PilieroMazza’s Weekly Update is an e-mail sent on Fridays that recaps legislative and regulatory issues affecting businesses of all sizes. When government agencies propose significant changes to existing regulations or Congress passes legislation of special interest to the small business community, we follow-up the Weekly Update with an analysis of the proposed change and the likely impact on small business.

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Weekly Report October 20, 2017

GOVERNMENT CONTRACTS

“Conferees Will Determine Fate of Defense Bill Provision to Deter Frivolous Contractor Bid Protest” Government Executive, October 13, 2017. Retrieved from govexec.com

Senators, as they have in past bills, inserted language in their fiscal 2018 National Defense Authorization Act that would affect the three-decade-old bid protest process in two ways:
  1. Companies with more than $100 million revenues in the previous year’s which file unsuccessful protests against contract awards to a competitor would be required to pay the Defense Department the costs of processing the protest at Defense and at the Government Accountability Office, which adjudicates the protests. It is called the “loser pays” provision.
  2. Second, the Senate bill calls for incumbent contractors who file a protest to have all payments above incurred costs withheld on any bridge contracts or temporary contract extensions awarded to that contractor as a result of a delay in award resulting from bid protests. The language is not in the House version.
The goal of the proposed changes would be to shift some of the costs of the protest system to the private sector, and reduce the frequency of frivolous protests by large companies and large awards.

Employee Benefits Security Administration, Department of Labor Proposed Rule 

The Department of Labor (“DOL”) proposes to delay for ninety (90) days—through April 1, 2018—the applicability of the Final Rule amending the claims procedure requirements applicable to ERISA-covered employee benefit plans that provide disability benefits. The Final Rule was published in the Federal Register on December 19, 2016, and became effective on January 18, 2017. The Final Rule currently is scheduled to apply to claims for disability benefits under ERISA-covered employee benefit plans that are filed on or after January 1, 2018. 
 
Following publication of the Final Rule, various stakeholders and members of Congress asserted that it will drive up disability benefit plan costs, cause an increase in litigation, and in so doing impair workers' access to disability insurance benefits. Pursuant to Executive Order 13777, the DOL has concluded that it is appropriate to give the public an additional opportunity to submit comments and data concerning potential impacts of the Final Rule. The DOL will carefully consider the submitted comments and data as part of its effort to examine regulatory alternatives that meet its objectives of ensuring the full and fair review of disability benefit claims while not imposing unnecessary costs and adverse consequences.
 
The DOL accordingly seeks public comment on a proposed 90-day delay of the applicability of the Final Rule in order to solicit additional public input and examine regulatory alternatives. If this proposal is finalized, the amendments made on December 19, 2016, would become applicable to claims for disability benefits that are filed after April 1, 2018, rather than January 1, 2018. The proposed rule can be found here.
 

SUPREME COURT DECISIONS

“U.S. Supreme Court Denies Petition for Certiorari on Constitutional Challenge to 8(a) Program” PM Legal Minute, October 17, 2017. Retrieved from pilieromazza.com

On October 16, 2017, the U.S. Supreme Court denied the petition for a writ of certiorari filed by Rothe Development, Inc. in Rothe Development, Inc. v. Department of Defense & Small Business Administration. Rothe, a non-minority-owned federal contractor, challenged the SBA’s 8(a) Program, a program which gives benefits to small business concerns owned and controlled by socially and economically disadvantaged individuals. Rothe alleged that the statutory basis of the 8(a) Program denies it, a company not owned or controlled by socially and economically disadvantaged individuals, equal protection of the law, in violation of the equal protection component of the Due Process Clause of the Fifth Amendment. Specifically, Rothe alleged that it could not compete on equal footing with companies owned by minorities. Rothe effectively undermined the program and brought the long standing dispute regarding the entire validity of the 8(a) Program to the forefront of the Federal courts.
 

CAPITOL HILL

Reactions to the Nomination of SBA Inspector General from both the House Small Business Committee and the Senate Committee on Small Business and Entrepreneurship. Retrieved from smallbusiness.house.gov and sbc.senate.gov

House Committee on Small Business Chairman Steve Chabot (R-OH) praised the White House’s decision to nominate Hannibal “Mike” Ware to serve as the Small Business Administration (“SBA”) Inspector General. Senator Jeanne Shaheen (D-NH), the lead Democrat on the U.S. Senate Committee on Small Business & Entrepreneurship, today issued the following statement on the nomination of Hannibal Ware, President Trump’s choice to be Inspector General of the U.S. Small Business Administration:
 
“I look forward to reviewing Mr. Ware’s record and examining his credentials. SBA’s Office of the Inspector General provides critical auditing and investigative services to ensure the integrity of SBA programs and the proper use of taxpayer dollars. Any person in charge of this office must be fully independent, dedicated to improving SBA’s overall performance and committed to weeding out waste, fraud and abuse.”

“Fostering Women’s Entrepreneurial Success” House Small Business Committee Press Release, October 12, 2017. Retrieved from smallbusiness.house.gov

On October 12, 2017, Members of the House Small Business Subcommittee on Health and Technology heard from a panel of women experienced in the challenges women entrepreneurs face in today’s economy, as well as the available resources to support women-owned small businesses.
 
“While women entrepreneurs face many challenges, one major issue women owners face is access to adequate financing opportunities. Men typically launch their businesses with twice the capital women do, and less than 10 percent of all venture funds are granted to women-led businesses. The matter of access to capital is of particular concern to me, as it is a persistent issue among my constituents in American Samoa,” said Subcommittee Chairman Aumua Amata Coleman Radewagen.
 

OTHER NEWS

“Women Still Underrepresented in the Highest-Paid Federal Jobs” Government Executive, October 17, 2017. Retrieved from govexec.com

In 2014, the U.S. Office of Personnel Management (“OPM”) conducted a study finding that between 1992 and 2012, federal agencies had closed the gender pay gap by over 50%. Researchers have attributed the remaining gap to differences in occupation, suggesting that men and women are beginning to receive equal pay for equal work.  
 
That said, in March 2017, Government Executive conducted an analysis of the highest-paid jobs within the federal government, and found that women are still underrepresented in the top salary jobs. Although researchers have speculated that the cultural shifts needed for a fully inclusive society can take time, OPM has not issued an official statement of conclusion. 
 

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Weekly Report October 13, 2017

SMALL BUSINESS ADMINISTRATION

Women-Owned Small Business Federal Contract Program NAICS Code Updates

The U.S. Small Business Administration (“SBA”) has updated the North American Industry Classification System (“NAICS”) codes authorized for use in the Women-Owned Small Business (“WOSB”) Federal Contract Program (“WOSB Program”). The update is being made to reflect the U.S. Office of Management and Budget's NAICS revision for 2017, identified as NAICS 2017. NAICS 2017 created 21 new industries by reclassifying, combining, or splitting 29 NAICS 2012 industry codes. These changes would impact eight of the 2012 NAICS codes designated for use under the WOSB Program. The designations of industries contained in SBA’s notice of NAICS Code updates, apply to all solicitations issued on, or after, October 1, 2017.  82 Fed. Reg. 47277.  
 

GOVERNMENT CONTRACTING

“The RISE Act allows SBA to give agencies double credit for contracting goaling purposes!” Small Business Administration Bulletin, October 13, 2017. Retrieved from govdelivery.com

In an October 13, 2017 bulletin, the Small Business Administration reminded the HUBZone community that, during the period of a presidentially declared major disaster, procuring agencies can provide contracting preferences for the small businesses located in the affected areas.
 
The Recovery Improvements for Small Entities After Disaster Act of 2015 (“RISE Act”) authorizes SBA to:
  • establish contracting preferences for small businesses located in disaster areas, including HUBZone firms, and 
  • give agencies double credit for awards to these small businesses that are located in the presidentially declared major disaster areas.
For more information, please see: RISE Act § 2108, 15 U.S.C. 644(f), FAR § 6.208, FAR § 26.202-1

"Defense Contractors Could Face Pay-Back Clause for Losing Bid Protests" Nextgov, October 10, 2017. Retrieved from nextgov.com

The Senate’s version of the House of Representative’s (H.R. 2810) National Defense Authorization Act (“NDAA”) 2018, contains provisions that could make it more difficult for companies to protest contract awards, particularly those made by defense and military agencies.  
 
Specifically, § 2340 of the NDAA proposes to “require contractors who file bid protests with the Government Accountability Office on a contract with the Department of Defense to pay to the Department of Defense costs incurred for processing a protest at the Government Accountability Office and the Department of Defense when such a protest is filed by a party with revenues in excess of $100 million during the previous year where all of the elements of such protest are denied” by GAO.
 
The provision would also require incumbent contractors that protest a follow-on contract award “to have all payments above incurred costs withheld on any bridge contracts or temporary contract extensions awarded to the contractor as a result of a delay in award resulting from the filing of such protest.” The protesting companies are spared paying fees only if GAO “upholds any of the protest grounds” or if the contract in question is scrapped.  
 
According to GAO data, bid protests have increased significantly across the government over the past decade. In fiscal 2008, bidders filed 1,652 protests; in fiscal 2016, they filed 2,789.
 
In a September 7, 2017 letter addressed to Sens. John McCain, R-Arizona, and Jack Reed, D-Rhode Island, U.S. Comptroller General Gene Dodaro asked the Senate Armed Services Committee chair and ranking member to delete the provision.
 
In his letter, Mr. Dodaro said GAO “expresses no view on the policy of imposing protest processing costs on certain contractors whose protests are denied,” but rather takes issue with the provision because it would require GAO to implement new procedures and collect data it currently does not need, nor have.  In addition, Mr. Dodaro expressed concern “that assessing costs associated with processing covered defense protests could involve GAO in federal court litigation concerning both the application of the requirement to pay costs” and the amount of costs to be paid.
 
Full text of the current version of the NDAA 2018 can be found here.
 

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Weekly Report September 29, 2017

SMALL BUSINESS ADMINISTRATION

“Rules of Practice for Protests and Appeals Regarding Eligibility for Inclusion in the U.S. Department of Veterans Affairs, Center for Verification and Evaluation Database”

The U.S. Small Business Administration (“SBA”) is proposing to amend the rules of practice of its Office of Hearings and Appeals (“OHA”) to implement procedures for protests of eligibility for inclusion in the Department of Veterans Affairs Center for Verification and Evaluation (“CVE”) database, and procedures for appeals of denials and cancellations of inclusion in the CVE database. These amendments would be in accordance with Sections 1832 and 1833 of the National Defense Authorization Act for Fiscal Year 2017 (“NDAA 2017”). Comments to this proposed rule are due on, or before, October 30, 2017. 82 Fed. Reg. 45212.

Small Business Size Standards; Adoption of 2017 North American Industry Classification System for Size Standards

The U.S. Small Business Administration (“SBA”) has adopted, without change, its proposed revisions to small business size standards. With the adoption of the proposed changes, SBA incorporates the U.S. Office of Management and Budget's North American Industry Classification System (“NAICS”) revision for 2017, identified as NAICS 2017, into its table of small business size standards. NAICS 2017 created 21 new industries by reclassifying, combining, or splitting 29 existing industries under changes made to NAICS in 2012 (NAICS 2012). SBA's size standards for these 21 new industries have resulted in an increase to size standards for six NAICS 2012 industries and part of one industry, a decrease to size standards for two, a change in the size standards measure from average annual receipts to number of employees for one, and no change in size standards for twenty industries and part of one industry. This final rule is effective October 1, 2017. 82 Fed. Reg. 44886.

CAPITOL HILL

“Unified Framework for Fixing our Broken Tax Code” House Committee on Ways and Means Press Release, September 27, 2017. Retrieved from waysandmeans.house.gov.

On September 27th, the Trump Administration, House Committee on Ways and Means, and Senate Committee on Finance released their unified framework to reform our nation’s tax code, which emphasized joint efforts to extend economic opportunities to American workers, small businesses, and middle-income families. You can read the entire document here.

“Shaheen, Velázquez to Equifax: Provide Assistance to Small Businesses Caught up in Data Breach” Senate Committee on Small Business and Entrepreneurship Press Release, September 27, 2017. Retrieved from sbc.senate.gov.

The top Democrats on the Senate and House Small Business Committees wrote the newly installed leadership of Equifax about the impact the company’s historic cybersecurity breach will have on the country’s 29 million small business owners. They are seeking answers on how the company will contain the damage and help small business victims.

GOVERNMENT CONTRACTING

“Actions Needed to Demonstrate and Better Review Compliance with Select Requirements for Small Business Advocates” GAO Public Report, September 25, 2017. Retrieved from gao.gov.

On September 25, 2017, the U.S. Government Accountability Office (“GAO”) publicly released its August 2017 report on small business contracting, having surveyed 24 federal agencies for compliance with section 15(k) requirements for the Office of Small and Disadvantaged Business Utilization. GAO included highlights from the study, as well as policy recommendations based on its findings. The report can be found here.

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Weekly Report September 15, 2017

CAPITOL HILL

“Serving Small Businesses: Examining the Effectiveness of HUBZone Reforms” House Small Business Committee Press Release, September 13, 2017. Retrieved from smallbusiness.house.gov

The House Small Business Committee heard from small businesses within the Small Business Administration’s (SBA) Historically Underutilized Business Zones (HUBZone) program. Specifically, the Committee heard testimony on H.R. 3294, the “HUBZone Unification and Business Stability Act,” introduced by Ranking Member Nydia Velazquez (D-NY) and Chairman Steve Chabot (R-OH).


SMALL BUSINESS ADMINISTRATION

“SBA Awards $5 Million in PRIME Grants to Help Emerging Micro-entrepreneurs Gain Access to Capital” SBA Press Release, September 7, 2017. Retrieved from sba.gov

Thirty-four community-based organizations across the United States that provide assistance to disadvantaged entrepreneurs are set to receive a combined $5 million in grants from the U.S. Small Business Administration’s Program for Investment in Micro-Entrepreneurs (PRIME). These organizations help low-income entrepreneurs gain access to capital to establish and expand their small businesses.
 
This year’s 34 recipients come from 24 states and the District of Columbia. The grants range from $55,000 to $250,000, and typically require at least 50 percent in matching funds or in-kind contributions. In total, 147 organizations applied for PRIME awards for 2017.


OTHER NEWS

“Small business hurt by Hurricane Irma? Apply for these interest-free state loans” Miami Herald, September 14, 2017. Retrieved from miamiherald.com

On September 14th, the Miami Herald published an article detailing an interest-free loan program activated by Florida Governor Rick Scott, to aid small businesses affected by Hurricane Irma. Governor Scott approved $10 million for this program. Businesses can request assistance through this program from the Florida Department of Economic Opportunity, through October 31st.
 

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Weekly Report September 8, 2017

GOVERNMENT CONTRACTS

Department of Veterans Affairs Withdrawal of Proposed Rule. Federal Register, September 1, 2017. Retrieved from federalregister.gov

The Department of Veterans Affairs (VA) published a rule in the Federal Register on November 6, 2015, 80 FR 68795, which proposed amending its regulations governing its Veteran-Owned Small Business (VOSB) Verification Program. The proposed rule sought to clarify the eligibility requirements for businesses to obtain “verified” status, added and revised definitions, reordered requirements, redefined ‘‘control,’’ and provided explanations for information on VA’s examination and review processes and procedures.
 
Comments to the proposed rule were to be provided to the Office of Small and Disadvantaged Business Utilization on or before January 5, 2016. Due to the nature of the adverse comments received, VA has determined not to pursue implementation of the rule as originally proposed. Accordingly, the VA withdrew the proposed rule.

CAPITOL HILL

Shaheen Statement on Hurricane Disaster Aid. U.S. Senate Committee on Small Business & Entrepreneurship Press Release, September 7, 2017. Retrieved from sbc.senate.gov

Senator Jeanne Shaheen (D-NH), the lead Democrat on the Senate Committee on Small Business & Entrepreneurship and a member of the Senate Appropriations Committee, issued the following statement on September 7, 2017, after the Senate approved $15.25 billion in emergency hurricane assistance, including $450 million for the SBA’s disaster loan program:
 
“Hurricane Harvey was a terrible tragedy for millions of people on the Gulf Coast, and this emergency funding will help support our fellow Americans who face a long and steep road to recovery.  With another hurricane bearing down on Florida, I am pleased Congress also approved $450 million to bolster SBA’s disaster response through low-interest loans to flood victims. 

SMALL BUSINESS ADMINISTRATION

“SBA Administrator Addresses Federal Regulatory Reform Small Businesses Encouraged to Comment on SBA Regulations.” SBA Press Release, August 28, 2017. Retrieved from sba.gov

Administrator Linda McMahon, head of the U.S. Small Business Administration, encouraged small businesses to comment on the Federal Register notice posted earlier this month. The notice is in response to President Trump’s Executive Order 13777 which aims to ease the burdens placed on America’s small businesses.  Under this Executive Order all federal agencies are required to designate a Regulatory Reform Officer and develop a process of evaluating their existing regulations and determine which ones should be repealed, replaced or modified.  
 

OTHER NEWS

“FLSA Overtime Rule Struck Down Leaving DOL and Employers in Limbo.” PM Legal Minute Blog, September 5, 2017. Retrieved from pilieromazza.com

In a decision issued on August 31, 2017, Federal District Judge Amos Mazzant struck down as invalid the Department of Labor’s (DOL) new overtime exemption rule. The new rule would have significantly increased the salary threshold under the Fair Labor Standards Act (FLSA). As explained further in an article by Sarah Nash, a PilieroMazza attorney in our labor and employment practice group, it leaves DOL’s path toward a new overtime threshold in question, while also being a welcome decision for employers.
 

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