1, the panel recognized that small businesses are valuable sources of innovation and described a pivot in how they should be utilized to support DoD’s warfighting capabilities and capacities. The recommendations included bolstering support and funding for the Small Business Innovation Research (SBIR), Small Business Technology Transfer (STTR), and Rapid Innovation Fund (RIF) programs, making SBIR and STTR permanent, and providing increased flexibility for use of RIF.
The panel’s Volume 3 recommendations aim to help level the playing field by drastically streamlining and simplifying defense acquisition. Currently, small businesses are at a disadvantage navigating these complex processes because they lack the staff and infrastructure many large businesses have dedicated to their work with the federal government (e.g., business development, compliance, legal). By reducing many of these government-unique processes, the panel cuts administrative time for both small businesses and the government’s acquisition workforce, allowing the system to deliver solutions faster.
A closer look at the panel’s recommendations as a whole made it clear that the panel views small businesses as central to DoD’s mission, as long as DoD policies focus on encouraging innovation and maintaining a diverse pool of suppliers that can meet mission needs. If the Section 809 Panel recommends eliminating anything, it is the excessive amount of time it takes to deliver innovation to warfighters.
So let’s throttle back on the hysteria and work together to put DoD’s acquisition system on a war footing to better support warfighters defending against the nation’s adversaries. Congress should adopt, and DoD should support, the panel’s readily available recommendation in the 2020 NDAA.
U.S. warfighters need more innovation from small businesses, and they need it now.”
“Government contractors often assume that a foreign-owned company cannot qualify as a small business under the SBA’s government contracting size rules.
Not so. As demonstrated by a recent SBA Office of Hearings and Appeals size appeal decision, a foreign-owned entity can qualify as a small business, provided that it has a physical location in the United States and contributes to the U.S. economy.”
After evaluating proposals, the Army announced that Bukkehave, Inc., or “BHI,” was the apparent successful offeror. BHI is based in Florida, and is a wholly-owned subsidiary of a Danish company, Bukkehave Corporation. An unsuccessful competitor, A&Y Government Services, LLC, then filed a size protest challenging BHI’s small business status.
The SBA Area Office noted that BHI was affiliated with its parent company and several other entities. However, when combined with its affiliates, BHI’s employee count still fell below the 1,500-employee threshold for NAICS code 336112. The SBA Area Office issued a size determination finding BHI to be an eligible small business for purposes of the Army contract.
A&Y filed an appeal with OHA. A&Y’s appeal stated that BHI “is merely a sales office owned by a FOREIGN corporate entity.” Awarding the work to BHI, A&Y argued, would mean that the money paid by the Army “will go to Denmark.”
OHA wrote that, contrary to A&Y’s apparent misconception, “SBA regulations . . . do not bar a foreign owned concern from participating in a small business set-aside, provided that the concern is based in the U.S. and contributed to the U.S. economy through the payment of taxes or otherwise.” In support, OHA cited 13 C.F.R. 121.105(a)(1), the SBA’s regulation defining a “business concern.”
In this case, OHA wrote, “BHI is a corporation based in the state of Florida, and . . . BHI contributes to the U.S. economy by paying taxes.” OHA denied A&Y’s size appeal, writing that there was “no basis to conclude that BHI is ineligible for this procurement.”
In my experience, many government contractors believe that a foreign-owned entity can never qualify as a small business for purposes of the SBA’s government contracting rules. But as the A&Y Government Servicescase demonstrates, the truth is more nuanced. It’s not foreign ownership that is the test, but rather a U.S. location and contribution to the American economy.”
“Individuals and groups often ask what conditions drive the right time to form a small business federal government contracting enterprise.
Here are factors to consider in determining if the time is right for you to form a small business federal government contracting company. “
Individuals and groups often ask what conditions drive the right time to form a small business federal government contracting enterprise.
They may be working in the venue for someone else. Perhaps they have discovered a need in the civil agencies or defense markets they can fill with a product or service being provided in the commercial sector and feel they could expand into the government marketplace.
A contractor moving from project to project in government contracting as an individual often asks, “Are conditions right to form an enterprise?”
Starting a government contacting company may seem a logical extension of the work one has done previously so the transition appears easy enough. What must be learned very quickly is the business planning, marketing and competitive analysis aspects of operating an enterprise, as opposed to single person efforts.
Industry teaming, having others work for us and dealing as a company instead of a person are all challenges. The adjustments in outlook and in the development of a client base as a company progressing to profitability pose challenges.
This article will suggest factors to consider in determining if the time is right for you to form a small business federal government contracting company.
Small business federal government contracting is not rocket science – to succeed one must take what one does well in the commercial marketplace or what experience leads one to believe one can plan successfully as a commercial enterprise and then apply it in a slightly different manner from a business perspective to accommodate federal government contracting requirements.
Very few companies enter federal government contracting without some commercial experience and success or prior professional employment. Very few start ups entertain initially contracting exclusively to the federal government without commercial work or other employment to sustain operations while the more lengthy government procurement process is being pursued.
There is often confusion regarding the definition of the term, “Contractor” in government work. The term is used in a conflicting manner to describe companies, individuals and business relationships. It has different connotations within corporations as opposed to government agencies, and is often confused with terms like “Subcontractor”, “Supplier” or “Vendor”.
The article linked below defines the term, “Contractor” and discusses the regulatory factors and practical considerations related to use of the term from a small business federal government contracting perspective:
Consider carefully a product or service area in which you have experience and talent as well as for which there is a demand. Make it in a field in which you would enjoy a long term involvement. Then give your small business company concept the following test:
1. Do you have a product or service niche in mind?
2. Do you believe you have a market for 1 above and the means to reach it?
3. Are you willing to develop a business plan using the tool kit linked below to validate 1 and 2 above before you launch?
If the answer to the above questions is “Yes”, take the actions indicated above, observe the results, and make an informed decision on whether or not to proceed.
Executing the below process establishes the firm officially on paper and commits the owner(s) to the enterprise:
For the majority of individuals who are starting single person or no more than 2 or 3 person operations, a Limited Liability Company (LLC) registered with the state and with the federal government is recommended.It will separate personal assets from company assets and protect them. When product or services sales begin generating revenue an LLC has many tax advantages. It can be registered as Sub Chapter ‘S’ for tax purposes and revenue and the expenses can be passed through to personal tax returns, paying no taxes as a company. The double taxation issue prevalent with many of the other types of incorporation is avoided with a Sub chapter “S” LLC. An LLC assists in limits your personal liability for debt and court judgments that may not fall in your favor.
Representing the business as a company allows pursuing financing as an enterprise. You can think of a creative name for your LLC and you can complete the articles of incorporation necessary to bring your enterprise into existence. The term, “LLC” must conclude the name of your company if you decide to form such an organization.
Free instructions for registering in your state and federally with the IRS are available at the Box Net “References” cube in the right margin of this site. You will receive tax and employer identification numbers by registering your business.
A very common mistake is not generating and executing an operating agreement among the founders if there is more than one person involved in forming the company. An operating agreement, is a separate document, not controlled or required by the state or the federal government, but very important to your company.It should be a simple, straightforward document you and the prospective partner(s) can draft yourselves addressing such matters as % of ownership, how revenue will be distributed and other general matters, as well as who can commit the company in the form of credit cards, employment offers and who signs checks on the company account and other administrative matters. Buying out a partner should also be covered as well as adding new members if the need arises down the road.
I have seen many enterprises fail or go through terrifically hard times due to lack of an operating agreement. The parties should sign it after a review by a lawyer. It should then be notarized and made an official part of the company file. You can download a generic operating agreement at the Box Net “References” cube in the right margin of this site.
It is for an LLC but you could modify it for other types of corporations. You can feel free to borrow from the sample or supplement it as you see fit. It is fairly comprehensive in order to cover most business situations and there may be elements of the example you feel are not necessary.
You will not be able to go it alone.
Evolving niches and industry teaming leading to larger projects as part of multiple company efforts is a necessity in forming a small government contracting business, particularly in the services venue.Synergism is paramount in teaming with any size company, whether in a lead or subcontracting role. There should be technical, management and market segment similarities between you and any company with whom you are considering teaming. Your prospective team member ideally will not be a direct competitor; rather a business in a related field with whom you share a mutual need for each other’s contributions in pursuing large-scale projects.
Relationships must be developed with primes and other small businesses that can help you, team with you and keep you in mind as they search for success. That takes time, patience and open-minded, out of the box thinking. It also takes more than a Non-Disclosure Agreement (NDA), a teaming agreement (TA) and a proposal to succeed. It takes dynamic marketing and communication with strong partners and hard, innovative work. Nice buzz words you say – but it is the truth and you have to find what that truth means to you.
Carefully consider the 5 factors noted above when evaluating the formation of a small business government contracting company. For additional details on any of the factors, please see the free book in the BOX at the right margin of this site: ”
But Saboo said her company won the Marine Corps contract and many others not because agencies are using the SBIR program like Congress intended, but despite of it.
“The best kept secret in Phase III of the SBIR program is that any agency can put millions of dollars on the contract without competition. It’s very similar to an 8(a) contract,” Saboo said in an interview with Federal News Radio. “The problem is most contracting officers have no clue how to do that. I’ve tried to sell that until I was blue in the face. I have 89 different SBIRs, but I can’t get them to use it. That is challenging.”
Instead, Harmonia Holdings is using SBIR as a kind of venture capital fund where Saboo can obtain funding for research and development and then once the tool or software is ready, offer it back to the government through other contract opportunities.
“I use SBIR technology opportunities as areas where I want to develop competencies for my company,” she said.
GSA to offer Assisted Acquisition Services
And this is why the General Services Administration’s new pilot to use its Assisted Acquisition Services in the Federal Acquisition Service aims to connect companies like Saboo’s with federal agency buyers.
“We partnered with Small Business Administration to make this pilot program happen, said Mark Lee, GSA’s assistant commissioner of the FAS Office of Policy and Compliance, during a press briefing on July 30. “We think AAS is positioned to set up a shared service across the government to help support innovative solutions throughout the marketplace and that can lead to the job creation the program is designed to bring. There is a unique opportunity to work with companies early on and bring them to a contract vehicle and get them opportunities.”
Lee said the client support centers in Region 5 and the FedSIM office will run the pilots and have dedicated support to help expand the use of companies under the SBIR program throughout the rest of the federal acquisition offerings by GSA.
Saboo said any more attention Phase III SBIR companies can receive to help commercialize their technologies, the real key is whether FAS trains its acquisition workforce to use the program to the full extent the law allows.
“Once you finish Phase III, you are in the valley of death because there is no specific need anymore,” she said. “If you find someone who is interested in your project, you need money to really expand the project to do what they want, and the customer, especially in the Defense Department, may not be able to get you money for two years because of how the budgeting process works. We, and many other companies, have never been able to use the Phase 3 contract because contracting officers don’t know how to use it and the gap between funding is too much.”
Lee said part of the reason why GSA is stepping in is to address similar problems Saboo is referring to.
Jeff Koses, GSA’s senior procurement executive, said AAS is offering access to the SBIR Phase III companies currently and the pilot runs through fiscal 2019.
“We will have a governance process in place to ensure we understand the rules and making most effective use of the program,” he said. “We will communicate with SBA about future possibilities, such as extending the pilot to other parts of GSA or other areas of the SBIR program. When a customer agency comes to us with authority to use a company in the SBIR program, GSA will be the acquisition arm to support that makes the connection between the agency need and industry partner.”
John Shoraka, a former SBA associate administrator for government contracting and business development and now managing director of GovContractPros, said GSA’s idea is a good one, but the agency and SBIR companies also need to keep in mind several things.
“There should be significant SBA involvement as their Office of Innovation and Investment (OII) manages the SBIR program and reports on it to Congress,” he said. “The reporting of SBIR awards is unclear, and it is also unclear how many agencies use all of their dedicated SBIR funding, and how successful the funding is. There should be a report card grading system like the small business report cards to Congress for SBIR.”
Saboo said another way to improve the SBIR program would be for agency acquisition officers and commercialization assistance programs to spread the word about how the program works consistently and persistently.
“GSA doesn’t have to do matchmaking. I can take products and create opportunities if contracting officers are open to listening and understanding what they can do with the SBIR program,” she said.”
“During fiscal year 2017, agencies bought $105.7 billion in goods and services from small businesses, which captured 23.9 percent of prime contract dollars. That proportion was slightly below fiscal 2016 when they captured 24.34 percent. Those numbers do not include subcontract dollars.
But the total dollars — prime and subcontracted — are higher with $105.7 billion in fiscal 2017, compared to $99.1 billion in 2016.
The Small Business Administration gave “A” grades to 20 agencies. Nine of those got an “A-plus” and 11 with an “A” grade. Two agencies received a “B” grade and one received “a” C grade — the U.S. Agency for International Development.
While the overall goal of 23 percent was surpassed, two specific small business categories fell short of their goals.
Women-owned small businesses have a goal of 5 percent but the government only spent 4.71 percent or $20.8 billion with these businesses. The fiscal 2017 percentage also is slightly below 2016 when women-owned small businesses picked up 4.79 percent of prime contract spending.
Results for Historically Underutilized Business Zone companies fell short. HUBzone firms won just 1.65 percent, or $7.3 billion, against the 3 percent goal. This also was a drop from fiscal 2016 when these businesses captured 1.67 percent of prime contract dollars.
Small disadvantaged businesses won 9.1 percent of the prime contracts, worth $40.2 billion in fiscal 2017. In fiscal 2016, they won 9.53 percent, a slight drop. The goal is 5 percent.
Only service-disabled, veteran-owned small businesses saw their percentage increase in fiscal 2017. They won 4.05 percent of prime contract dollars or $17.9 billion, compared to the 3.98 percent they won in 2016. The goal is 3 percent.
The overall subcontracting goal of 31.95 percent was not achieved. Small businesses won 31.4 percent of subcontract dollars.
Only women-owned and small disadvantaged businesses surpassed their 5 percent goals. Women-owned captured 6.2 percent of subcontract dollars, and small disadvantage captured 5.3 percent.
Service-disabled, veteran-owned business won 1.9 percent of subcontract dollars and HUBZone captured 1.3 percent. Both have a 3 percent subcontracting goal.
“In commentary published in the Federal Register last week, the SBA rejected (among other things) recommendations that it use average employee count to evaluate the sizes of construction firms and that other firms’ sizes be measured by profits or net worth instead of average annual receipts.
Way back in October 2009, the SBA solicited commentary on the White Paper in effect at the time. The SBA also sought comments on various policy questions the SBA must consider when developing size standards, such as “how high a small business size standard should be, should there be a single measure of business size for all industries (i.e., employee or annual receipts)” and so on. The SBA accepted comments until the end of the 2015 fiscal year.
Now, some 8 1/2 years after the SBA first sought public comments, the SBA has published its responses to those comments. If you’re something of a size policy nerd (I’ll admit to it!), the SBA’s Federal Register commentary is worth reading in its entirety. But for those who may not put themselves in that category, here are some of the highlights:
Profit measure rejected. The SBA rejected a suggestion to establish size standards based on gross profits rather than average annual receipts or employee count. “If a size standard were established in terms of gross profits,” the SBA wrote, “a company with hundreds of millions in revenues and thousands of employees can qualify as small under a profits-based size standard.” In fact, the SBA said, “[i]t is not unusual for very larger companies to have little or negative profit over the course of business cycles.” Plus, “a firm’s profits can be manipulated and thus would be an inconsistent and misleading measure of [a] firm’s size for size standards purposes.” Probably once a month or so, I hear from a business owner who asks whether size standards are already based on profits. It’s a rather common misconception. But not only are profits not the measure of small business size, the SBA has no plans to head in that direction.
Employee count for construction rejected. The SBA also rejected a suggestion to use average employee count, rather than average annual receipts, to measure the sizes of construction companies. “Under SBA’s prime contractor performance requirements . . . a general construction company needs to perform as little as 15 percent of the value of the work and a specialty trade contractor can perform as little as 25 percent of the work with their own resources,” the SBA wrote. “SBA is concerned that employee based size standards could encourage construction companies near the size standard to subcontract more work to others to bypass the limitations on subcontracting and remain technically a small business.” The SBA concluded: “[r]eceipts, as a representative of the overall value of a company’s entire portfolio of work in a given period of time, are a better measure of the size of a construction company to determine its eligibility for Federal assistance.”
Net worth limits rejected. The SBA similarly rejected a proposal to base size standards on net worth, saying that such a measure “is not practicable.” The SBA explained that “[a] company’s net worth can be affected by a number of things, such as debt, repurchased corporate stock, etc.” Furthermore, “data on net worth is not available by industry,” which would make it impossible for SBA to fairly establish size standards based on that measure.
No mid-tier or “micro” size standards. The SBA also rejected calls to establish new size standards for “mid-sized” businesses (certain companies that have outgrown the small business size standard) and “micro” businesses (such as those with less than $100,000 in sales or fewer than 20 employees). In rejecting these proposals, the SBA cited “significant complexity,” a “much more burdensome system and reporting requirements” and the fact that “Congress would need to establish new small business procurement goals for each tier to ensure that small businesses at different tiers have a fair access to Federal contracts.”
The SBA’s commentary is chock-full of interesting information, and not everything is the SBA saying “no.” The SBA does make some proposed improvements and refinements to its size standards methodology. The SBA also seeks public commentary on a variety of important size questions, such as whether there would be a uniform maximum size standard, and whether the SBA should consider lowering any size standards. Public comments are due by June 26, 2018.”