1. kaufCAN.com 1 Tidewater Government Industry Council Third Annual Small Business Regulatory Update: A Must for Small and Large Businesses Alike Terence Murphy (757) 624-3139 tmurphy@kaufcan.com January 29, 2013

2. kaufCAN.com 2 Overview 1.2013 National Defense Authorization Act 2.Enhanced subcontracting management by the SBA 3.Accelerated payments for small business subcontractors 4.Small business set-asides on multiple award contracts 5.Non-displacement of qualified workers

3. kaufCAN.com 3 National Defense Authorization Act (“NDAA”) Key Areas affecting Subcontractors and Small Businesses –Subcontracting Plan Enforcement –Limitations on Subcontracting 1.

4. kaufCAN.com 4 NDAA Subcontracting Plan Enforcement –Notification: Sec. 1653 requires an offeror to notify any potential subcontractors that it intends to include in its subcontracting planSec. 1653 –Reporting: Sec. 1653 also requires the SBA to establish a reporting mechanism to allow a subcontractor or potential subcontractor to report “fraudulent activity or bad faith by a contractor with respect to a subcontracting plan”Sec. 1653

5. kaufCAN.com 5NDAA Limitations on Subcontracting Service Contracts –Sec. 1651 requires that small business prime contractors not expend on subcontractors more than 50 percent of the amount paid to the concern under the contract, with exceptions for subcontractors that qualify as a “similarly situated entity”Sec. 1651 compliance with the limitations on subcontracting will be based on the total amount paid to the small business, not the “cost of the contract incurred for personnel” (13 C.F.R. § 125.6(a)(1))13 C.F.R. § 125.6(a)(1)

6. kaufCAN.com 6 NDAA Limitations on Subcontracting Supply Contracts –Sec. 1651 also requires that small business prime contractors for supply contracts (other than from a regular dealer) “may not expend on subcontractors more than 50% of the amount, less the cost of materials, paid to the concern under the contract.”Sec. 1651 compliance with the limitations on subcontracting is based on the total amount paid to the small business, not the “cost of manufacturing the supplies or products (not including the costs of materials.) (13 C.F.R. § 125.6(a)(2))13 C.F.R. § 125.6(a)(2

7. kaufCAN.com 7 Enhanced Subcontract Management by the SBA Final rule expected March, 2013 to implement provisions of Small Business Jobs Act 2010 (Rule initially proposed in October, 2011) (76 Fed. Reg. 61626)76 Fed. Reg. 61626 For procurements >$1.5 million for construction and $650k for non-construction: –Rule specifically authorizes agencies to consider proposed small business subcontracting plans when evaluating offers 2.

8. kaufCAN.com 8 –Large prime contractors must represent they will make good-faith efforts to award subcontracts to small businesses at the same percentage as set forth in the subcontracting plans in their proposal –If a large prime does not meet the small business percentage the prime represented in its subcontracting plan, the large prime must provide a written justification and explanation to the CO Enhanced Subcontract Management by the SBA (cont.)

9. kaufCAN.com 9 –A prime must notify the CO in writing whenever the prime reduces payments to a sub or when payments to the sub are 90 days or more past due Enhanced Subcontract Management by the SBA (cont.)

10. kaufCAN.com 10 Accelerated Payments Proposed rule in December 2012 to require accelerated payments to small business subcontractors (77 Fed. Reg. 75089)77 Fed. Reg. 75089 –Implements OMB Policy Memorandum (July 11, 2012) Rule would establish new FAR clause at 52.232-XX, Providing Accelerated Payment to Small Business Subcontractors –“Upon receipt of accelerated payments from the Government, the contractor is required to make accelerated payments to small business subcontractors to the maximum extent practicable after receipt of a proper invoice and all proper documentation from the small business subcontractor.” 3.

11. kaufCAN.com 11 Small Business set-asides on Multiple Award Contracts (“MAC’s”) Proposed rule in May 2012 to implement Small Business Jobs Act of 2010 (77 Fed. Reg. 29129)77 Fed. Reg. 29129 –Aimed at increasing small business participation in multiple award contracts –Gives agencies discretion to award MACs with a partial set-aside –Allow small businesses to submit an offer on the set-aside portion, non-set aside portion, or both –Applies to GSA Multiple Award Schedule contracts Final rule expected: February, 2013 4.

12. kaufCAN.com 12 Non-displacement of Qualified Workers Under Service Contracts Final rule (77 Fed. Reg 75,766, 12/22/12) amending the FAR to implement Executive Order 13495 for Nondisplacement of Qualified Workers Under Service Contracts77 Fed. Reg 75,766 –EO 13495 policy: require the successor contractor and its subcontractors to offer those employees employed under the predecessor contract, whose employment will be otherwise terminated as a result of the successor contract, a right of first refusal of employment under the successor contract in positions for which they are qualified 5.

13. kaufCAN.com 13 Non-displacement of Qualified Workers (cont). Rule applies to all solicitations issued on or after January 18, 2013: –Contracting Officers are expected to work with their existing contractors to bilaterally modify their contracts to include a clause at FAR 52.222-17: Requires that the predecessor contractor: (1) inform its workforce of their right of first refusal; and (2) provide a certified list of its service employees to the Contracting Officer no less than thirty (30) days before contract completion.