It is a known fact many small businesses do not read or negotiate contracts. The same fact is true also for small businesses in the aerospace and defense industry as it relates to Government subcontract negotiations.
Here are five reasons this is important.
The news: On September 9, 2022, DoD’s pricing chief John Tenaglia issued a memo opening the door of possibility for contractors performing a firm fixed price contract to request equitable adjustments as a relief for inflation.
To be sure this door is not all wide open. The memo states that where there are extraordinary circumstances contractors may seek and upward adjustment of an “existing firm – fixed priced contract to account for current economic conditions” and DoD will entertain an upward adjustment under Part 50 of the Federal Acquisition Regulations (FAR), subject to available funding.
What does this mean for contractors: Generally,
Small businesses in the aerospace and defense industry often lose federal contact awards because during their proposal writing they fail to consider whether a business which they have identified as a subcontractor could bring the small business within the ostensible subcontractor rule losing eligibility for a contract award as a small business. Briefly, an ostensible subcontractor is a subcontractor that is not a similarly situated entity and performs primary and vital requirements of a contract or is one upon which the prime contractor is unusually reliant.
In plain English, the small business is the prime, but the subcontractor does the work. The businesses are considered affiliated for size determination purposes. Usually, th
Last year, I spent time researching various social media groups to see what many small businesses desired when considering making the U.S. government their customer. There is almost always a universal answer: I want to be a prime.
Last year it was not the first time I had heard the desire to become a prime among small businesses. It was a confirmation of what I had known. The part that catches my attention is that many are people owning a business for the first time in their life and have yet to learn the ropes of what it takes to run a business for the long haul. To be clear, I am not judging anyone’s desires rather coming from a place of knowing what the government contracting landscape is I often question myself: Am I being too pessimistic, or too much of a pragmatist? W
Today United States Government released the first anti-corruption strategy to address this malaise domestically and internationally. Anti - corruption was a core national security interest in President Biden’s National Security Memorandum. Important in the strategy is the fight against money laundering, especially in real estate. Another crucial point of the strategy is the transnational and diplomatic focus. The U.S. Strategy has both domestic and international outreach.
Five organizing pillars are central to the strategy:
1. Modernizing, coordinating, and resourcing U.S. efforts to fight corruption.
2. Curb illicit finance. Therein lie the anti-money laundering efforts, business ownership transparency, cross - co
Holmes and his team have made progress and have identified a list of potential businesses in all the desired countries. That is success, except, Holmes and his team will need to follow another process to vet the businesses. Unlike other countries, U.S. has policies and regulations in place that forbid doing business with some countries, some entities, and some individuals. So, now that Holmes has a list of desired buyers, their team must comb through the businesses and list to get to know their customer and more important spot transaction red flags.
There are reasons for this. Holmes produces products that are export controlled – more on these on an upcoming article – that can be used for malicious pur
Last week the Office of Federal Contractor Compliance Programs announced the launch of a new Contractor Portal and the opening of its Affirmative Action Program Verification Interface. Beginning next year, covered contractors - contractors and subcontractors - must register on the portal and will have to submit a formal certification on the Portal. Based on the timeline shown, contractors have about seven months to prepare their certificates. Here are three milestone dates to know:
February 1, 2022 – expected opening date of the portal for registration
March 31, 2022 – certification features will be available
June 30, 2022 – all contractors and subcontractors must certify compliance with AAP requir
Human nature is made of habits. Some are in the habit of getting things done at the last minute, some like to plan. When preparing goods for export it is best to plan. The reason is simple and practical: don’t delay shipment or discover at the last minute you can’t export because your items are controlled for export reasons. Therefore, it is best to prepare your goods for shipment. This includes classification of goods, of the items, you intend to export.
Holmes, too, and his team are beginning the process early. Fortunately for them, their inventory comprises few select items so it will not be too time consuming to complete the process. If, however, you’re a company that has a variety of parts and items in your inventory you intend to export then this process w
There is a basic tenet in bid proposal preparation: state what you know and state so truthfully. This basic tenet seems sometimes forgotten. I’m not sure whether it happens out of enthusiasm or some conviction it will cause no harm if the truth is stretched, or one becomes creative with the facts.
So, people fall into the trap of using their own imagination to present as facts that which is not. This was the case for a company that had misrepresented the experience of a key person in its bid proposal. It cost the company the loss of a $13.6 million contract award and it was disqualified from the competition. Auch!
Here’s the takeaway, when preparing bid proposals check and double check your facts. Make sure they are accurate. Folks, the truth does set you
It takes a village to make things happen. In Michigan, we have the Aerospace Industry Association, an organization making things happen for the aerospace companies in our state.
Last year, we got together to visit the Spirit Airlines maintenance hangar to launch our first in person event after COVID. More important, we got together to advocate for the companies involved in Aerospace at the State’s Capitol. Also, to showcase that the Aerospace Industry in Michigan is to be celebrated. There are a lot of companies here in Michigan are doing that not only are creating jobs, but also are being innovative, and attracting local talent. We highlighted the wonderful achievements of Michigan Tech students winning the Artemis Award in NASA’s Breakthrough, Innovative, and Game -
- Overview of the U.S. Sanctions and OFAC
Embargoes and Sanctions are familiar concepts of the American vernacular. These embargoes and sanctions impact U.S. businesses in cross border transactions. Some people think these regulations apply only to banks to later discover they can’t move on with a transaction or worse to discover they are subject of an investigation. Some people don’t like regulations. Doing business sometime is not about liking or disliking all of it. It’s often about following certain guidelines that align a business undertaking with the country’s national policy. The United States maintains these sanctions for many reasons such as national security, diplomacy, and humanitarian reasons.
The idea behind embargoes and san
When I read a contract, I go through it line by line to make sure there are no hidden fees, no costs that would be detrimental to my client, terms are clear, and there are no loopholes. Often as attorneys we use a checklist to make sure we cover all there is to cover. Call it a safety net. Note, however, that before reviewing, we have gathered all the facts about a transaction to make sure we understand the transaction and risk, so that when we work with a contract, we aren’t just putting redlines on it. Rather, we’re mindful of the transaction, its risks, the goals of the client, and the work we must do to advance our client’s interest in the transaction. While I can’t go over all the details and work that goes into a contract review, I have created a checklist
A manufacturer of defense articles was charged with violations of Arms Export Control Act (AECA) and the International Trade in Arms Regulations (ITAR) for having exported defense articles and furnished defense services without seeking authorization from DDTC, and failure to appoint a qualified Empowered Official.
We will focus on failing to appoint a qualified official, the emphasis being in bold letters to signify the importance of the qualifications of the empowered official. A defense articles’ manufacturer knows that it must appoint an Empowered Official empowered in writing to sign license applications and other approvals. It is of no surprise that the empowered official has to have “authority for policy and management within an organization.” (§ 120.
One way to grow a business is through export, be that of goods or services. Yes, there are risks doing business internationally, however, any risk whether real or perceived can be avoid with proper planning, and accounting for the risk. International business is no different with a little preparation you too can export.
Before you embark on the journey there are a few steps and a roadmap to follow so you can avoid making costly mistakes. Sometime the consequences of these mistakes can cause criminal or civil liability. For instance, if one you were to export to sanctioned countries, or dubious parties, or import here into the United States resources or goods from those countries or parties. This is not to scare you from doing business overseas: it is meant only to draw your atte
Last week on the second State of the Union address President Trump did not miss to address U.S. trade policy and emphasized his promise “to defend American jobs and demand fair trade for American workers.” The speech did not fail to mention also the USMCA ( U.S. Mexico Canada Agreement ), or colloquially being referred to as NAFTA 2.0.
The President invited the Congress to pass the USMCA without sparing colorful words to express his sentiments about the NAFTA. On the one hand, it is promising to hear the President’s position on passing the USMCA. It is a positive promise for all countries involved and it creates a level of certainty, at least while this article is being written, that the work done to bring an agreement into existence between the countries involved will yie
A recent settlement between OFAC and a California based cosmetics company for $996, 080 highlights the impotance of supplychain due diligence and audit in international transactions. This case involved 156 apparent violations of the North Korea Sanctions Regulations 31 C.F.R. Part 510.
The company had imported false eyelash kits for a period of years from two suppliers based in the People’s Republic of China. The kits contained - unbeknown to the company - materials sourced from the Democratic People’s Republic of Korea. Among the aggravated factors include the lack of an adequate compliance program and a lack of sufficient supplier oversight. Whereas immediate disclosure, full cooperation with OFAC were among the mitigating factors.
Note the company’s steps to pr
In May we wrote about President Trump’s decision to withdraw from JCPOA. At that time businesses were given a period of 90 - 180 days to wind down their operations or business with Iran. That wind down period ended on November 4, 2018.
According to U.S. Department of Treasury’s Office of Foreign Assets Control (OFAC) the United States will fully enforce the reinstated sanctions on Iran. The OFAC has issued a FAQ related to the re-imposition of sanctions. These sanctions may be imposed on provided goods and services and the “extension of additional loans or credits to an Iranian counterpart” unless there is an exemption, OFAC has authorized them, or said activities are not sanctionable. Significantly, exceptions and authorizations do not apply to transactions with persons on th
An often overlooked aspect of being a contractor to the federal government is the requirement of responsibility. That is the government does business with responsible contractors.
The standards of responsibility are listed in FAR 9.104. Generally, a contractor must have capital, technical skills, ability to perform and deliver on schedule, capacity to do so, have a record of integrity and business ethics, and other requisites.
The standard of responsibility isn’t confined only to prime contractors. It extends to subcontractors. To clarify, while the contracting officer ensures a responsible contractor receives a contract award, the prime contractor ensures its subcontractors are responsible subcontractors. It is for this reason one must not only vet its subcontractors
Why live in a fantasy of ones own fiction to have it turn into a vivid real nightmare? This is the case of some businesses or individuals who may take steps that they may perceive to be beneficial to them and can outdo or cheat the U.S. government from the well established rules of being involved with procurement work. Its, unfortunately, a nightmare with dire consequences both personal and business wise.
This is what happened recently with Arena Americas and Military Training Solutions. These two entities allegedly had the idea, a fiction, that they could both benefit from the generosity of Uncle Sam. They created an arrangement where MTS would be compensated for bidding and winning small business set aside contracts and Arena a large entity would perform the work.
Cybersecurity measures across the supply chain were the focus of the Deputy Deputy Secretary of Defense Patrick Shanahan during the annual Air Force conference.
The responsibility falls on the prime contractors to ensure that tier 1 and tier 2 suppliers have security measures in place. According to the Deputy Secretary the measure will be the “fourth critical measure” , in addition to cost, quality, and schedule to hold “people accountable.”
Security is the standard not the exception. To ensure these measures are in place the Pentagon could launch red team cyber attacks to test the vulnerability of contractor’s systems.
“Risks for Businesses with Supply Chain Links to North Korea” is the title to the advisory issued today, July 23, 2018, by the U.S. Department of State, with the U.S. Department of Treasury’s Office of Foreign Assets Control (OFAC) and the U.S. Department of Homeland Security. The advisory cautions about deceitful ways North Korea uses to circumvent sanctions. Particularly, the advisory draws attention to two key risks: “1. inadvertent sourcing of goods, services, or technology form North Korea, and 2) the presence of North Korean citizens or nationals in companies’ supply chain, whose labor generates revenue for North Korea.”
Industries and countries where North Korea exports laborers are highlighted and listed. Industries concerned include construction, IT services, shipbuil
Recently, Credit Suisse Group, AG agreed to pay $77 Million and would enter a non - prosecution agreement as a result of actions in violation of the Foreign Corrupt Practices Act (FCPA) where people connected with Asian government officials were promoted to win banking business. Now, $77 Million is a lot of money. May be a company a size of Credit Suisse Group, AG (“Credit Suisse”) can afford to pay that amount. But what if you were a small or midsize business found in violation of FCPA or some other regulation, what can you afford to lose? But more importantly, what would a sizable loss mean to your business or to your reputation?
You can take steps to avoid these outcomes. If you are a government contractor or a business engaged in international business or transactions, one
On May 8, 2018, President Trump announced that US will no longer participate in the Joint Comprehensive Plan of Action (JCPOA), commonly known as the Iran deal. The President issued a National Security Presidential Memorandum (NSPM) directing the Department of Treasury and other Departments and Agencies to immediately take action to re-impose the U.S. sanctions that were lifted as a result of JCPOA.
As a result, Departments and Agencies will implement a process to allow persons engaged in business in Iran to wind - down their operations or transactions within a period of 90 - days to 180 days ( August 6, 2018 to November 4, 2018 time frame) . To assist with this process the Office of Foreign Assets Control (OFAC) issued a guidance in the form of Frequently Asked Questions outl
Recently, Deputy Attorney General Rod Rosenstein announced a new DOJ policy encouraging “coordination among DOJ and other agencies” to avoid “unfair duplicate penalties” for companies. This in the context of corporate crimes where companies operating in highly regulated industries are accountable to many agencies. As a result, they could face multiple penalties in the event of any wrongdoing.
Important is Rosenstein’s emphasis on the role of compliance in corporate enforcement. Personally, I am glad that performance is the focus, for it is key to the well being of a company. The strength of a company lies, among other, on having in place functioning compliance programs known to all within the organization.
One certainly cannot prevent a bad actor, but a business can c
On March 23, 2108, Department of Defense (“DoD”) issued a final rule to implement section 861 of National Defense Authorization Act (“NDAA”) for Fiscal Year 2016 (FY 2016) amending the DoD Mentor - Protégé Pilot Program. The rule applies to small businesses that participate in the program.
The final rule provides new reporting requirements for mentor firms to provide information to the DoD’s Office of Small Business Programs to support decisions about the continuation of mentor - protégé agreements. Under the final rule, mentor firms must provide reporting requirements about the assistance provided protégé firms and the success of such assistance. Though protégé firms are not required to provide reports, the mentor firms will require supporting information from the prot
You may be wondering what does mother’s advice in Little Red Riding Hood have anything to do with Government Contracts. Well, it is the sort of advise we tend to apply to caution of the dangers ahead.
Is then government contracting a dangerous undertaking? It depends. I am not to write a scary story of the likes of Edgar Allen Poe, that is not my intention. Nor do I want to lead you in believing that all is doom and gloom. But the reality is this: there is a dark side in government contracting that you should be aware as you prepare to engage in this area and it has to do with the consequences of finding oneself in a position where you may have done a wrong that in other commercial circumstances may not be so.
When that occurs the consequences can be detrimental to y
Once a business is formed it must bring into focus its marketing strategy. Competition is tough to make it as a small business. Generally, businesses look to the federal, state and local government to become vendors for the government to supply services or products. Specifically, for small businesses the government has set aside contracts for small women, minority, and veteran owned businesses.
Before deciding to supply services or products to the government it is important to decide if you are going to be in it for the long haul. Considering the tedious process and the many regulations that are involved in government contracting, the efforts you put should make it worth your while. Should you then decide to take advantage of the opportunities offered by the federal, state or lo
The story of the three little pigs was one of children’s favorite bedtime stories. Perhaps, my animations of dramatizing the vicious wolf and the fear and strength of each little pig helped to make it a favorite. In short, there were three pigs each set out to build a house for its own enjoyment. One build it out of straw, one out of sticks, the other out of stone. A wolf desiring to feast on the pigs walked by and huffed and puffed on each house with the result of blowing down the straw and stick house and feasting on the pigs that lived inside. But the wolf was unsuccessful with the house of stone, and the little pig that lived in it, claimed victory by doing the wolf in. The pig lived happily ever after, in true fashion of fairy tale endings.
The fable reminds me of the rea
Our decision to start a business springs from the passion lingering within to change the status quo, to do something different, better. It is an endeavor with many uncertainties, yet, despite being faced with the unknown we take on the step to give shape to our vision.
As many of you reading these lines, I took the step to venture on my own. The idea to start came after a lot of contemplation, of answering to my “what ifs” of thinking about the “naysayers” and all the other thoughts and pondering that come with making major life decisions.
The idea to start was looming largely in my mind until I said it out loud. Some supported me, especially my family, but then there were also looks of incredulity were met among my interlocutors. Once announced there was another thoug
When we, attorneys, read news like the title of this post, we wonder whether the act was intentional or whether it was ignorance of the law that brought about the charges. Some acts are intentional, and the consequences are more severe.
Here, the person involved committed acts besides illegal exports, resulting in several charges, each with its own sentencing and fines. It’s worth mentioning that stories like this do not reach the daily press, however, they do interest the international trade community, not only as a cautionary tale, but also as a reminder to go back and check if we need to be concerns with any gaps in compliance within our own environment.
Let’s explore the facts of this case that brought the situation he’s in. The actions can be summed up as