Carla:Good morning. Welcome to the live SBA web conference. With that, I'll turn the call over to Dwight Johnson. Dwight, please go ahead.
Dwight:Hi, everybody. Thank you, Carla. Sorry we're a little bit late. We had some technical issues and today we're talking about supporting service disabled veterans through federal contracts. Our presenter is Keith Waye from Maine. I'm Dwight Johnson and Jan Kaiser is with us as well.
We have these first slides. They're usually the same, but on number two here in the fine print, we wish you would pay attention to this. This is very important. It's come to our attention that there are many postings on FBO that include references to private companies for doing SAM registrations. Do not do this. The consequences of doing that, if you were to review for doing it, it would not be desirable because we never want to promote a private company.
I wish all of you would look at what you're doing and make sure that there's no reference to a private company in your FBO listing. The list we have seen that are included look like there could be a legitimate referral. I'm sure they are except your referral is costing small business several hundred dollars when the services could be obtained through the procurement technical assistants that are our good friends. Please do not do that.
Obviously this is so big because this comes actually from a legal statement, so it's always long. Caution. Don't make referrals to private companies. Make those referrals to the PTAC.
On the next slide, this is slide ... whatever slide it is.
Carl:Slide four.
Dwight:It looks different than what I had on my deal here. This is slide four. This is basically what Carl just said. We're on slide four and so it should be stating these slide numbers. Then down on point five, think of what you're doing if you're listing a private company. The thing to do if you're going to include a listing for a resource, which is the intention is very good, is rather than to do that, list the PTAC website, so you can make a reference there.
Slide five. This is new, so you might want to test it out. This is what they say is the beta stage of this. What we're doing is that we're going to be posting all of our past programs on this link and you'll be able to go there. You'll be able to view what we've done in the past. There will be a closed captioning document there that reflects what we're saying and so you can actually obtain credit as we're working on it. We're taking this at another time.
This is particularly designed for those who are farthest west, so you might want to check that out. If you have any feedback for us, let us know. The link below is how PTACs partner with federal agencies. You might find that interesting as well.
On slide six, next month we're talking, I like March, about partial small business set-asides. We haven't done this before and this will be a very interesting program for everyone, so I'm looking forward to that.
Then on slide seven, we're looking at having, of course, one continuous learning point for your participation. As you know, we're always grateful to have you tune-in and join us as we go through these topics which are very near and dear to our hearts here at SBA.
This is a self-service certificate, but keeping here is phoning in only. For those of you on the phone only mode, please email so that we have a record of you for attending on our roster. If you're listening in groups, it's nice to have a list of those participating in email in Excel. If you just send the names, that's not very meaningful for us.
This is the certificate and this is what you complete for your records to maintain your certification. With that, at least the points are going to cover and I'm going to turn it over to Keith. Keith, take it away.
Keith:Thank you, Dwight. Good morning, everyone. Today, we're going to talk about the SDVOSB program. Some of the key points that we want to cover is the control of the company, the SDVOSB program with the subcontracting and joint ventures, and a little bit how that works, the contract types, and how the size and status protests works. Towards the end, we're going to talk a little bit about market research. Next slide, Dwight.
Dwight:Ten, slide ten.
Keith:The SDVOSB program has been a work in progress with different congresses, different congressionals. The first time they passed Public Law 106-50 in '99. It was designed to assist the veterans especially the SDVOSB to expand and establish new businesses, and it provided counseling assistance and financial assistance for the veteran businesses, and established the contracting goals to assist them.
That worked for a little bit. Then a few years later they passed another public law that actually created the SDVOSB program. It allowed the set-asides and sole source authority for the SDVOSB program. The first time a law was passed, they didn't allow the set-aside. They just said to contracting officers, "Okay, this is the new program. Go ahead and make a goal." But they didn't give us a real good tool. Public Law 108-183 tried to add a little bit more keep to that.
Then Executive Order 13360, that was passed to strengthen the laws and it outlined a strategic strategy to meet the 3% goal. It gave a lot more of the inner workings on how the program would work. It also mandated the Veteran's Affairs to assist veterans and obtain a certification through the CVE, and they set-up the CVE program. They encouraged the agency contractors to subcontract the SDVOSB companies.
Then the last one was the Veteran's Benefits Healthcare and Information Technology Act of 2006, Public Law 109-461. That actually created the Veteran's First contract and program for the VA. It was just a natural progression as people were starting to return from the Gulf and saying, "You know what VA? These are your customers. These are your clients, so you should be doing something to help your veteran businesses. They created the Veteran's First program.
This applied only for VA acquisitions and established contracting goals, and gave the VA the sole source contracting authority, and [inaudible 00:09:39] a restricted competition for the SDVOSB and veteran-owned small businesses. Next slide.
Dwight:Eleven.
Keith:For the service-disabled veteran-owned small business, they have to be a small business and they cannot own any less than 51% of the business. The management and the daily business operations, they have to be controlled by one or more of the service-disabled veterans. A business maybe dual sided. They maybe large in some NAICS codes and then you look at some of their other NAICS codes that they certified to and they maybe small in those.
The business has to be small based on the NAICS code assigned to the solicitation, so you really need to make sure when you're looking at SAM that you're looking at the proper NAICS codes. The other difference in the SDVOSB program that's different than any other one is bullet two where the management and daily business operations of the disabled vet, that can be accomplished also by a caregiver or their spouse if the veteran has a permanent or severe disability. Next slide, slide 12.
Dwight:Twelve.
Keith:Who does SBA consider to own? The ownership must be direct. The ownership by one or more service-disabled veterans. It cannot be controlled by a parent company or another business entity. The service-disabled veteran has to be able to make the day-to-day decisions in the company. The ownership of a partnership, 51% of every class of partnership must be unconditionally owned by one or more of the SDVOSB and it has to be reflected in the partnership agreement.
For a corporation, 51% of the aggregate of all stock outstanding and at least 51% of each vote in stock outstanding must be owned by one or more SDVOSB. The companies can change ownership, but once their company changes ownership or business structure as long as one or more SDVOSB still control it after the change. Slide 13.
As we mentioned in the case of the veteran where the permanent or severe disability spouse or permanent caregiver can maintain that status for them. Fourteen.
The SDVOSB must have the managerial experience descending complexity to run the business that they're incorporated for. The SDVOSB may not have the technical expertise or they don't have to hold any of the special licenses to be found to control the company, but they have to demonstrate that they have the ultimate managerial and supervisory control over the personnel with the licenses or with the technical expertise.
They have to have the highest officer position, usually the president or chief executive officer. Again, they have to have the experience to run the company. Fifteen.
What requirements must an SBO submit on offer? They must be an SDVOSB. They must be small. They must meet the percentage of work requirements [inaudible 00:14:07] section 125.6 which is the limitations of subcontracting act. They must be an eligible joint venture and they must be an eligible non-manufacturer. Sixteen. That's a repeated slide for some reason. Seventeen.
The limitations of subcontracting for small business set-asides. 8(a) and WOSB is represented on this slide. Basically it pretty much says for the services they must provide 50% of personal cost, they must provide 50% of costs of manufacturing excluding the materials, and for construction, 15% of the cost of contract with their own employees excluding materials. Then the special trades 25 for SAM. This is what you would use for clause 52.219-14 for your regular set-aside contracts or 8(a) and WOSB. Next slide.
As you can see for the SDVOSB program, it changes just a little bit. You'll notice that the SDVOSB company can now use other SDVOSB companies and take credit for the percentage of work requirements of those subcontractors and their other business partners. It'll still have the same percentages, it just changes who they can count towards those percentages. Next slide.
Dwight:This is 19.
Keith:Slide 19. The small business joint venture definition, basically the definition is that it's an association of individuals and concerns with interests in any degree of proportion by way of contract expressed or implied. They're starting to engage in and carry out more than three specific or limited purpose business ventures for joint ventures over a two-year period, the three to two rule.
They can only submit three joint venture submissions in two years. They're combining their efforts, the property, money, skill, or knowledge to work on a particular contract. It's not a permanent basis for conducting business and it generally has to be writing.
The three tools based on submissions and not on awarded contracts, the two-year period starts from the date of the first award. An individual joint venture may receive more than three awards if they received one or two awards and then they put in offer on two different solicitations and received those awards. The companies may get those awards.
The companies may also create a second or a subsequent joint venture, but eventually the SBA is going to look at them and start looking at some of the affiliations rules because the joint venture is supposed to be just a limited duration. Next slide, please.
Dwight:Twenty-one.
Keith:The joint venture represents the formation of a new small business and it consists only of small businesses or only of SDVOSB companies, and it has to self-certify that it is small. It would do that by registering in SAM.
It's subject to the regulations that govern any other small businesses and the important thing on here is don't put into your solicitation that the joint ventures for an SDVOSB has to be reviewed by SBA. SBA only reviews the 8(a) joint ventures. Slide 21.
Dwight:Twenty-one.
Keith:Is the joint venture small? As I mentioned, the NAICS codes, the acquisitions, they have to be small. The NAICS code is chosen by the contracting officer that best meets the need of their requirement. The SBA size standard says that it's a three-year average annual revenue. If it's a revenue based at 17.5 million for three years, they may have 19 million in sales in one year, but be under it. You take the average of the aggregate of the three years.
The size standard for number employees is based on the last 12 months. The combined total revenue is for the employees. That would determine the size just like any other small business.
Dwight:Twenty-two.
Keith:There is exceptions to every rule. Basically the exceptions is for bundling where the procurement is too large for a small business to compete or under large procurements greater than ten million, they can be small. The joint venture or the [inaudible 00:20:01] small as long as each member is small under the size standard assigned to a procurement. That's really the only exception is for these large bundled contracts. Next slide, 23.
Dwight:Twenty-three.
Keith:The SDVOSB, in order to be eligible, they must manage the venture. They must be the managing partner and they have to receive at least 51% of the profit. When you're doing your contract administration on these joint ventures, you need to pay attention to who's getting paid, who's getting the majority of the money because the SDVOSB has to receive 51% of those profits. You could see 13 CFR 125-15 for more information on that. Next slide.
As mentioned just like any other small business, they have to be registered in SAM in the dynamic small business search. The one thing I want to mention in SAM is that the contractors can opt-out at having a public view of their records. If you're looking for a company that you think should be in SAM and you can't find them, remember to go in and go through SAM with your user name ID. Then those companies that opted out of public view will be able to be found. Next slide.
The FAR requires the offerer to provide the CAGE code prior to award for any action above the micro purchase level. Again, they would do that by registering in SAM. The contracting officers would go in and they would verify the CAGE codes in SAM. I don't think there's really a lot of issues with the CAGE codes and government contracting. Now it's a pretty seamless operation, a lot better sense with the CCR in SAM than when they used to have to go to DLA to get the CAGE codes. I think that's not really an issue anymore. Next slide.
Dwight:Twenty-six.
Keith:The SBA has stated their parity among all the programs. At one time, those contracting officers, we used to believe that we had to go to 8(a) first and then we go to some of the other programs, and then we do small business. The SBA clarified that quite a few years ago and said there is parity among all the programs, so the set-aside choice is based upon the market research and the goals of the individual agency, and is at the discretion of the contracting officer on which program they will use.
The only caveat to this is for the veteran's administration under Veteran's First program. They have to look at the SDVOSBs first. They do their market research. If they find that there is two or more SDVOSBs, they can provide a reasonable price. Then they have to set it aside for SDVOSB. Then you look at your other programs, then you would look at the small business set-asides, and then as a last resort you look at other than small business. Next slide.
Dwight:Twenty-seven.
Keith:As I said, the relationship among the small business programs for procurements valued over 150,000 are based upon market research. Everything under 150,000 is automatically set-aside for the small businesses. Next slide.
Dwight:Twenty-eight.
Keith:For the set-aside requirements, you look at the 8(a) HubZone, SDVOSB woman-owned. Is there a reasonable expectation? At least two responsible service-disabled will submit offers through the Rule of Two.
The other thing is the reward has to be made at a fair market price and often this is the hardest thing to gauge is, what is a fair market price? Is it what you paid for it five years ago or is it what the customer is giving you as the independent government cost estimate, or is it I can get it from a SDVOSB, but I can go to Walmart and save 10%. You need to figure out what is a fair market price.
We can also do partial set-asides and have a pool of SDVOSB companies. If you have a large procurement that can be broken up into several smaller requirements, look at doing an SDVOSB set-aside on that requirement. You can award your contract if only one firm responds. The test was at the market research phase.
Was there an expectation of having two or more bids? It don't necessarily mean that you will get those two or more bids, but did you have the expectation at market research. If so, you only got one firm and the firm responded within reasonable price, go ahead and annotate your contract file and make the award.