Going through the 2021 NDAA

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Enacted barely a month ago, federal contractors are still unpacking everything stuffed into the National Defense Authorization bill for 2021. For one assessment, Federal Drive with Tom Temin turned to Morris, Manning and Martin partner, attorney Kelly Kroll.

Interview transcript:

Tom Temin: Ms. Kroll, good to have you on.

Kelly Kroll: Thanks Tom. Thanks for having me.

Tom Temin: And you’ve done a deep dive into this bill, that was a relatively small bill, it was only a couple of 1000 pages, that’s small these days. But a few issues of top of mind concern I wanted to ask you about in all that you have dug out of this. And let’s start with other transaction authority agreements, those are growing in popularity, you’re hearing more and more in larger and larger OTAs. The authority and the OTA process goes back 50 years, but now it seems to be rediscovered. What does the NDAA say about it?

Kelly Kroll: Well, I guess you’re right, it has grown in popularity. And I think that came about as part of the NDAA in 2015 when they widened the scope of the authority for other transaction authority, it used to be for prototype weapons and weapon systems, but now it’s up to anything that quote unquote enhances the mission effectiveness of the warfighter. So it has opened it up to a whole other area outside of weapons and weapon systems, so it can be a lot of different things. And this all continues without transparency. So part of this section that you’re referring to in the NDAA is meant to give more transparency to this because as you probably know, OTAs can be done with a lot more flexibility in that they don’t have the typical competitive requirements or federal regulatory oversight that applies to them. So a lot can be going on that people just don’t have insight into. And so what this section does is basically required DoD to put out a list on a portal somewhere that everybody can access the information to find out, okay who’s doing what and how much and kind of what’s going on to give people, again, we’re gonna say the word insight one more time into what’s going on there with the OTAs to make sure there’s, part of the concerns of waste or flash fraud that could be going on because of a lack of regulatory requirements with respect to OTAs.

Tom Temin: Sure. So the genie is way out of the bottle, they just want to make sure they can see where it flies.

Kelly Kroll: Sure, yeah. Now because of the increased growth. I personally I’ve been practicing for over 20 years, and I didn’t see any OTAs until after 2015, because I wasn’t representing weapons manufacturers or people that were developing prototypes in that area, so I didn’t see it. But then when they expanded the scope, I see them all the time and I see how people can be left out of the loop if you’re not involved with one of these consortiums that are involved in these. Not that all OTAs go to consortiums. but you can really miss out on opportunities, and I’ve seen that firsthand with some of the clients that I represent.

Tom Temin: Alright. Let’s switch gears here for a moment, employee based size standards. And that has been already the subject of a lot of work by the Small Business Administration. Does this NDAA overturn what they’ve done or upset what they’ve done already or do they have to start over? What’s going on with those size standards?

Kelly Kroll: Well, I think you’re referring to the increase in the employee size standard, as far as a metric upon which of these a business determines whether or not it’s small or not. So just to give you a little background, I guess it was 2019, they again NDAA in 2018 I think, came out and said for businesses that are measuring their size standard off of three year revenue base, we’re going to increase that to five years. The revenue base to size standard metric is for service providers. For manufacturers and providers of supplies, the size standard is based on how many employees you have. And it was previously based on the number of employees you had during the preceding 12 months. So they’ve increased that scope with this to 24 months. So they’re not resetting rules, it’s just basically increasing the period of measurement for which you measure your size standard against. And it can be really a good thing for companies that are growing rapidly, because what happens is a company will be a small business under a size standard, they’ll win a big contract as a small business, they’ll get lots of money, they’ll hire new people, and next thing you know, they’re large. And so when their own contract comes up for re-compete, they can’t bid on it because they’re large now all of a sudden, because it previously was based on a three year revenue standard, or 12 month standard depending on what you’re looking at. But the business would become large, and then they couldn’t bid on their own work. So they’re trying to expand the period to kind of prolong the period in which you can stay small because it stretches that period out. Now the change is not necessarily good for companies that are shrinking because they’ll lose the contract and now they’re going to be larger for a longer period of time. But it’s not a new rule, it’s just a different metric for measuring your size. And again, this is just for employee based standards.

Tom Temin: So it requires just a calculation by the contracting officer or contracting entity, but no fire drill by the SBA?

Kelly Kroll: No, not at all. I don’t even think they have to make a rule on this because I think the act just changes it automatically and it’ll go into effect I believe next year,

Tom Temin: And let’s go on to the software development and acquisition provisions in the NDAA.

Kelly Kroll: Well, Tom, what would you like to know? There’s a lot of things in there about software development and acquisition. I think the primary thing to take away from this is we’re just gonna have to wait and see. Because basically, what the NDAA says to me and my reading of this is, look DoD you need to go out there and you need to develop regulations that are going to make sure that the acquisition and development of the software that DoD’s using is more secure, right. Because they don’t have any insight into the supply chain. They don’t have any insight into third party IT that’s embedded in software that there buying. How secure is the coding process? So they’re gonna develop regulations that will govern this whole process. That’s a big list.

Tom Temin: Yeah, that could be a five year process, in other words.

Kelly Kroll: Absolutely. And when you look at how long it’s taken, and I am not passing judgment on anyone, there’s no negativity here, but when you look at how long it’s taken to implement things, like the CMMC program. When you look at how long that’s taken the rollout, and just like with anything with the government, they’ve got to go through the whole notice and comment rulemaking process, and there’s going to be an input and you’re dealing with a complex subject. I mean, it’s really just going to be wait and see process, because then it’s going to become like when these regulations come out, how’s it going to affect the evaluation process when agencies make their decisions? And ss that going to lead to protests and just where is that all going? So that it’s a very wide mandate as far as my opinion. I’m sure people are already working on it in the background, but to me, it’s a wait and see how it comes out in the regulations.

Tom Temin: Okay, well we will wait and see, probably for another administration or two, possibly. And finally, the consolidation of veterans contracting programs. That seems like a piece of housekeeping that’s probably overdue.

Kelly Kroll: Sure, yeah. Because they have two different systems that effectively do the same thing. I’ve been through the process with some of my clients, it’s the same documentation that’s being asked, two different systems that could be consolidated into one and frankly, be a better system. The VA system is not extremely user friendly so I’m hoping they actually develop a whole new system for this. But it’s duplication of effort that’s being done by the VA and the SBA, and I think it should be transferred to the SBA because they have more experience, especially when it comes to areas of determining who controls the company, and also issues like affiliation, right. So to be qualified as a service disabled veteran owned small business, it’s not just a 51% ownership issue, it’s also a control issue. And is that company affiliated with other companies. And I’m not sure that the VA has, well I know, they don’t have as much experience in this area as SBA does. So I think SBA is better qualified and that’s being recognized by the NDAA by transferring that over to the SBA, one system, it’s going to take two years before that system gets put in place, and then the SDVOSBs then have yet another year before they have to get their application in. So what it is effectively does is allows SDVOSBs to continue to self certify as to status. But in the end, they’re going to close this loop, get rid of self certification, not only for SDVOSBs but women owned small businesses, and other socio economic certification to get rid of the self certification process because of, again, because of the fraud and abuse in that area that continues to be rampant in those areas. So they’re going to close the loop, take two years to do, two-three years. But they’ll close the loop on that.

Tom Temin: And I guess VA will still be connected because it has the data that would prove that someone is a veteran.

Kelly Kroll: Sure. And it’s a transition so VA is going to continue to do this. And it continues to apply for their program because keep in mind, you can continue to self certify right now as an SDVOSB or VOSB as long as it’s not a VA procurement, right. The requirement to get qualified to the VA program is for VA procurements so if you’re bidding on a DoD project, you can self certify as SDVOSB, but if you’re bidding on a VA procurement, you have to go through their process.

Tom Temin: Lots to chew on. Kelly Kroll is a partner at the law firm Morris Manning and Martin. Thanks so much for joining me.

Kelly Kroll: My pleasure, enjoyed very much thanks.

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