B2G is moving!
Blogs posted after May 22, 2015 will be located on Deltek's central blog page at
Just select the "B2G Essentials" blog to continue to receive this valuable content.
Scrutiny of Defense's Mounting Cyber-Crisis Intensifies

Protected U.S. government networks have fallen prey to an alarming array of attacks in recent months.

  • In early 2009, four websites belonging to the Department of the Army's Military District of Washington (MDW) were hacked and defaced, likely by pro-Palestinian supporters
  • In April of this year, the public discovered that the Pentagon's Joint Strike Fighter (JSF) knowledge infrastructure was repeatedly infiltrated by hostile elements, which copied a wealth of sensitive information related to the structural and electronic systems design of the aircraft
  • And U.S. Navy satellites transponders have been increasingly hacked into by Brazilian nationals, who utilize the UHF frequencies on the satellite communications system for their own transmission purposes.

Add to these incidents the fact that attacks upon government systems have increased 40% in 2008, and we have on our hands a genuine cyber-crisis.

Despite advances in network security technology, our sensitive systems seem to be as vulnerable as ever to cyber-attack, a vulnerability which is widened not only by risky human behaviors, but also by the structure of the networks themselves. "Logic Bombs," viruses, botnets, and other forms of malware all prey upon structural facets of our networks, and the Department of Defense (DoD) has yet to develop a comprehensive approach or body of policy to combat these systematic threats. The liabilities within our cyber-defense system, thrown into high relief in recent months, is surely a factor in DoD's plans to stand up a Cyber Command dedicated to electronic warfare and defense of our military's information infrastructure. On April 28th, the Senate heard testimony on U.S. cyber-security, partly to determine whether standing up such an independent organization should be part of our national strategy.

Gaining control of the cyber-crisis in a top-down manner is important, inasmuch as creating a new organization serves to streamline processes and effectively marshal resources. But on a tactical level, the threat must be met headfirst on a daily basis. The military branches do not have the luxury of waiting for a Cyber Command, and are already addressing the issue by focusing on developing their human capital. The Army, for example, released Field Manual 3-36, Electronic Warfare (EW) in Operations, its first major EW doctrine in over 10 years, advocating, among other strategies, an increase in specialized personnel. The Department of the Navy and Department of the Air Force's immediate EW roadmaps also rely heavily on personnel development.

For contractors, this not only means taking part in the education, training, and development of such personnel, but also providing their specialists with securely-configured software, cutting-edge network security tools, and savvy architectures (all of which will ideally exhibit awareness of social and complex network theory to combat inherent weaknesses within our information systems). Additionally, until the military turns out an adequate number of technically-trained personnel, it will also need help in the management of its Information Warfare (IW) programs. GovWin is tracking the following opportunities related to cyber-defense:

AIR FORCE Space Threat Awareness Characterization Service (STACS)
ARMY Engineering Support Services Required to Support Electronic Security and Utility Monitoring Services at Locations Worldwide (ESS)
AIR FORCE Vulnerability Lifecycle Management System Spiral 2 (VLMS)
DEFENSE Wireless Intrusion Detection System (WDS)
DEFENSE Host-Based Security Support (HBSS)
DEFENSE Operation of Information Assurance Technical Analysis Center (IATAC)

Contractors Beware: Aggressive Cost-Cutting Initiatives Set in Motion

There's been a great deal of negative backlash against President Obama's directive to agency heads to cut $100M in spending within 90 days. Many critics cited this as a trivial move relative to the estimated $1.8 trillion deficit projected for FY2009. My argument has been that although this amount is a drop in the bucket, the move was more symbolic than anything else. It was a first step in forcing the government culture to change to one of cost efficiency and smarter spending. In his weekly address President Obama outlined several next steps that may signal the demise of programs that help contractors pay the bills:

  • Program review: OMB has already started its line-by-line program review. President Obama stated that they will identify more than 100 programs that will be cut or eliminated.
  • Coburn amendment: A proposed amendment to the FY2010 budget, introduced by Senator Tom Coburn (R-OK), that would require agencies to report wasteful government programs to Congress, first within 90 days and then annual thereafter.
  • Pay-go: Re-instating the pay-as-you-go system used under former President Bill Clinton. With this system, agencies requesting increased spending in one area will be required to reduce spending in another.
  • Incentives: Obama plans to provide incentives for agencies that cut costs, which could include giving them a portion of the savings for use on other programs.
  • Employee feedback: Obama is asking federal employees for suggestions on becoming more efficient to save money.
  • Industry outreach: There are plans for a forum on government reform that will include businesses that show innovative ways of using technology.
  • Considering the goal of this administration to limit the number of contractors and bring jobs back into the government, I wonder if programs supported primarily by contractors have a higher chance of cuts or elimination? Will programs be cut in order to make them easier to handle by government employees alone?

    As always, GovWin's Industry Analysis team will track how all of this unfolds in order to understand the implications to the contracting community.

    Final Thoughts on DISA's Customer Partnership Conference

    Greater utilization of information sharing, enterprise infrastructure, command and control capabilities, information assurance (IA), and cloud computing dominated discussion and thought throughout the week at the 2009 DISA Customer Partnership Conference in Anaheim, CA. This year's seminar's theme, "1 Force. 1 Focus. Connected." illustrates DoD's ambitious desire for enterprise solutions that facilitate the establishment and maintenance of a fully connected force.

    Various tracks and sessions held by DISA, the DoD CIO and the Business Transformation Agency (BTA) throughout the week provided participants with a collaborative forum to consult with peers in industry and government. It also offered insight into obstacles and recent advances in areas related to DISA's mission. These sessions covered Computing Services, Defense Information System Network (DISN), Defense Message System (DMS), Spectrum Organization, Enterprise Services, Global Information Grid (GIG) Enterprise Services Engineering, Information Assurance (IA), Joint Interoperability Test Command (JITC), Network Operations Training, SATCOM, Teleport, and more.

    In addition, keynote presentations by government and IT leadership, invitation-only information sessions, networking events, and speaker roundtables further stimulated discussion and debate among the nearly 4,000 attendees. The AFCEA Technology Showcase provided a chance for more than 200 industry partners to showcase their information solutions and to interface and build relationships within industry and with government personnel.

    Designed to increase communication with industry partners, the 2009 DISA Customer Partnership Conference provided an excellent opportunity for both DoD leaders and the IT community to exchange ideas and information, as well as assess challenges in supporting National Level Leadership and the Warfighter. Contractors can expect increased collaboration with their DoD partners, as DISA and the Department as a whole strive to achieve a fully connected force in support of the warfighter.

    For more information on the DISA Customer Partnership Conference, please see:

    DISA Partnership Conference: Day 2

    Day 2 of the 2009 DISA Customer Partnership Conference in Anaheim, CA brought an update on the status of DISA's Small Business program as well as advice for small businesses trying to win business with the agency. During one of the sessions, Sharon Jones, Director of DISA's Office of Small Business Programs, discussed the importance of small businesses demonstrating the value they can provide to DISA. Ideally, vendors should be able to pitch their value propositions to DISA in a quick one to three minute presentation. Contractors that can add value should be knowledgeable about all that is DISA; keeping up with or ahead of technology trends; attending DISA events; disciplined in exceeding expectations; meeting with the end-users; and able to provide real-time support and services.

    Jones also reported that, overall, DISA has been successful in achieving its small business goals. Jones indicated that small businesses were awarded $871 million by DISA in FY08; Jones would like to see this figure exceed $1 billion in FY10. In addition, DISA has done extraordinarily well regarding awards to Women-Owned Small Businesses (WOSB), which has increased steadily over the last five years. Jones noted the recent decrease in HUBZone firms' interest in DISA, which she would like to see increase substantially. She urged such firms to be more visible to DISA and to foster and maintain relationships with industry partners for potential subcontracting opportunities.

    Jones then addressed some common misconceptions held by small businesses. Small business should focus on demonstrating their technical capabilities, rather than past performance. Contractors do not have to demonstrate that they can perform all of the work for a given requirement; they may instead simply utilize subcontractors, whether they be large or small businesses. She also contrasted the "50-Percent Rule" with the "51-Percent Rule" that are often confused. The 50-Percent Rule essentially mandates that the prime contractor must only cover at least 50-percent of labor costs for a requirement; the 51-Percent Rule only refers to ownership, in the context of defining whether a firm qualifies as an 8(a) company.

    For vendors hoping to start working with DISA, she emphasized the importance of responding to market research, such as RFIs and Sources Sought Notices. The results are used not only to formulate requirements but also to determine if there is adequate competition for a set-aside, therefore it's the best time for potential bidders to influence the shape of the procurement. Small businesses should read the Federal Acquisition Regulations (FAR) and DoD Instruction 5000.2 , visit their local Procurement Technical Assistance Center (PTAC), visit contracting websites, and spend time with a small business advocate. With so much opportunity at DISA - and in light of its expressed desire to increase 8(a) involvement - small businesses would do well to heed this advice.

    Below is are several upcoming DISA small business opportunities to watch:

    • GIG ENTERPRISE SERVICES, Small Business set-aside, GovWin ID: 35666

    Please check back tomorrow for more from DISA Customer Partnership conference!

    Industry Day for NASA’s I3P Acquisitions: Day 2

    The Second Day for the NASA I3P Industry Day was held in Washington DC on April 22, 2009. The focus of this Industry Day was the three remaining I3P Acquisitions that weren't discussed on the first day of the Industry Day: Web Enterprise Service Technologies (West), Enterprise Applications Service Technologies (EAST), and Agency Consolidated End User Services (ACES).

    Web Enterprise Service Technologies (WEST):

    Brian Dunbar provided a deep briefing on the WEST program, and NASA's expectations from the WEST contractor. The WEST contract will be managed out of NASA's Headquarters and the COTR for the program will be NASA's Web Program Executive.

    Contract highlights:

    • The WEST contract will be conducted within a Firm Fixed Price framework
    • 2 Year Base, with 3 One Year Option periods

    Brian stated that it is important that the transition to WEST will be invisible to external customers, and largely invisible to NASA users. The presentation he provided on WEST was very detailed, and the slides are anticipated to be released by NASA later this week.

    As a final note, Brian said that he welcomes vendor comments and questions on the Draft RFP.

    Enterprise Applications Service Technologies (EAST):

    Amy Stapleton the Technical Lead for the EAST contract, provided an overview of NASA's expectations for the EAST Contract. EAST will be managed by NASA's Office of the Chief Information Officer and will provide support to Enterprise Applications offered by NASA's Enterprise Applications Competency Center (NEACC).

    She also stated that UNITeS contract with SAIC is the primary incumbent for EAST, and part of the shift associated with moving to the EAST contract is to move away from the Cost Reimbursement model currently employed by NEACC and UNITeS. Since EAST is a Firm Fixed Price environment, the program office for EAST has developed a mechanism to define minimum and maximum workload expected out of this contract.

    Contract Highlights:

    • 2 Year Base, 1 Two year option, 1 One Year Option
    • The Contract will cover:
      • Program Management
      • Applications Operations
      • Applications Implementation
      • Delivery Functions
    • Cumulative small business target of 18%

    Agency Consolidated End User Services (ACES):

    Don Sosoka and Tracy Hall of NASA's Shared Service Center provided the briefing on the ACES contract. Don stated that the ACES contractor will conduct technology infusion and transformation activities.

    The ACES contract is expected to have three main components:

    • General Services – A variety of end user services
      • ACES Product Catalog
      • Enhancement Support Services
      • Infrastructure Upgrade Proposals
    • Base Services
      • Includes Email, calendaring services, and other services
    • Seat Services
      • Bundled Hardware, Software, System Administration and associated infrastructure

    Contract Highlights:

    • Single award Firm Fixed Price ID/IQ contract
    • Minimum value of $5M, Maximum value of $2.5B
    • A 10 year period of performance
      • 4 Year Base, 2 Three Year options

    The phase in for the contract is anticipated to start on April 1, 2010, and fully implemented across NASA by September 1, 2010. These dates are subject to change.

    Concluding Remarks:

    Bobby German the Chief Information Officer for NASA provided the concluding remarks for the Industry Day and shared his guiding principles for IT, and also his Top 5 IT challenges.

    Guiding Principles:

    • Not implementing IT for IT's sake. He wants to implement a structure that supports NASA's mission and customers
    • Integration
    • Efficiency across all services
    • Security

    Top 5 Challenges:

    • IT Security
    • Budget
    • The I3P Program
    • Continuing to meet current IT demands
    • Rapidly responding to change

    Background Information:

    As stated in yesterdays blog please see GovWin's related I3P Opportunity Reports for the released Draft RFPs, and developing updates of NASA's I3P Program.

    DISA Partnership Conference: Day 1 Observations

    Day One of the 2009 DISA Customer Partnership Conference in Anaheim, California provided an update on current JITC and DISA activities as well as an indication of where DoD is headed. Not surprisingly, current hot topics such as information sharing, cloud computing, and information assurance (IA) featured heavily in the agenda, starting with Col. Ron Stephens, Commander of the Joint Interoperability Test Command (JITC).

    JITC, which serves as the DoD certification authority for all National Security Systems (NSS) and IT regarding net readiness and joint interoperability, as well as the Operational Test Agency (OTA) for DISA and other DoD elements, is moving from a systems approach to a "systems of systems" approach. All programs must meet predetermined, overarching requirements. This shift reflects the tendency of particular service-focused requirements to produce service-focused systems, whereas the new approach fosters interoperability across DoD. Also in the spirit of fostering interoperability, Col. Stephens noted JITC's desire to move from multiple stand-alone test environments to a single DoD Test and Evaluation (T&E) environment.

    As JITC moves forward, the command hopes to:

    • Provide GovWin to architecture development for testing and interoperability,
    • Serve as executive agent for Capability Portfolio Management (CPM) sponsored test-evaluation events,
    • Establish a CPM T&E NetOps Center,
    • Establish CPM T&E Federations, and,
    • Provide Joint Interoperability Certification/Assessment letters that outline system compliance with key CPM requirements.

    In a separate panel, John Garing, DISA Director of Strategic Planning and Information, briefly discussed the agency's objective of moving toward cloud computing. A prime consideration in moving toward on-demand/cloud computing is reconciling the desire to share vast amounts of critical information, while ensuring that this information is transmitted and stored securely. Garing used the analogy of to illustrate the direction he would like to see for DISA. When one purchases hotel or flight tickets online, it doesn't matter much what's "behind the glass"; i.e., it's not important to know whose server is being used or exactly how the transaction occurs. What matters is that the customer gets what they want when they want it.

    This is not the case, however, when viewed from DISA's perspective, considering its role in securing information for its customers. Where the information goes, and how it gets there, clearly matters. DISA hopes to address this concern while still preserving the on-demand nature of cloud computing. Garing also expressed his desire to bring social networking sites inside DISA's firewall, thus making them more available and secure to those DISA supports. Garing stated that, as people will undoubtedly attempt to access such applications regardless, it is better to have them firewall protected, rather than working against this perceived inevitability.

    In addition to Garing's presentation, Bobbie Stempfley, DISA Deputy CIA and one of DoD's top experts on IA, discussed challenges and objectives regarding IA, specifically the ability to assure DoD mission execution in the face of a cyber attack and to maintain security while sharing information broadly. In part due to DoD budget cuts, Stempfley expects increased consolidation and standardization of information and processes, increasing the volume and rate of transfer of information that originates from more sources. There will be an increased need to efficiently manage these results, since you can't secure what you can't manage. Ideally, all DISA processes would be repeatable, consistent, transparent, managed and manageable, shared but not transferred, as simple as it can be and no simpler, and as complex as it needs to be but no more complex.

    The need for information sharing across agencies and the speed and agility of cloud computing continue to grow as our warfighters encounter an increasingly complex enemy in current conflicts. Information assurance, though always important, will only become more vital as information is passed securely to all necessary parties. Given the prevalence and complexity of DoD discussions concerning security issues surrounding information sharing, cloud computing, and information assurance, contractors would be wise to suggest solutions that revolve around or incorporate related elements when proposing solutions to JITC and DISA in particular. Vendors who are able to help DoD create a solution so they do not have to choose between security and communication.

    Stay tuned for more on DISA's Customer Partnership Conference.

    Colorado Selects a State-Designated Entity to Receive Health IT Stimulus Funding

    Colorado is moving quickly to prepare for the release of economic stimulus health information technology (IT) funding. The state's first step was to designate an entity charged with applying for competitive grants and leading the related projects.

    Governor Bill Ritter announced that the Colorado Health Information Organization (CORHIO) is the designated state-level entity to receive American Recovery and Reinvestment Act (ARRA) health IT funds. Designating the entity meets the first requirement necessary to apply for the $300 million health information exchange (HIE) grants from the Office of the National Coordinator for Health Information Technology (ONC); properly preparing the state for competing once they are made available. In addition, the state will be seeking to establish an electronic health record (EHR) loan program for providers interested in purchasing EHR systems through the ONC stimulus funding. CORHIO also hopes to be named as a Health IT Regional Extension Center, providing technical assistance and support at the local level for least-advantaged providers.

    Vendors should pay close attention to the naming of the state-designated entities because this is where the funding will flow, resulting in contracting opportunities. Similar to CORHIO, these entities will likely apply for several grants taking on multiple roles and needing external support. Vendors should work to establish relationships with these entities even before the funding is released, potentially help states write grant applications and seek funding.

    Industry Day for NASA’s I3P Acquisitions: Day 1

    NASA held the first day of an Industry Day for their I3P acquisitions on April 21, 2009. The Industry Day's focuses were discussions surrounding the release of Draft RFPs for four of the I3P acquisitions, which were released on April 20, 2009. The Draft RFP for the EAST contract is anticipated to be released on or about May 11, 2009.

    During the course of the Industry Day, NASA provided insights into how the I3P acquisitions fit into NASA's transformational IT strategy, and future Enterprise Architecture.


    Mike Hecker, Associate CIO for Architecture and Infrastructure provided the introduction and overview to the NASA I3P Industry Day. Mr. Hecker primarily highlighted some of the major IT initiatives that will be fulfilled by the I3P acquisitions.

    Among them:

    • Define the network perimeter and consolidate network management
    • Establish Agency Network visibility of IT assets and consolidate agency security
    • Enable cross-center collaboration

    At the end of his briefing Mr. Hecker stated that NASA is really looking for Industry comments, to receive guidance on developing the final I3P RFPs.

    Enterprise Service Management:

    Cliff Ward from the NASA Shared Services Center (NSSC) highlighted the Enterprise Service Management Model that NASA was adopting for I3P. NASA has chosen ITIL v3 as their process model, and will apply across these processes across all 5 I3P acquisitions. NASA plans to eventually grow into all 27 ITIL process areas.

    Enterprise Service Desk:

    Ken Griffey the CIO for the NSSC discussed the development of NASA's Enterprise Service Desk. The Enterprise Service Desk (ESD) when implemented will provide the primary customer interface for the I3P contracts, and will be handled out of the NSSC. Initially the ESD will take over Tier 0 and Tier 1 support from the NISC and ODIN contracts.

    Because the ESD will provide the customer interfaces to the I3P contracts, it must be active before the award of the I3P contracts. Currently NASA has an Internal Go Live date of January 4, 2010, with a Customer Go Live Date of May 1, 2010. These dates are subject to change.

    NASA Integrated Communications Services (NICS) Contract:

    Brad Solomon and Jeff Jackson from Marshall Space Flight Center highlighted some key features of the NICS Contract:

    • NICS will interact with the Center specific IT contracts and this interaction is outlined in section 4.0 of the Draft RFP
    • The NICS contractor will also provide integration of GSA's Networx Services, and provide support to the procurement of telecommunications service from Networx

    Mr. Solomon also discussed the major initiatives that the NICS contract is expected to fulfill.

    The following projects are active and will continue under the NICS contract:

    • Network Communications Initiative (NCI)
    • Center Zone Architecture Project (CZAP)

    The following projects will be initiated under NICS:

    • NICS Consolidated Configuration Management System
    • Consolidated Corporate Network Operations Center

    NICS Contract Highlights:

    • The Contract will be a Cost Plus Award Fee contract for the base period of 3 years, and will transition to a Cost Plus Incentive Fee/Award Fee for the remaining period of performance
    • The cumulative small business target for NICS is 32%

    NASA Enterprise Data Center (NEDC) Contract:

    Tony Anania, of the Kennedy Space Center stated that the NEDC Program Office at the Kennedy Space Center will manage the NEDC Contract and support the implementation of the longer agency wide data center transformational strategy.

    NEDC Contract Highlights:

    • 9 year period of performance, 5 year base with 4 one year options
    • Minimum contract value of $5M and a maximum value of $1.5B
    • The cumulative small business target is 12%

    Concluding Remarks:

    Bobby German, the acting CIO of NASA provided the remarks for the Industry Day. He started by saying that I3P was the vision of his predecessor Jonathan Pettus, the current CIO for the Marshall Space Flight Center, and former NASA CIO. The I3P program currently has the full support of NASA's executive team, and also fits the comprehensive IT strategy of the new Obama Administration. He did however state one of the key fears of moving away from local to agency wide contracts through I3P is local responsiveness. Mr. German stated that as this transition occurs, the I3P contracts must maintain local responsiveness as a key goal in the transition.

    Industry Day 2:

    Stay tuned for GovWin's follow up blog on Day 2 of NASA's I3P Industry Day. The highlights for Day 2 will include briefings on the remaining 3 I3P procurements, ACES, WEST, and EAST. For further details regarding the I3P Acquisitions please see the Draft RFPs that have been linked to the relevant GovWin Opportunity Reports.

    Broadband Technology Opportunity Program – A Missed Opportunity?

    When Barack Obama was campaigning for the presidency, he had a strong technology platform that included plans for broadband. The platform stated: "Barack Obama believes that America should lead the world in broadband penetration and Internet access..."

    Acting on that campaign promise, the American Recovery and Reinvestment Act (ARRA) legislation appropriated $4.7 billion for a new Broadband Technology Opportunity Program (BTOP) (GovWin member login required) to establish a national broadband service development and expansion program. The $4.7 billion will be distributed for the following purposes:

    • $4.35 billion for grants to states, the District of Columbia, U.S. territories, possessions, non-profits, or any other entity, including broadband or infrastructure providers
    • $350 million for developing and maintaining a broadband inventory map
    • $200 million for competitive grants to expand access to public computing, including community colleges and libraries
    • $141 million (3 percent) may be retained by the National Telecommunications and Information Administration (NTIA) for administrative costs

    In addition to BTOP, the economic stimulus legislation appropriates $2.5 billion for distance learning, telemedicine and broadband, which will be distributed by the Department of Agriculture's Rural Utilities Service (RUS) through two existing federal assistance programs: Distance Learning and Telemedicine Loans and Grants and Rural Broadband Access Loans and Guarantees (GovWin member login required).

    The legislation also includes deadlines for various aspects of BTOP implementation:

    • The Federal Communications Commission (FCC) must submit a national broadband plan to Congress by February 17, 2010
    • All awards must be made by September 30, 2010 for projects that do not exceed two years to complete
    • NTIA will make a national inventory of existing broadband service available on its web site by February 17, 2011

    NTIA, RUS, and FCC are working together on the BTOP program to ensure that its goals and objectives and those of the Rural Broadband Access Loans are aligned.

    Will this money be spent wisely? Until the administration's national broadband plan is released, we won't know for sure. But there are already clues it might not be.

    ARRA also provided $27.5 billion for restoration, repair, and construction of our nation's highway infrastructure. $26.8 billion has already been distributed to states through the Federal Highway Administration's (FHA) Highway Planning and Construction (GovWin member login required) grant program. On Monday, the Obama Administration announced that the 2,000th transportation project funded by ARRA had been approved. More worrying is that all of the $27.5 billion must be obligated by September 30, 2010.

    What's significant about that date? It's the same date as the deadline for the BTOP grant awards to be made. States and local governments will be tearing up roads once in order to spend the $27.5 billion for highways in the timeframe required by ARRA and then tearing them up later to lay fiber for broadband.

    GovWin's Take

    If you wonder why your state and local government prospects are moving slowly on several areas impacted by ARRA, this is one of the reasons why. What happens to a governor, mayor, or county executive when a citizen becomes a whistleblower and reports this duplicate road construction activity as waste and abuse?

    When ARRA money flows to state and local governments through existing programs, there are still many unresolved questions. When ARRA money is slated to flow through new programs that have yet to be well defined but still require fast action due to the deadlines included in the legislation, your government prospects will have more questions than answers. If your company expects business from these new grant programs, you'll need to think about getting involved at the federal level where the policy decisions are being made. And you'll need to be prepared to help advocate for your prospects.

    Those vendors who want to see where the real scrum is on broadband should watch closely the emerging debate over broadband mapping.  Should it be done transparently and, if so, will this expose broadband carriers' competitive market data?  Should data be provided by broadband carriers, or third party mapping companies and/or non-profit interest groups--how about by individual consumers?  How can we define unserved and underserved when there is still debate over what constitutes "real" broadband?  Don't expend this to be resolved quickly or peaceably if the Obama administration doesn't invest some political capital alongside the stimulus funds.

    Potential Fallout from the Rothe Development Corp. v. Department of Defense Decision

    On February 26, 2009, U.S. Court of Appeals for the Federal Circuit entered its final judgment on the Rothe Development Corp. v. Department of Defense case, denying the appeal issued by the Department of Defense (DoD) regarding the constitutionality of the Small Disadvantaged Business Program. The case was originally decided on November 4, 2008 when the Court sided with Rothe Development Corp (RDC) who claimed that the DoD policy of applying a 10% price evaluation adjustment to bids or offers of small businesses owned and controlled by socially and economically disadvantaged individuals was facially unconstitutional.

    Under Section 8(d) of the Small Business Act, the government presumes that minority owned business are socially and economically disadvantaged, and it was this aspect of the policy that was under scrutiny. RDC claimed that this policy was unconstitutional because it brought race into the mix, violating the equal protection component of the due process clause of the Fifth Amendment. The Court's ruling was based upon the decision that the government lacked "a strong basis in evidence" in deciding that minority-owned businesses were socially and economically disadvantaged. This became a big problem when RDC lost a contract to a Korean-owned business that received a 10% price evaluation adjustment. If the adjustment was not made, RDC's bid would have won the contract.

    The Small Disadvantaged Business (SDB) Program was created by Section 1207 of the National Defense Authorization Act of 1987, specifically 10 U.S.C. § 2323, which established a goal of awarding 5% of DoD's contract dollars to companies owned by socially and economically disadvantaged individuals. DoD has met this goal every year since 1997 with very few complaints from companies who don't fall into one of the SDB categories. The issue here isn't really the goal of 5%; it's the 10% price evaluation adjustment, and this was the deciding factor in the Rothe v. DoD case. Understandably, small businesses that have historically benefited from the SDB program are concerned about their future business.

    On March 10, 2009, the DoD Office of Small Business Programs released a guidance memorandum addressing the Rothe v. DoD case. In the memo, it is stated that "any activity, which includes but is not limited to the award of contracts and orders under contracts, advance payments, and the award of grants or scholarships or the addition of funds to existing grants and scholarships, that rely exclusively on the authority of 10 U.S.C. § 2323 should cease." This would lead one to believe, or at least hope, that the government is going to edit or change the current policy. Nevertheless, the concerns are there.

    Potential Impact on Industry, Both Immediate and Long Term

    The exact ramifications of the Rothe v. DoD decision remain to be seen, but a report released on March 16, 2009 by the Congressional Research Service (CRS), a legislative branch agency within the Library of Congress, minimizes the potential consequences. In the report, the co-writers address the potential implications of the decision. The big question is whether or not the percentage of contract dollars awarded to minority-owned businesses as well as other small business programs will decrease. The CRS report indicates that it won't. First of all, the 10% price evaluation adjustment has not been exercised in over a decade, and this is primarily because the government has not needed to use it. The contract that RDC lost to the Korean-owned business was procured over 10 years ago; it just took this long to go through the chain of courts. Because DoD has met their goal of 5% to disadvantaged businesses every year since 1997, they have not been in a situation where the price adjustment was needed to push them over the goal. As long as this continues to happen, problems shouldn't arise. Secondly, an additional goal is already in place for DoD to award contracts to strictly minority-owned businesses. This policy was not in question in the Rothe case because in each contracting situation, the minority-owned business' bid was lower than the competition and was therefore justified in winning.

    However, anytime race is involved with the decision, regardless of whether the decision was made strictly on a high bid/low bid basis, the government could see further protests or lawsuits referencing the Rothe case. This situation might also be seen in contracting activities involving woman-owned businesses. A losing bidder could claim gender discrimination, thereby finding grounds to protest. Whether or not these potential protesters would succeed is not known. Presumably, as long as the government awards the contract to the best offer without using any type of price adjustment or preferential treatment, legal harmony will stay intact.

    As for other small business programs such as veteran-owned, service-disabled veteran-owned, and HUBZone businesses, companies under these classifications should be unaffected. Only programs that rely upon potentially suspect classifications, such as race or gender, are subject to possible constitutionality challenges. It is the opinion of this blogger that industry should continue to see business as usual as we move into the future. GovWin attempted to contact a representative from the Office of Small Business Programs but was unsuccessful.

    More Entries