Government Contracts

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Attention HUBZone Companies!The Small Business Administration (SBA) recently issued a final rule implementing a very important change to the Historically Underutilized Business Zone (or HUBZone) program. The final rule—which becomes effective on May 25, 2018—“amends the HUBZone regulations to allow indirect ownership by United States citizens to more accurately align with the underlying statutory authority.” As the SBA points out, “[d]irect ownership is not statutorily mandated,” and thus the SBA “believes that the purpose of the HUBZone program—capital infusion in underutilized geographic areas and employment of individuals living in those areas—may be achieved whether ownership by U.S. citizens is direct or indirect.”

The final rule explains that the Small Disadvantaged Business (SDB) program and the SBA’s “other currently active socioeconomic programs (including the 8(a) [Business Development] program, the [Woman-Owned Small Business] program, and the [Service-Disabled Veteran-Owned] small business program) are intended to assist the business development of small concerns owned and controlled by certain individuals, so requiring direct ownership for these programs is consistent with their purpose.” According to the final rule, “[t]he HUBZone program differs in that the program’s goals do not center on the socioeconomic status of the [small business concern] owner but rather the location of the business and the residence of its employees.”

In light of the foregoing, “[t]his direct final rule deletes the requirement that ownership by United States citizens in the HUBZone program must be direct, and instead it merely copies the statutory requirement that a HUBZone small business concern must be at least 51% owned and controlled by United States citizens.”

If you have any questions about the SBA’s final rule, or about any other issues pertaining to the HUBZone program, please do not hesitate to contact Aron Beezley.

Enhanced Postaward Debriefings Have Arrived!The Office of the Under Secretary of Defense recently issued a memorandum to DOD contracting officials directing as follows:

Effective immediately, when providing a postaward debriefing of offerors in accordance with Federal Acquisition Regulation (FAR) 15.506(d), contracting officers shall include in the debriefing information provided to unsuccessful offerors an opportunity to submit additional questions related to the debriefing within two business days after receiving the debriefing. The agency shall respond in writing to the additional questions submitted by an unsuccessful offeror within five business days after receipt of the questions. The agency shall not consider the postaward debriefing to be concluded until the agency delivers its written response to the unsuccessful offeror.

The memorandum—which was issued in response to section 818 of the National Defense Authorization Act for Fiscal Year 2018—goes on to state:

[T]he agency shall comply with the requirements of FAR 33.104(c) regarding the suspension of contract performance or termination of the awarded contract, upon receipt of a protest filed by an unsuccessful offeror at the U.S. Government Accountability Office (GAO) within—

  • Ten days after the date of contract award;
  • Five days after a debriefing date offered to the protester under a timely debriefing request and no additional questions related to the debriefing are submitted; or
  • Five days after the Government delivers its written response to additional questions submitted by the unsuccessful offerors, whichever is later.

According to the memorandum, this direction “remains in effect until it is incorporated in the DFARS or otherwise rescinded.”

If you have any questions about the DOD’s enhanced postaward debriefing procedures, or any other related issues, please feel free to contact Aron Beezley.

A Warning for Government Contractors: Sovereign Immunity

A recent Georgia appellate court decision serves as a stark reminder to contractors on government projects that sovereign immunity, though frequently disclaimed in the contract, may limit a contractor’s ability to recover. In Fulton County v. SOCO Contracting Co., the contractor (SOCO) entered into a contract with Fulton County (the “County”) for the construction of a local cultural center.  The contract specified that the schedule could be extended and the scope of work could be altered by following the contract’s procedure for change orders, which required a written, bilateral agreement as to such changes.

After delays to the project, the County ordered changes to SOCO’s scope of work, but there was no evidence that such changes were executed through bilateral, written agreements as required by the procedure. SOCO even admitted that the County never issued a written change order extending the contract time or altering the scope. SOCO ultimately brought an action against the County for breach of contract and bad faith performance of the contract. The County asserted that any claims arising from unwritten change orders were barred by the doctrine of sovereign immunity.

In Georgia, the doctrine of sovereign immunity has constitutional status and may be waived only by an act of the General Assembly or the Constitution itself. Sovereign immunity is a threshold issue that must be addressed before the court may reach the merits of a case; the party seeking the benefit of the waiver of sovereign immunity bears the burden of proving such waiver, and whether it has been waived under undisputed facts such as these is a question of law.

The court asserted that although the County did waive sovereign immunity for breach of the written contract, it did not waive sovereign immunity for claims arising from modifications to the written contract that failed to follow the written change order policy outlined in the contract. The court concluded that SOCO provided no evidence that the change order procedure requiring a written change order was followed. The court determined that sovereign immunity could not be waived by the County for actions outside the written contract. Further, the court was unable to create an exception to the rules regarding waiver of sovereign immunity based on any reliance that SOCO may have placed on the County’s request for changes, upon the parties’ course of conduct, or upon facts that were deemed admitted. As a result, the court determined that there was a question of fact as to whether the County waived sovereign immunity and remanded the case for further consideration of whether the parties strictly complied with the contract’s procedure regarding written change orders.

The case highlights the fine distinction between compliance with a written contract and the breach of the terms of a written contract. It further serves as a stark reminder to contractors that the contract terms must be followed strictly to ensure the validity of an argument that the government waived sovereign immunity for breach of contract.