Fair & Reasonable Pricing Determinations for Small … · • In making a determination of price reasonableness, CO may, among other things, perform a comparison of proposed prices

2018

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Fair & Reasonable Pricing Determinations for Small Business Set Asides

Jeffrey Hale & Natalie Colbert

NOAA Small Business Officers

May 01, 2018 NOAA -- SCIENCE - SERVICE - STEWARDSHIP 1

FIELD DELEGATE TRAINING

Relevancy of Small Business • Critical component of and major contributor to the strength

of local economies. – Bring growth and innovation to the community in which the business is

established. – Attract talent who invent new products or implement new solutions for

existing ideas – Possess the ability to respond and adapt quickly to changing economic

climates.

• Create new employment opportunities and serve as the building blocks of the US largest corporations. – Large corporations depend on small businesses for the completion of

various business functions through outsourcing.

NOAA -- SCIENCE - SERVICE - STEWARDSHIP 2


Relevancy of Small Business • According to SBA:

– Small businesses represent 99.7 percent of all employer firms. – Since 1995, small businesses have generated 64 percent of new jobs, and

paid 44 percent of the total United States private payroll.

• Awards to SB help them grow – Often remain in the community in which the business was first

established. Having a large corporation headquartered in a community can further help provide employment and stimulate the local economy.

– Can make significant contributions to the world. • Nike and Ben and Jerry’s started off as small businesses that grew to become

major players in the national and international marketplace. • Microsoft is another prime example of how a small business idea can change

the world.



Federal Small Business Policy • Provide maximum practicable opportunities in acquisitions

to small businesses at both the prime and subcontract level.

• Must be afforded an equitable opportunity to compete for all Federal contracts that they can perform.

• A “set-aside for small business” is the reserving of an acquisition exclusively for participation by small business concerns.

• Award must be at fair and reasonable prices



Set-Asides – Simplified Acquisitions • Procurement actions above the micro-purchase threshold and below

the Simplified Acquisition Threshold (SAT) are automatically reserved exclusively for small business concerns (FAR 19.502-2(a)); whether procured through open market, Federal Supply Schedule (FSS), or Government-Wide Acquisition Contracts (GWAC).

• Market research should be conducted within the past 12 months or for task/delivery orders within the past 18 months, that is specific to the acquisition to determine if the acquisition can be set-aside.

• The extent of market research will vary, depending on such factors as urgency, estimated dollar value, complexity, and past experience.



Set-Asides – Simplified Acquisitions

• Should consider competition among one of the socioeconomic categories, SDVOSB, HUBZone, EDWOSB, and WOSB, or 8(a) sole source, before setting-aside the acquisition for small business concerns.

• Conduct market research to make small business concerns aware of the acquisition opportunity and increase the likelihood of receiving offers from qualified small business concerns and offers relevant to the purpose of the acquisition. – A DSBS search, for example, is not sufficient without concerns

being made aware and a determination of firms interest in bidding on the requirement.



Extent of Small Business Participation

• A set-aside determination is based on the following criteria:

– The results of recent market research demonstrate that there is a reasonable expectation that

offers will be received from at least two small business concerns and that award will be made at fair market price; or

– Historically, acquisitions for the requirement and/or similar requirements have been awarded

to a socioeconomic small business or small business concern;

– The CO shall not attempt to verify or make a responsibility determination of small businesses, such as compliance with the limitation on subcontracting, before deciding to set-aside an acquisition. Responsibility determination is not part of the set-aside determination.

• If conditions are not met for set aside, the CO processes a CD-570 in accordance with current DOC & NOAA policy and approval is required prior to solicitation.



Small Business Set-Asides

• If, before award of a contract involving a small business set-aside, the CO considers award would be detrimental to the public interest, the CO may withdraw the small business set-aside through the CD-570 process.

• The GAO has upheld the concept of paying a premium for SB. – One of the purposes of a SBSA. It is recognized that SB cannot always

compete with LB in pricing and therefore would not win contracts in a competitive F&O environment.

– To alleviate and support SB, set-asides were created that allow SB to compete on their own terms and within their own price arena.

– A premium must be taken into consideration when determining fair market price.



GAO Decision B-278371

• CO has discretion to determine price reasonableness in a small business or other set-aside, as long as the determination is reasonable.

• In making a determination of price reasonableness, CO may, among other things, perform a comparison of proposed prices received in response to the solicitation, including prices submitted by an otherwise ineligible large business.

• Contracts may be awarded under small business set-aside procedures to small business firms at premium prices, so long as those prices are not unreasonable.



GAO Decision B-278371 (Cont’d)

• A small business bidder's price is not unreasonable merely because it is greater than the price of an ineligible large bidder, since there is a range over and above the price submitted by the large business that may be considered reasonable in a set-aside situation.



GAO Decision B-278371 (Cont’d)

• The determination of whether a particular small business price premium is unreasonable depends upon the circumstances of each case.

(See Advanced Constr., Inc., B-218554, May 22, 1985, 85-1 CPD ¶ 587 at 2 (contracting officer in a set-aside procurement properly found reasonable a small business bid which was more than 11 percent higher than large business courtesy bid); Browning-Ferris Indus., B-209234, Mar. 29, 1983, 83-1 CPD ¶ 323 at 2-3 (small business bid which was 51 percent higher than large business bid was properly found reasonable); CDI Marine Co., B-188905, Nov. 15, 1977, 77-2 CPD ¶ 367 at 2-3 (small business offer which was 17 percent higher than that of other qualified firms, large and small business alike, was properly found reasonable).



CO Withdrawal Determination

• CO is responsible for using good judgment and factual information in assessing the need to withdraw a small business set-aside.

• Decision should be based on good market research. • CO must reject an offer received from an ineligible

offeror (FAR 52.219-6); • To determine the reasonableness of a price proposed

by an eligible offeror, CO shall use FAR 15.404-1(b)(2) as their guideline.



Withdrawing Small Business Set-Asides – (FAR 19.506)

• CO shall initiate a withdrawal of an individual small business set-aside by giving written notice (CD-570) to the NOAA small business specialist (SBS).

• If the NOAA SBS does not agree to a withdrawal or modification, the case shall be promptly referred to the SBA PCR for review. (PCR will review actions under SAT when withdrawing a set aside when quotes are received regardless of the SBS agreement).



SUMMARY • The CO has broad discretion in determining fair and reasonable prices on

small business set-asides. • A small business bidder's price is not unreasonable merely because it is

greater than the price of an ineligible large bidder. • CO must use good judgment and factual information and make good

business decisions when determining the need to withdraw a set aside. • Set-asides should be withdrawn only if the CO determines award would

not be in the public interest. • We all know that small businesses create jobs and stimulate the economy

but your judgement should be whether or not small businesses are providing a value to the tax payer’s dollars. The value does not have to be completely monetary on the basis of the purchase price but also the jobs and benefits to the economy that will be created by awarding to small firms.


FIE LD DEL EGATE T RAINING EVENT

2018

Miscellaneous SB items

Jeffrey Hale & Natalie Colbert

NOAA Small Business Officers

May 01, 2018 NOAA -- SCIENCE - SERVICE - STEWARDSHIP 15


• Commerce is working on a Manual for SB that will supplement the FAR and CFR. – Purpose is to provide instruction and guidance for

how to effectively maximize the utilization of small business concerns in DOC’s acquisitions.

– The Manual and acquisition guidance issued by the Office of Acquisition Management (OAM) shall be used in tandem. If there is any conflict between the Manual and OAM’s guidance, the FAR will take precedence.



Definitions • New requirement – A requirement that has not been previously procured by the

bureau or by another contracting office acting on behalf of the bureau and the requirement is not related to purpose or scope to any existing contract(s) or contract(s) that ended within the past 18 months;

• Existing requirement – A requirement that may have subsumed some part or parts of an existing contract or a contract that ended within the past 18 months. (consolidation or bundling may be applicable)

• Re-compete – A reoccurring or repetitive requirement that is currently being met under an existing contract or order, or under a contract or order that ended within the past 18 months. The requirement may have been altered or modified prior to re-competition. However, the changes or modifications did not cause a change in the purpose of the acquisition.

• Follow-on – Refer to 6.302-1.



Task and Delivery Orders • Contracts awarded by GSA are considered indefinite delivery/indefinite quantity

type contracts and multiple award contracts (MAC).

• Unless the Schedule specifically identifies DOC or civilian agencies as required to use the contract as a primary source of products or services, the use of FSS contracts is optional. When contemplating the use of a GSA contract, the Contracting Officer shall conduct market research.

• A justification for an exception to fair opportunity when setting-aside an order is not required (see reference to section 1331 of Public Law 111-240 found in FAR subpart 16.505). However, the Contracting Officer shall submit documentation along with the CD-570, Small Business Set-Aside Review, to explain why an order was not set-aside when the authority and opportunity to do so could have been used. (See 13 CFR 125.2(e)(iii)).

• The CD-570 shall be submitted to the Small Business Specialist for SAT actions that are not set aside.



Similarly situated entity • Identifies a type of prime/contractor teaming arrangement

based on the socioeconomic or small business program used to solicit offers (i.e., small business, 8(a), EDWOSB, WOSB, HUBZ, or SDVOSB).

• The first-tier subcontractor must have the same program status that qualified the prime contractor to receive the contract award.

• The similarly situated entity subcontractor must also meet the size standard for the NAICS code assigned to the prime contract, or that has been assigned to the subcontract by the prime contractor.

• This rule applies to set-aside and sole-source contracts awarded under FAR Part 19.



FedDataCheck Findings Feb 2018 • Overall NOAA has by far the lowest one bid rate at Commerce

(NOAA competitive one bid rate is 7.9%), and about half the rate as compared to the civilian government. – One outlier on competitive one bids: Field Delegates at

33.8%. • NOAA’s competition rate (87.3%) is the 2nd highest at

Commerce and well above the average for the civilian government (80.1%) – The outlier again is Field Delegates (58.2%) (a little less

than half of the awards have been made on a sole source basis).

• From an outsider’s perspective, the fact that Field Delegates have the highest one bid rate and the lowest competition rate means that there could be an issue regarding competition.



Misc. Discussion Points • You should be doing market research prior to solicitation. If

your market research leads you to believe you will not receive competitive quotes from small business then you must get a CD-570 approved prior to solicitation for F&O. You should not simply just post set aside as that is a waste of time if you do not have the expectation of receiving quotes from small firms.

• If you are buying a supply you are required to use the manufacturing NAICS code.

• You do not have to go through the offer and acceptance process with SBA for 8(a) SAT actions.

• A sole source to a small business is not considered a set aside; a set aside involves competition



Misc. Discussion Points • Cannot do a socioeconomic set aside and utilize an exception to the Non-

Manufacturer Rule (NMR). – The exception is applicable below $25K where a SB can provide the product of a domestic

large business without the need for a waiver. So an 8(a), HUBZone, SDVOSB, or WOSB (under one of those set aside types) does not have the exception to be able to provide the product of a large business under $25K. However, those types of firms can utilize the exception if the requirement is set aside for SB in general.

• The NMR requires a firm bidding on a SBSA to supply the product of a domestic small business. The EXCEPTION to the NMR applies below $25K. However there are two key elements to that which must be considered:

– In order to utilize the SBSA as an exception, there must be two manufacturers products in the item description.

– The product being provided MUST BE DOMESTIC. • It is only when you invoke the WAIVER to the NMR that the SB is allowed to

provide ANY product (foreign or domestic) NOTWITHSTANDING the BUY AMERICAN ACT and other restrictions on foreign product. The waiver also requires at least two manufacturing sources in the item description.

• The waiver allows use of a foreign product if no other regulations prohibit it. But the exception does not.



QUESTIONS?


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Fair & Reasonable Pricing Determinations for Small … · • In making a determination of price reasonableness, CO may, among other things, perform a comparison of proposed prices