Member Article

The negotiation and passage of the National Defense Authorization Act (NDAA) draws the attention of the government contracting community every year. The NDAA is the primary mechanism Congress uses to establish policy priorities for the U.S. Department of Defense (DoD). This year, provisions in the NDAA address an array of issues that are significant to government contractors. Several of the most noteworthy provisions are summarized below.

Small Business Past Performance

Section 868 changes two aspects of past performance evaluations for small businesses. First, a small business that is a member of a joint venture may use a past performance reference for a contract performed by the joint venture when competing for contracts independently. Second, the NDAA allows a small business offeror to use a contract performed as a first-tier subcontractor when competing for certain federal prime contracts if the subcontract was performed under a mandatory subcontracting plan. These changes expand the universe of contracts a small business offeror may submit as past performance references, which should be beneficial for new businesses and businesses entering new markets.

Consolidation of Veterans' Contracting Programs

The NDAA consolidates the separate veteran-owned small business contracting programs administered by the U.S. Small Business Administration (SBA) and Department of Veterans Affairs (VA) into one program administered by the SBA. The NDAA provides a two-year transition period from the enactment of the NDAA. Once that process is complete, the VA's certification program will end, and SBA will be responsible for certifying all veteran-owned small businesses (VOSBs) and service-disabled veteran-owned small businesses (SDVOSBs).

Extension for SBA 8(a) Program Participants

Section 869 extends the nine-year term for participants in the SBA's 8(a) Program by one year. All participants admitted before September 8, 2020, may extend their term. The extension applies even if the participant elected to suspend participation in the Program, as allowed by SBA during the COVID-19 pandemic.

Employee-Based Size Standards

Section 863 amends the Small Business Act to extend the period of measurement for employee-based size standards from 12 months to 24 months. This change will provide many small businesses that use an employee-based standard more flexibility in maintaining their eligibility under a given size standard.

Sole Source Manufacturing Contracts

The NDAA increases the maximum value for manufacturing contracts awarded to women-owned small businesses (WOSBs) and Historically Underutilized Business Zone (HUBZone) concerns on a sole-source basis from $6.5 million to $7 million.

Other Transaction Authority Agreements (OTAs)

Section 833 requires the DoD to list the consortia announcing or otherwise making available opportunities to enter into OTAs. Obligations under OTAs reportedly reached $7.7 billion in 2019 and continue to increase. Providing more transparency about opportunities under OTAs which are not required to be publicized for formal competition may allow more contractors to participate in OTAs.

Whistle Blower Rights

The NDAA includes a provision that forbids contractors from using nondisclosure agreements that prohibit or restrict an employee from reporting any information that relates to any waste fraud, or abuse related to the performance of a DoD contract.

Commercial Item Determinations

Section 816 of the NDAA requires contracting officers to document commerciality determinations within 30 days of award. The provision also allows a contracting officer to consider the views of public and private sector entities when making a commercial item determination. These changes are intended to bring more consistency to commercial item determinations.

Software Development and Acquisition

Section 835 requires the DoD to develop software security criteria to be used in solicitations for commercial and developmental solutions. The requirements will include (1) establishment and enforcement of secure coding practices; (2) management of supply chain risks and third-party software sources and component risks; (3) security of the software development environment; (4) secure deployment, configuration, and installation processes; and (5) an associated vulnerability management plan and identification of tools that will be applied to achieve an appropriate level of security. Depending on how this requirement is implemented, this provision could have significant impact on the IT community.

Printed Circuit Boards

Section 841 prohibits the DoD from acquiring a printed circuit board from a "covered nation." Covered nations include the Democratic People's Republic of North Korea, the People's Republic of China, the Russian Federation, and the Islamic Republic of Iran. This prohibition is similar to the procurement ban on certain telecommunications and video surveillance equipment that has been implemented over the last two years.

Ownership Disclosures

Section 885 requires offerors and prospective grantees to disclose information regarding beneficial owners to be included in the Federal Awardee Performance and Integrity Information System database. A "beneficial owner" means any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (1) voting power which includes the power to vote, or to direct the voting of, such security; and/or (2) investment power which includes the power to dispose, or to direct the disposition of, such security. These disclosure requirements are aimed at identifying shell companies used for illicit purposes, as well as foreign owners that may raise security concerns.

If you have any questions about this legal update, please reach out to the Government Contracts group.