Part 5: Winning an 8(a) Competitive Contract

SUSAN MOSER: Welcome to Cherry Bekaert's GovCon podcast, where we discuss current government contracting trends, compliance matters, and best practices to guide federal contractors forward.

SUSAN MOSER: I'm Susan Moser. I'm a partner with Cherry Bekaert and leader of the Government Contracts industry practice. Today with me is my colleague Eric Poppy, who is a senior manager in Cherry Bekaert's Government Contracts Services Group.

SUSAN MOSER: Today we're continuing our series on the 8(a) program. This is our fifth podcast in our 8(a) series. Our last podcast discussed 8(a) sole source contracting. Today we will focus on winning 8(a) competitive contracts. Eric, can you give an overview of what the Small Business Act authorizes?

ERIC POPPE: Section 8 of the Small Business Act authorizes agencies to award contracts for goods, services, or construction work through the SBA to 8(a) firms. The Act also authorizes the SBA to delegate the function of executing contracts to procuring agencies, and the SBA often does so.

ERIC POPPE: To discuss competitive contracts, we need to talk about set-asides. A set-aside award is a contract in which certain contractors may compete, whereas a sole source award is a contract awarded without competition. The Competition in Contracting Act generally requires federal agencies to allow full and open competition when procuring goods or services, but set-aside and sole source awards to 8(a) firms are permissible under certain circumstances. In fact, an 8(a) set-aside is recognized as a competitive procedure.

ERIC POPPE: Agencies are encouraged to use the 8(a) program because there are governmentwide and agency-specific goals regarding the percentage of procurement dollars awarded to small disadvantaged businesses, which include 8(a) firms. As an informational note, the governmentwide goal is 5% of all small-business eligible procurement dollars awarded to 8(a) firms.

ERIC POPPE: The SBA is barred from awarding any 8(a) contract, either as a set-aside or sole source, if the contract price would cost the contracting agency more than a fair market price. Once the SBA accepts a contract into the 8(a) program, the contract is awarded either through a set-aside or on a sole source basis.

ERIC POPPE: One thing to note is the dollar threshold. When the contract's anticipated total value, including options, is less than $4.5 million, the contract is normally awarded as a sole source. In contrast, when the anticipated value exceeds that threshold, the contract generally must be awarded via a set-aside, with competition limited to 8(a) firms, so long as there is a reasonable expectation that at least two eligible and responsible 8(a) firms will submit offers and the award will be at a fair market price.

SUSAN MOSER: I gave a lot of information quickly about set-asides versus sole source and the $4.5 million threshold. Do you want to talk about identifying awards and things to consider when there might be an opportunity to pursue?

ERIC POPPE: Sure.

SUSAN MOSER: If you haven't listened to our last podcast on sole source, we recommend you do. Generally, that's a great place for an 8(a) company to start to win a sole source award. The next step is to look for 8(a) competitive opportunities. They are competitive but limited to 8(a) companies.

SUSAN MOSER: How do you find those opportunities? Notices are issued for 8(a) competitive RFPs, and you can find them on FedBizOpps or in other database services that list RFPs. Generally, we don't recommend starting there. By the time things hit a notice, many other companies have already been doing pre-planning to target those agencies.

SUSAN MOSER: We recommend selecting the agencies you want to target and meeting with their small business offices. Each agency has small business offices that are resources and advocates for small businesses. Look at what contracts they have already awarded as 8(a) contracts and what 8(a) contracts will be expiring. Research other 8(a) companies that may be graduating and will no longer be eligible.

SUSAN MOSER: Before you start bidding, avoid a shotgun approach where you respond to every RFP you see. That can be time-consuming, expensive, and not necessarily successful. Focus on particular agencies when you start looking.

ERIC POPPE: Once an opportunity has been identified and you decide to pursue it, consider the contract type. Single awards typically provide the most direct value because dollars are attached to that single award. Multiple award contracts or contract vehicles are more like a way to get your foot in the door with an agency; they require you to compete for task orders under the vehicle.

ERIC POPPE: Many vehicles involve a pool of contractors where a subset is awarded the IDIQ, and you then compete against those awardees for task orders. Vehicles may provide minimums, but those are usually low-dollar amounts and do not guarantee a significant amount unless you win task orders.

ERIC POPPE: Teaming partners can be an effective way to develop past performance and relationships with an agency. If you pursue a teaming partner, pay attention to subcontracting limitations. Federal subcontracting limitations require that small businesses receiving the contract perform a minimum percentage of the work. For many services, you need to perform at least 50% of the work based on the contract price, so monitor that requirement carefully.

SUSAN MOSER: Another point about single awards versus multiple awards: the SBA 8(a) program is a nine-year program with different stages. We advise companies to initially focus on single awards to secure wins where only one company is the successful offeror and you don't have to compete for tasks. As a company matures, builds capabilities, and pursues larger opportunities, multiple award contracts and IDIQ vehicles become more attractive because they create more opportunities across different customers.

ERIC POPPE: There's been renewed focus on the 8(a) program. The Congressional Research Service noted shrinking participation in 2020, and recent changes to the Small Business Act have incorporated revisions to make it easier for companies to become 8(a) certified. The current administration has a focus on contracting with disadvantaged businesses, so we expect more 8(a) competitive and sole source opportunities.

SUSAN MOSER: Let's shift to proposal preparation. You've identified an RFP to bid on as an 8(a) competitive. What are some things to consider when starting to put that proposal together?

ERIC POPPE: Ideally, decide to pursue the work before the final RFP is issued. That gives you time to review drafts, line up teaming partners, and gather subcontractor proposals so you're not scrambling at the end. Carefully read the RFP and, if you don't understand certain items, seek outside help. Understand FAR requirements, costing requirements, any pricing tables, and the teaming arrangement and division of work.

ERIC POPPE: Many companies encounter hidden compliance requirements in the RFP. Reading the RFP thoroughly is one of the most important steps.

SUSAN MOSER: RFPs can incorporate Federal Acquisition Regulation clauses by reference through a FAR clause, and those clauses become part of your contract. People often skim over FAR clauses and then don't understand what they've signed up for.

SUSAN MOSER: The type of contract you bid on dictates the level of compliance and the risks. For example, a fixed-price contract with competition places most risk on the contractor; if you underbid, you bear the consequences, but it also often offers higher profit margins because you're taking the risk. You are bidding against other 8(a) companies, so price competitiveness matters, but you must avoid winning at a price that threatens your company's viability.

SUSAN MOSER: Time-and-materials and cost-type contracts carry different risks and compliance requirements. On a cost-type contract, you estimate expected costs and, subject to a ceiling and funding, the government will pay your actual direct and indirect costs. Cost-type contracts place higher scrutiny on your accounting system and cost buildup, so we generally do not recommend that a company's first contract be a cost-type contract.

ERIC POPPE: Regarding cost contracts, understand the process for indirect rates, submitting provisional rates, billing, and wrapping up with incurred cost submissions, final rates, and closeout. That's where many issues arise. That ties directly into understanding the RFP instructions and responding precisely to the requirements, especially the cost volume.

SUSAN MOSER: For listeners new to government contracting, the RFP format is standardized. The RFP becomes the contract once awarded. Section B covers pricing, Section L contains instructions for proposal preparation, and Section M explains evaluation criteria and how the government will evaluate your proposal. When reviewing an RFP, start with Section B, then Section L for technical and cost volume instructions, and finally Section M to understand evaluation.

ERIC POPPE: If you don't succeed, request a debrief and take notes to incorporate into your next proposal. Many companies do not take advantage of debriefs, but you have the right to request one and it can be highly instructive.

SUSAN MOSER: That concludes our discussion on bidding on competitive 8(a) contracts. If you have not subscribed to our podcast series, subscribe to receive other podcasts on different aspects of the 8(a) program and other topics of interest to government contractors.