48 C.F.R. 9.601 Definition FAR 9.601 “Contractor team arrangement,” as used in this subpart, means an arrangement in which— A potential prime contractor agrees with one or more other companies to have them act as its subcontractors under a specified Government contract or acquisition program.
Q: Can a Small Business Set-Aside Contract Award be made to a Small Business using a Teaming Agreement when the response to the RFP includes the Past Performance of the large business at a 9 to 1 ratio. In other words, if the Past Performance only includes 1 project of the Small Business and 9 of the non-affiliated Large Business can the award be challenged?
A: Yes the Award can be made to the Small-Business Prime Contractor. The fact that the past performance of the Large Business is relatively exemplified at a 9 to 1 ratio does not create an undue reliance on the large business subcontractor. Re: http://www.gao.gov/decisions/bidpro/4026523.htm. The Past Performance does not demonstrate the Prime Subcontractor would not be performing the Limitations on Subcontracting as prescribed in FAR 52.219-14.
Q: Should a Small-Business Prime contractor allow a teaming partner Large Business become an "ostensible subcontractor" to make it easy to perform on the completion of the Small-Business set-aside Concern? This is usually created by "side deals" under the request of the surety. In essence the surety mandating this requirement.
A: No, a Small Business prime contractor must do all in its power to NOT allow Large Business to become Affiliated or an Ostensible Subcontractor, even after award. A federal judge recently found "side deals" aka State binding agreements post award to be agreements conceived in fraud. The teaming agreement should not be used an access door to federal contracts then amended for the benefit of financial gain. See MORRIS-GRIFFIN CORPORATION, Plaintiff, v. C & L SERVICE CORPORATION, Defendant. Civ. No. 2:10cv298 http://www.pubklaw.com/rd/courts/10-298.pdf
Q: What are the penalties, if a large business "knows" a surety will attempt to demand and enforce the Presented Teaming Agreement to the government be changed behind the seines to create "Affiliation" or "Ostensible Subcontractor" post award (as they always say...."for protection of the bonds")?
A: The fall out for "knowingly" procuring a federal set-aside contract may lead to severe penalties and even criminal sanctions. See Public Law No. 111-240 § 1341. In the context of the False Claims Act, the word "knowingly" may rest on the bonding company or the Large Business receiving the benefits of the ill-conceived contract. See: http://www.milesstockbridge.com/pdf/publications/NHartlandLAW360.pdf
It is extremely difficultto prove that a surety and large business "knowingly" planed to defraud the government on a Set-Aside contract. One would have to have evidence "Prior to Award" such as correspondence between the Surety and the Large Business discussing alleged profits, bank accounts, and control to the Large Business. Then prove misrepresentation to comply with federal law, like a teaming agreement. A teaming agreemnt which represents to the government compliance with federal law. Even then it is not enough, the Surety and the Large Business would have to have successfully followed through with the preconceived plan to create the "knowingly" False Claim. See United States Court of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT Argued September 21, 2010 Decided December 3, 2010 No. 09-5385 UNITED STATES OF AMERICA, APPELLEE v. SCIENCE APPLICATIONS INTERNATIONAL CORPORATION, APPELLANT Appeal from the United States District Court for the District of Columbia (No. 1:04-cv-01543).
Q: Why is it that a Surety can create affiliation?
A: A surety cannot create affiliation. It is typical that a Surety is the backbone/excuse for the large business to enforce the affiliation. This is usually the way Surety's and large business secure their misrepresentations to the government. A small business must do whatever possible to make sure the control is not lost.
Q: What if the Contracting Office is inexperienced and allows for affiliation to be created.
A: Many contracting officers are unaware of the SBA guidelines and FAR’s. Do not let a Contracting Officer break the Law. Even when a Contracting Officer makes false statements it is not an excuse to create affiliation. A quick story....Once a Contracting Officer (CO) contacted the SBA to see if an 11 Million dollar award could be made to an 8a in sight, because this contracting officer wanted to “negotiate” a project without it going out for bid. Well, if the CO would have done their research, they would have found that an award in excess of 5 Million dollars cannot be awarded under a non-compete “negotiated” award.
This is typical of some of the CO’s knowledge. We have even seen where the government has displayed its knowledge of Federal Law, FAR 52.219-14 by taking the total contract amount and multiplying it by the Percentage required to be met under 52.219-14, and setting that as the labor requirements. THIS IS WHY A SMALL BUSINESS SHOULD BE COGNIZANT OF SBA RULES/GUIDELINES. The government doesn’t even know all the laws.
Q: Why is it that Federal Law places self-perfomed labor requirements on Sbmall Business Set-Asides?
A: The LAW 52.219-14 is in place to make certain the small business is meeting its obligation of providing vital rolls in the performance of the set-aside contract.Q: What if a Surety takes over the contract? Isn't the surety a little above the law, to where when a project is taken over they are no longer required to comply with the Small Business Limitations on Subcontracting 48 C.F.R. 52.219-14?A: No were is it written that a surety is “a little” above the law. What has been seen before are inexperienced Contracting Officers and Government Lawyers that allow a Surety to create the takeover agreements and not notice the 52.219-14 LAW has been tactfully omitted. Some of the times a CO doesn’t even know that obligation is still required even after a Surety takes over. The ONLY proper way to not have to meet the Limitations of Subcontracting LAW is to have clause 52.219-14 omitted from the award by a contract modification.
48 C.F.R. 52.219-14 Limitations on Subcontracting. Title 48 - Federal Acquisition Regulations System As prescribed in 19.508(e) or 19.811–3(e), insert the following clause: (3) General construction. The concern will perform at least 15 percent of the cost of the contract, not including the cost of materials, with its own employees.