First Offshore Wind Project in United States to Launch This Fall

Mainbrace | September 2016 (No. 4)

Jonathan K. Waldron and Joan M. Bondareff

Although skeptics said it couldn’t happen, the first offshore wind project in the United States is scheduled to begin opera- tion by the end of this year, bringing wind power to shore from waters off Block Island, Rhode Island. Bragging rights can go to Jeffrey Grybowski and his team at Deepwater Wind. The project may be relatively small—five turbines producing only 30 megawatts (“MW”) of wind and providing power to about 17,000 homes—but it is a giant step forward in the world of offshore wind in the United States. Continue reading “First Offshore Wind Project in United States to Launch This Fall”

SBA Rule Expands Mentor-Protégé Program, Creates New Opportunities for the Maritime Industry

Mainbrace | September 2016 (No. 4)

David M. Nadler and Justin A. Chiarodo

After a long wait and much anticipation, the Small Business Administration (“SBA”) issued its final rule expanding the mentor-protégé program to all small businesses on July 25, 2016. The new rule broadly expands upon the existing 8(a) mentor-protégé program, and is projected to result in two billion dollars in federal contracts to program participants. The final rule makes some key changes to the February 2015 proposed rule, including changes regarding size certification and reporting. As the new rule is now final, contractors in the maritime industry, both large and small, should prepare now to take advantage of what the newly expanded program has to offer.

Background

The SBA mentor-protégé program has long-allowed large businesses to provide technical, management, and financial assistance to small businesses, and for the mentor and protégé to compete together for contracts. The program was designed to help protégé businesses by leveraging the experience and expertise of the larger mentor contractors. Originally limited to 8(a) concerns, the program was extremely successful. Large businesses were attracted to the program because it allowed them to pursue small business set-aside contracts as a joint venture with a protégé and foster small business relationships, and small businesses benefited from the resources and expertise of their mentors.

In 2010 and 2013, Congress authorized the expansion of the mentor-protégé program. In February 2015, SBA issued its proposed rule expanding the program to include all small businesses, although the 8(a) program will also remain independent of the new program. The proposed rule indicated that the SBA was contemplating a number of changes to the 8(a) model, including size certification approval requirements from the SBA and additional reporting and compliance requirements, particularly with regard to the structure of the joint venture. Many of these new requirements remain in the final rule, but there are some significant changes that government contractors in the maritime industry should be aware of.

Key Provisions of the Final Rule

The key changes and provisions of the final rule are discussed below.

1. Size Status Determination: The proposed rule contained a requirement for formal SBA verification of the size status of the protégé. This requirement was removed from the final rule. The SBA will  continue to allow protégés to self-certify, and will rely on the size protest mechanism to ensure that businesses are accurately certifying their size.

2. NAICS Code Standard: Under the final rule, businesses that do not qualify as small under their primary NAICS code can still participate under a secondary NAICS code if the protégé can show that it would benefit from the progression into a secondary industry to enhance its current capabilities.

3. Financial Condition of the Mentor: Under the proposed rule, a mentor was required to demonstrate to the SBA that it was in “good financial condition.” This requirement was removed from the final rule. The SBA acknowledged that as long as the mentor can meet all obligations under its mentor-protégé agreement, then the “good financial condition” requirement was unnecessary and created too much confusion, since the term was undefined.

4. Duration of the Agreement: The proposed rule limited the mentor protégé agreement to three years. It also only allowed for a protégé to engage in one three-year agreement with one entity and one with a separate entity, or two three-year agreements with the same entity. Commentors did not believe that three years was long enough. SBA’s final rule allows for two three-year agreements with different mentors, but also allows for each agreement to be extended for an additional three years as long as the protégé continues to receive the agreed-upon business development assistance.

5. Joint Venture Entity: The SBA clarified in the final rule that a joint venture need not be, but could be, a separate legal entity. The SBA sought to clarify that formal or informal joint ventures were permissible. Also, consistent with the proposed rule, the SBA clarified that a joint venture may not be populated with employees who are performing the contract, as this would defeat the purpose of the protégé learning from the mentor. A mentor may, however, own up to 40 percent of their small business protégé under the final rule. If ownership continues after the mentor-protégé agreement expires, the SBA indicated that its affiliation rules would apply.

6. Compliance and Reporting: In order to ensure the program serves its purpose and is not abused, the SBA has enacted rigid reporting requirements under the final rule. The SBA requires both the mentor and protégé to certify the joint venture’s compliance with the regulations, the terms of the joint venture agreement, and the performance requirements of the particular contract. The protégé is also required to engage in annual reporting on compliance. Penalties for non-compliance can include suspension and debarment.

Impacts on Government Contractors

Contractors should be aware that nearly all future small business set-aside contracts will draw bids from mentor-protégé joint ventures. Given this expansion to all small businesses, mentors will now have a wider selection of protégés to choose from. The new rule is expected to result in thousands of additional applications for the program. Indeed, the SBA has created an entirely new division within the Office of Business Development to process and review applications, and has left open the possibility of imposing open and closed enrollment periods for the program. Companies that are interested in participating in the program should make sure they obtain appropriate guidance on the final rule to ensure that all application, performance, and reporting requirements can be met.

U.S. Export Controls Pose Risks for Offshore Energy Companies’ Return in Iran

Mainbrace | June 2016 (No. 3)

Matthew J. Thomas

In March, Blank Rome co-hosted a breakfast seminar in Dubai with Fichte & Co Legal Consultancy to discuss with local shipping and energy professionals the real risks and opportunities presented by the rollback of international sanctions on Iran. We were awed by the warm reception we received, the huge turnout (well over 250 clients and friends), and by the insightful questions and contributions of those who joined us. Continue reading “U.S. Export Controls Pose Risks for Offshore Energy Companies’ Return in Iran”

New China-Liberia Maritime Bilateral: Savings on Port Fees Just One Element of Broader Trade Cooperation

Mainbrace | June 2016 (No. 3)

Matthew J. Thomas

In a November 2015 state visit in Beijing, the leaders of the People’s Republic of China and the Republic of Liberia signed a historic bilateral maritime agreement offering significant benefits to Liberian ship- owners. Headlines on the bilateral highlighted the immediate economic impact of the agreement: a 28 percent discount on tonnage dues in Chinese ports, putting Liberian ships on parity with Chinese vessels, and potentially saving $75,000 to $150,000 in annual port costs for capesize, VLCC, and large container vessels. Less well-understood, however, are the reasons behind this new alliance, and where the relationship appears to be headed in the future. Continue reading “New China-Liberia Maritime Bilateral: Savings on Port Fees Just One Element of Broader Trade Cooperation”

Top Ten Bid Protest Considerations for the Maritime Industry

Mainbrace | June 2016 (No. 3)

David M. Nadler

It is no secret that federal procurement spending has dropped considerably in recent years. With fewer dollars being spent and fewer procurements, government contractors in the maritime industry are increasingly turning to the bid protest process for a second chance to compete for, and hopefully win, new contracts, and preserve their incumbent contracts. The statistics bear this out. Bid protest activity at the U.S. Government Accountability Office (“GAO”) has steadily increased year-over-year, with a record 2,639 protests filed in fiscal year 2015 alone. But more filings has not meant more sustained protests; the GAO sustain rate in 2015 fell to its lowest recent level of only 12 percent (though this does not account for voluntary agency corrective actions, which have remained steady).

These statistics, and the new federal procurement reality, reinforce the need for maritime contractors to think carefully about effective protest strategies and emerging issues to maximize their chances to successfully protest procurements (or defend contract awards). Below are ten key trends and tips for government contractors in the maritime industry to keep in mind:

1.   Common Protest Grounds Remain Winners

As reported by the GAO, the most common winning protest grounds in 2015 contended that the agency failed to follow stated evaluation criteria, engaged in an unreasonable technical evaluation, failed to adequately document its evaluation and award decision, unreasonably evaluated cost or price, and/or unreasonably evaluated past performance.

2.   Focus on Process

Protesters are more likely to prevail if they focus on flaws in the agency’s evaluation process. Subjective debates about the merits of an award are almost always unproductive because the GAO affords agencies considerable discretion on their conclusions regarding such matters; for example, whether the protester’s technical approach was poor, acceptable, good, or excellent. The GAO will sustain a protest if the protester can show prejudicial process errors, like that the agency failed to follow the solicitation’s stated evaluation criteria, relied on unstated criteria to discriminate among offerors, or reached conclusions that are not reflected in the evaluation record. Successful protest arguments often focus on objective process errors in the agency’s evaluation and award process. Highlighting these types of defects may also encourage an agency to take early corrective action and can improve the chances of a successful protest.

3.   Make Disparate Treatment Arguments

Whenever possible, protesters should seek to make arguments that their proposals were disparately evaluated relative to the awardee’s proposal. Such unequal treatment arguments are important because they give protesters a basis to request the awardee’s proposal as part of the agency report. Having the awardee’s information and comparing it side-by-side with yours and the agency’s respective evaluations will significantly improve the pro- tester’s chances of demonstrating that the agency engaged in improper disparate treatment.

4.   Supplemental Protests Are

Because a protester has limited information at the time of a contract award and initial protest, protesters should focus closely on developing issues that will position counsel to have a broader look at the record as the protest develops. For example, having the awardee’s proposal is important because it usually allows the protester to identify supplemental protest grounds. In many cases, protests are won, or corrective action is taken, on the basis of supplemental protest grounds rather than the initial protest.

5.   Mind Trends in LTPA Procurements

Recent years have seen an increasing use of fixed-price contracts in lowest-priced, technically-acceptable (“LPTA”) procurements, over the more traditional best-value procurements. Although offering the lowest price is a necessary part of winning the contract, price alone is not a sufficient condition to award. Contractors must still ensure that their proposed technical solutions demonstrate an adequate understanding of solicitation requirements and are realistic to meet the agency’s needs and schedule. In short, while price is important, offerors competing for LPTA contracts should ensure that their proposals are compliant with the solicitation’s terms, realistic, and whenever possible, demonstrate performance that exceeds minimum requirements or otherwise provides benefits and advantages not required by the solicitation. These potential discriminators, which the agency can recognize as strengths, are still very relevant considerations in LPTA settings.

6.   The CICA Stay Loophole

 A primary advantage of filing a protest at the GAO versus other forums has been the automatic stay of contract performance under the Competition in Contracting Act (“CICA”) during the pendency of the protest. As a practical matter, the stay has benefitted protesters who are incumbents because it has generally resulted in the agency issuing a bridge contract to the protester to continue the work for the duration of the protest. Agencies generally issue a bridge contract, rather than seek an override of the automatic stay, because of the heavy burden placed on the agency to obtain an override. However, where a multiple award ID/IQ contract is in place, and the protest concerns a new task order under the current contract, some agencies have started circumventing the traditional override process by sole sourcing a task order bridge contract to the non-incumbent awardee for less than $10 million. This allows the awardee, rather than the incumbent protester, to perform the contract while the protest is pending. Because the GAO generally lacks jurisdiction over task orders valued at less than $10 million, and the Court of Federal Claims has no protest jurisdiction over task orders at all, this approach effectively allows agencies to bypass the purpose of the CICA stay, which is to preserve the status quo until the protest has been resolved. Until Congress closes this loophole, the potential lack of a bridge contract during the protest period and the associated revenue loss should factor into the risk/benefit analysis for incumbents when deciding whether to protest.

7.   Intervention as Protest Insurance

Even though the majority of protests that proceed to a decision are denied, a contract awardee has a vested inter- est in the outcome that almost always warrants participation in the protest through intervention. No other party to a protest, even an agency that awarded you the contract, will be able to represent your interests as well as counsel admitted under a protective order. Intervention by outside counsel will afford an awardee representation who will have access to complete copies of protest filings, and enable the intervenor to actively assist in the defense of the protest. In short, if you can intervene in a protest, you should.

8.   Check the Clock

Bid protests are subject to strict timeliness rules that vary based on the type of procurement and forum. At the GAO, contractors typically have 10 days to file a post-award protest from when they knew or should have known their basis for protest. Timeliness rules are particularly important where protesters are seeking a stay of contract award or performance (as is almost always the case). For example, to obtain a stay of award under CICA on a procurement with a required debriefing, the protest must be filed—and the agency notified by the GAO of that filing—within five days of the date offered for the debriefing. The key takeaway: if you’ve learned adverse information regarding a procurement, the clock is ticking.

9.   Two Bites at the Apple

A common strategy is to first file your protest at the GAO, and depending on the developments during those proceedings or their outcomes by the GAO, to take another shot by refiling the protest at the Court of Federal Claims. Protesters who find their chances of success low at the GAO are free to withdraw their protests and refile them at the court. Indeed, a protester can refile its protest at the court even after the GAO has denied it. While the court recognizes GAO’s bid protest expertise, it does not consider GAO decisions binding or precedential. The court conducts a new review of any protests before it. Because the court arrives at its own factual and legal conclusions, it can, and often does, sustain a protest previously denied by the GAO.

10.  Keys to the Kingdom

Access to an agency’s source selection documents and the awardee’s proposal is paramount in maximizing your chances of success in a protest. While GAO rules limit a protester’s access to documents to only those that are relevant to its allegations, which may only lead to partial access, the Court of Federal Claims requires the government to automatically provide all documents related or used in the procurement as part of the administrative record in the case. Thus, while going to court is generally more expensive than the GAO, this key difference may justify that premium in bigger ticket protests where the entire procurement needs to be carefully reviewed.