Transcript Tribal Sovereignty/Government Contracting The Sheraton

Tribal Sovereignty/Government
Contracting
The Sheraton Hotel
Oklahoma City, Oklahoma
February 6 - 7, 2007
Presented by:
Pamela J. Mazza
Antonio R. Franco
PilieroMazza PLLC
888 17th Street, Suite 1100
Washington, DC 20006-3317
202-857-1000
The Current State of Government Contracting:
How Involved Should Tribes Be?
1.
2.
3.
4.
GAO Report
Congressional Hearings
Native American Contractors
Association/National Center for American Indian
Enterprise Development
What’s in store with the new Congress?
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Government Contracting
FULL AND OPEN COMPETITION
Small Business Set Asides
Special Subcontracting Programs
SB
SDB
WOSB
HUBZone
VOSB
SD-VOSB
HUBZone
8(a)
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Native Sliver of the Pie
Comparison of Procurement Spending By
Socioeconomic Category FY 2005
70.0
$65.1
Billions of dollars
60.0
50.0
40.0
30.0
$20.3
20.0
$11.9
$11.0
10.0
$1.8
$1.9
$1.5
SDVOBs
ANC & Tribal
8(a)
ANC 8(a)
0.0
All Small
Business
SDBs
WOBs
8(a) Set Aside
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Developing the Infrastructure to be a
Profitable Government Contractor
A. How is Ownership Status Structured
1.
2.
3.
4.
Direct Tribal Ownership
Section 17 Corporations
Holding Companies
Ownership by Third Parties
1. Direct
2. Through compensation plans
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Developing the Infrastructure to be a
Profitable Government Contractor
A. Other Infrastructure Issues
1.
2.
3.
4.
5.
6.
Accounting
Finance
Costing
Proposal Preparation
Technical Capabilities
Human Resources
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Use of Multiple 8(a) companies



Different Lines of Business
• Primary NAICs code
• Secondary NAICs code
Size – Small Business Concerns
Management
- Commonality – Small Business Purposes


- Day-to-Day – 8(a) Purposes
Waiver of Sovereign Immunity
Likelihood of Success – 2 yr rule
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Size Issues and Affiliations Among Sister
Companies


Small Business Programs
 Limited Exemption from Affiliation
- Common Ownership
- Common Management
- Shared Services Agreement
8(a) Program
 Broad Affiliation Exemption
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Benefits of Establishing
Holding Companies
Separates government contracting
companies from other enterprises
 Centralizes administrative and other
general costs
 Allows for no or smaller boards at the
company level
 Helps eliminate shared services by sister
companies

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TRIBAL HOLDING
COMPANY
CEO
COO
HR
Facilities Management
8(a) Company
BOD Controlled
By the Tribe
8(a) Construction
Company
8(a) IT Company
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8(a) Security
Company
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Choosing the Structure for 8(a)
Companies

Tribal Entity
– Must waive sovereign immunity
– Should this vehicle be utilized for off-reservation work?

LLC – State or Tribal
– Passes through any tax obligation to the tribe so no
federal taxes

Corporation – State or Tribal
– May pay federal and state taxes
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Using Tribal Business and Corporate
Codes



Does the tribe have a corporate code in place?
Does it define how to establish:
– Tribal Entities
– Corporations
– LLCs
Should the tribe consider adopting such a code?
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Teaming Partners,
Subcontractors, and Joint
Ventures
February 7, 2007
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Building a Winning Team While Protecting
Your Interests and Complying with
Regulations
Team Role
• Prime Contractor
- Responsible for fulfillment of contract requirements to
the Government customer
• Subcontractor
- Responsible to the prime contractor for fulfillment of
the requirements of a subcontract
• Joint Venture Partner
- JV becomes responsible for fulfillment of
requirements to the Government customer
• Mentor-Protégé
- Both formal and informal mentoring of teaming
partners by others on the team
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Teaming Agreements
Traditional Prime/Sub Arrangement
a. Purpose
b. Typical Chronology:
1.
Identify Requirement
2.
Find teaming partner
3.
Negotiate division of work (areas and
%’s)
4.
Sign teaming agreement
5.
Prepare and submit proposal
6.
Contract award
7.
Negotiate and sign subcontract
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BE SELECTIVE


Avoid the temptation to get on any team . . . and, at any
cost
Carefully & thoroughly screen prospective primes &
subcontractors
– History of being a good teaming partner . . . Ask for
references
– Record of being fair, equitable, collaborative, and flexible
in teaming relationships
– Attitude of mutual dependence and benefit
– Unblemished reputation with the Government
– Strong technical capabilities to fulfill elements of the
SOW
– Proven record of past performance covering elements of
the SOW
– Positive name recognition with the customer
– Cost competitiveness
– Proposal support resources
– Strong infrastructure support
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Use of Teaming Agreements—Key
Considerations
A.
B.
C.
D.
E.
F.
No affiliation
No ambiguity
Mutuality
Proprietary Information
Division of Work (areas and %’s)
Other issues
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Other issues
A.
B.
C.
D.
E.
F.
Assignment
Termination
Exclusivity
Indemnification
Disputes
Governing law
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Affiliation
Ostensible Subcontractor Rule
• Unusual reliance on subcontractor
a. Totality of the Circumstances Test
b. Which party will manage the contract?
c. Are there discrete tasks to be performed by
ach party or is there commingling of
personnel?
d. Which party performs more complex and
costly contract functions?
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Affiliation (cont’d)
e. Which party possess the requisite back
ground and experience to carry out
contract?
f. What degree of collaboration was there on
the bid or proposal preparation?
g. Which party “chased” the contract?
h. What is the amount of work to be
preformed by each?
i. Identification of the concerns as a team.
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Affiliation (cont’d)
j.
Hiring of now-large incumbent’s project
management team and subcontracting a significant
portions of the contract to the incumbent.
k. Challenged concern’s lack (and subcontractor’s
possession) of qualifications relevant to the
contract requirements.
l. Challenged concern’s inexperience in the primary
and vital requirements of the solicitation.
m. Challenged firm’s plan to hire a substantial number
of incumbent’s (and ostensible subcontractor’s)
employees.
n. Sharing of profits/losses.
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Use of Subcontractors—
Subcontract Agreements: Key Clauses





Subcontract Agreements—include:
– Same provisions from teaming agreement
– Additional performance details
Scope of work—identify:
– SOW sections applicable to contractor
– SB, SDB, WOB, and 8(a) firms should retain
service order discretion
Flow down provisions
Identify PM roles for agency relations
No assignment/lower-tier subcontracting
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Subcontract Agreements (cont.)




Carefully define duration, options, modifications,
extensions, and follow-on work
Deliverables and timeframe—identify:
– Deliverables
– Delivery schedule to prime contractor, then
government
Include FAR termination clause
Choice of Law/Venue
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Subcontract Agreements:
Personnel and Performance




Identify billing rates for sub personnel
Primes should have rights to review sub
employees and replace unqualified individuals
Primes should have rights to inspect and reject
non-conforming goods and services
Government has right to inspect sub’s
work/facilities
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Subcontract Agreements: Payments
Clearly define when payment is due
 Define invoice procedure
 Limit travel and include the applicable per
diem
 Identify costs for indirects and perquisites
 Right of audit
 Specify procedure in case government
disallows sub’s costs
 Escrow accounts

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When are Joint Ventures Appropriate?
Main Characteristics
A.
Co-management
B.
Sharing of profits and losses
C.
Limited duration
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Advantages of Joint Ventures
A. The Government can look to the resources of
two (or more) companies to perform the work;
B. A minority joint venture member can exert more
control over contract performance to protect its
interests than in a traditional prime-sub
relationship;
C. The joint venture parties receive favorable
partnership income tax treatment; and
D. Participating in a joint venture may allow a
company to avoid any perceived stigma
associated with being a subcontractor to its
competitors.
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Disadvantages of Joint Ventures
A. Lead Contractor gives up substantial
control;
B. The participating contractors become
joint and severally liable to third parties
for the acts of their joint venture
partners, including criminal acts;
C. The Government may view the joint
venture as lacking a clear point of
contact, thus raising concerns regarding
control, authority, and accountability;
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Structuring of a Joint Venture
Traditional Joint Venture (Partnership)
a. Limited Liability Company
b. Corporation
c. Other Considerations:
1. Populated v. Unpopulated Joint Ventures
2. Limitations on Subcontracting
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Joint Venturing Under Small Business/8(a)
Set-Asides
A. General Rule - Affiliation Rules Relaxed
1. Joint Venture/Teaming Arrangements of
two or more businesses may submit an
offer as a "small business" without regard
to affiliation so long as each is small under
NAICS code assigned to the contract
2. Encourages teaming/joint venturing on
larger and/or bundled contracts
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Joint Venturing Under Small Business/8(a)
Set-Asides
B. Joint Venture for Small Business Set-Aside
contracts
1. All partners must be small businesses; and
2. The contract must meet certain size
requirements
a. Revenue-based size standard-contract
must exceed one-half of the size
standard
b. Employee-based size standard-contract
must exceed $10 million
3. The “3 and 2 Rule” for JV’s
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Joint Venturing Under Small Business/8(a)
Set-Asides
C. Joint Ventures for 8(a) contracts
1. At least one partner must be an 8(a) firm
2. All partners must be small businesses
3. The contract must meet certain size requirements
(discussed above)
4. The SBA must approve the Joint Venture
Agreement
a. 8(a) firm must manage
b. 8(a) employee must be project manager
c. 8(a) company must receive at least 51% of
profits
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Use of Mentor-Protégé Programs
1.
2.
3.
Broad exclusion from affiliation
Ostensible subcontractor rule generally not
applicable on prime/sub relation
8(a) protégés may joint venture with their
mentors, regardless of the size of the mentor
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