If you have a
Federal contract or you have ever represented or registered your company with the
U.S. Government as a small business, then read on. Changes to how companies register will go into
effect on August 27, 2013. In a move to
increase the penalties for mis-registering as a small business, the Federal Government
has eased its burden of proof regarding misrepresentation to provide for a ‘Presumption of Loss Based on the Total
Amount Expended’. These changes to the Code of Federal Regulations (CFR)
are a game changer for many medium companies, who may not be aware of their
immediate impact.
Changes to Federal Regulations. Here’s what
will happen. Changes to 13 CFR 121 et.
seq. are due to take place on August 27, 2013 and will severely increase
the penalties for misrepresenting the size of your business entity. If a
company soliciting to or contracting with a component of the Federal Government
represents itself as being a small business, but is in fact not a small
business, the Government has the right to assert that it has been damaged by
the total value of the contract. Performance
does not matter. Value does not matter. And the company cannot mitigate potential
costs or damages by using other small businesses. In other words, the company
was not entitled to have the contract in the first place, so the Government may
want its money back! In full.
Risk Mitigation
So how do you
prevent this from happening to you? While inadvertent misrepresentation may result
from a range of errors, the following two mistakes tend to be prevalent.
Mistake #1 - Failure to ensure that company representations
and registrations are current and accurate. Ensure that you understand your entity status
and where you have recorded it. What have you asserted in the past? Check online
with the Online Representations and Certifications Application (ORCA)
and System for Award Management (SAM). Verify that these representations
are still accurate and update them if necessary. Also, ensure that your
business development and contracting staff understand and adhere to this. If in doubt, it is not difficult to determine
if you qualify as being a small business.
That depends on your North American Industry Classification Systems (NAICS)
code, how many employees you have, and whether you are owned in common with
other companies. However, and this is
important, if you are owned or controlled in common with another company, then
their employees may count towards your total headcount and so prevent you
qualifying as a small business!
Mistake #2 - Willingly soliciting for work under a
‘set-aside’ to which you are not entitled. Submitting “a bid, proposal, application or
offer for a Federal grant, contract, subcontract, cooperative agreement, or
cooperative research and development agreement reserved, set aside, or
otherwise classified as intended for award to small business concerns” will be
deemed a certification that your company is a small business! Additionally, if
your bid, proposal, etc. encourages the Government to set a contract aside for
small businesses that would otherwise be opened to all bidders, then you are deemed
to have legally certified your small business status. And finally, if you
register in any Federal database as a small business concern then you are
deemed to have self-certified.
Only once you
are certain that you comply with the definition of a small business should you
consider offering your products and services to the Federal Government as a
qualifying small business.
Ignorance of
the law is no excuse. Don’t get caught out
with the new rules meant to protect small business concerns. If you have ever
represented yourself as a small business, then it is time to review, ensure your
business status, and update your representations. A misrepresentation will cost
you substantially, including the contract, no matter how much or how well you
have performed.
About the Authors
Robert Merting
and Alec Mackenzie work for Defense Management Group (DMG), a government
contracting consulting group with a focus on the defense industry. DMG
personnel are well experienced in drafting proposals, negotiating contracts,
and complying with the Federal Government through NAICS, ORCA, and SAM. If the
above applies to you, and you would like help sorting through your
requirements, please feel free to reach out to DMG.
For information
on other similar topics addressed by DMG, including NISPOM, FMF/FMS, FOCI, FCL
and GSA please see our blogspot at http://defensemg.blogspot.com/
No comments:
Post a Comment