United States. Congress. House. Committee on Small.

The abuses in the SBA's 8(a) Procurement Program : hearing before the Committee on Small Business, House of Representatives, One Hundred Fourth Congress, first session, Washington, DC, December 13, 1995 online

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1992 on a form entitled Legal Opinion Sheet which sought a
legal opinion related to a draft standard operating procedure
No. 0006.

2. As stated in FAR 3 . 104-4 ( k ) ( 1 ) ( i ) , the type of information
which must be protected is that information whose disclosure
"would jeopardize the integrity or successful completion of
the procurement." While the specifications might be the
"heart and soul" of the procurement, it is properly not listed
in FAR 3. 104-4(k)(2) as it is not data likely to yield an
unfair advantage. Note the focus of FAR 9.505-2 is to avoid
manipulation of specifications, not the knowledge of them. We
safeguard the specifications and release to all competitors at
once to avoid any appearance of favoritism. A release to
targeted 8(a) firms is a full release and should not
jeopardize a subsequent competitive action nor be a violation
of procurement integrity. There is always the possibility of
unique circumstances where release of the specifications could
lead to an unfair advantage or of the inclusion of source
selection or proprietary information. Such an unique
circumstance might be where there is a sole source
subcontractor and the firm secures a contract precluding
competition. Use of a "strawman" would not solve such
problems. An example of improper inclusion would be including
technical evaluation criteria in the specifications. Rather
than direct the useless creation of a "strawman", we recommend
a reminder that the specifications should be reviewed prior to
release to ensure that source selection information has not
been improperly included.



Thomas A. Mason, Jr.



211



LEGAL OPINION SHEET

Summary of facts: During the development of the SOP covering
Small Business/Small Disadvantaged Business reviews for G-ACS,
the issue of improper disclosure of source selection information
arose as it relates to 8(a) capability demos. In the past, 8(a)
firms have routinely been provided copies of statements of work
to enable them to prepare capability statements or present
capability demonstrations. These firms may have been identified
as a result of in-house identification of potential offerors, or
in the case of SBA intervention, may have resulted from
unilateral requests through the SBA. In the majority of
instances, an 8(a) firm is selected to receive the resultant
contract under the auspices of the 8(a) program. However, there
is always the chance that no qualified firms can be identified,
and thus, the requirement may ultimately be pursued under full
and open competition. In an attempt to preclude any improper
disclosure, which in a worst case scenario may be a violation of
Procurement Integrity, it was suggested in the draft SOP that
only current contract statements of work be provided in the case
of follow-on acquisitions, or for new requirements, a "strawman"
be developed by the requiring activity. Either approach would
enable a potential offeror to have sufficient information to
develop an acceptable statement/brief, but would not result in
disclosure of any source selection sensitive information. The
draft SOP is provided as enclosure ( 1 ) . The applicable area is
highlighted for your convenience.

Legal Question: Does release of the statement of work to
targeted 8(a) firms after identification of a specific action,
but prior to public release, constitute a violation of
Procurement Integrity, or in anyway result in premature
disclosure of procurement sensitive information?

Recommended Action: FAR part 3 sets forth specific statutory
prohibitions and restrictions related to Procurement Integrity.
Clearly, in this instance, an 8(a) firm meets the definition of a
"competing contractor" as defined at 3 . 104-4( b) ( 1 ) . The
timeframe for release of the statement of work to an 8(a) firm
falls within the definition of Federal agency procurement conduct
given at 3 . 104-4( c ) ( 1 ) . Although the statement of work is not
clearly and expressly included in the list of items given as
source selection information at 3 . 104-4( k ) ( 1 ) , it can reasonably
be argued that as the "heart and soul" of any procurement action,
it is source selection information. In any event, it is
procurement sensitive and must be protected against premature
disclosure and release. Thus, the recommended course of action
which would preclude even the question of violation of
Procurement Integrity statutes, is to provide current contract
statements of work in the case of follow-on acquisitions, or for
new requirements, to develop a "strawman" statement of work.
Referenced regulatory citations are included as enclosure (2) for
your convenience.



212



Alternative Action: Continue to provide statements of work

should an affirmative opinion be given regarding legality.

Ashl^y^. Lewis Date WILLIAM L. DELLAR Ddte «

Procurement Analyst Chief, Policy &



Legal Response:



Review Section



Reviewer Date



213



U S Department
of Transportation



United States
Coast Guard




Suoieci STATEMENT OF WORK RELEASE TO 8(A) FIRMS Dale



21 SEP 1992
4280



Fiom Chief, Procurement Law Division



Reply to
Ann. of



G-LPL/7-1544
T.A. Chenault



to Chief, Policy Review Section

1. This memorandum confirms the meeting of 18 September 1992
in which it was decided that in the future statements of work
will not be released to 8(a) firms for informal assessment. /J*
This change is to comply with SBA rules as set forth in KL CFR
§ 124.308(g). It is noted that all participants agreed that
this restriction is not currently in the FAR or our agency
rules. Since we are participating in the SBS 8(a) program, we
are now complying with their restriction having been placed on
notice of that restriction. We also note that the release is
not a violation of Procurement Integrity and we do not
consider earlier release to have been statutory violations.

2. As was discussed, technical personnel will have to develop
a summary of the requirements for purposes of the informal
assessment. We wish to caution that evaluation criteria is of
at least, if not greater, sensitivity than the statement of
work so the evaluation criteria is not to be used as this
summary of the requirements.



THOMAS A. MASON, JR.



214



OEPARTMENT OF
TRANSPORTATION
U S COASTGUARD
CG-S080 (Rev 2-81)



SMALL AND SMALL DISADVANTAGED BUSINESS
LABOR SURPLUS REVIEW FORM



GENERAL INFORMATION
This form is lor Coast Guard use in support ol established national policy for Small and Small Disadvantaged Business and
Labor Surplus A/ea Programs

Prescribed requirements lor Small Business review (CGPP 12-1 704-51) Labor Surplus review (FPR t-t 802 (b)).(SBA).
Stclioo 8 (a) and Subcontract Progran ol PL 95-507
For resolution ol disputes, see CG-407. I2B-I 7S0-3



TO BE FILLED IN BY SMALL BUSINESS SPECIALIST



PROCUREMENT REQUEST

2193233EA3030



TOTAL ESTl.UATEO VALUE

s 13. 9M (IDIQ)



STANOARO
OR OOLLAR



IEU DESCRIPTION AND QUANTITY



QUANTITY: 1 JOB



INTEGRATION OF EXISTING TELECOMMUNICATION AND COMPUTER SYSTEMS
(AVIATION LOGISTIC MANAGEMENT INFORMATION SYSTEM)



RECOMMENDATION



HO USE ONLY



SMALL BUSINESS AND LABOR SURPl US SET -ASIDE (FPR 1-1 706-5(a))

SMALL BUSINESS SET -ASIDE (FPR If 706-5(t>)-6)

LABOR SUPLUS AREA SET-ASIDE (FPR II 804)
SECTIONS'*) OFFERING (FPR 1-1 713)
ADDITIONAL SOURCES ADDED



SET-ASIDE NOT INITIATED BECAUSE

O SOLE SOURCE/PROPRIETARY



LEmiESOf ANO/OR (



JPETition TO PROVIDE



r ECONOMICALL



EXPLANATION/AODITIONAL COMMENT

TAMSCO

404 1 POWDER MILL RD . STE 500

CALVERTON. MD 20705



HBCU:
NISH:



OPPORTUNITY EXISTS
NO OPPORTUNITY



NOTE

Change in the procurement plan described herem will require return for re-evaJuatjon by the Small Business Specialist.



N^UREOr^S-ALLBUSIN



->L>e>"\



m\ c fr



CONCURRENCE



CONTRACTING OFFICER

VQ CONCURS □ REJECTS fMfla tor rejection ituchcdl



SMALL BUSINESS SPECIALIST

O ACCEPTS □ APPEALS (o*ttt tor mppeil 4



PREVIOUS COITION IS OBSOLETE



JOHN J. UFALCE. New York



215



Congress of the United States

House of ftfpreBtntatiocB

imall J6osiness

IW "Ragbom ftouit ORict Building

March 5, 1996



Ms. Kavelle Bajaj, CEO
I -Net Corporation
6700 Rockledge Drive
Suite 100
Bethesda, MD 20817-1804



Dear Ms . Bajaj :

I am sorry you were unable to appear at the Committee on
Small Business hearing on the 8(a) program on December 13, 1995.
It was extremely informative, but we missed the added dimension
your testimony would have provided. In that vein, I was hoping
that you would be so kind as to respond to a few written
questions. Your answers would help complete the hearing record,
and provide the Committee with valuable information regarding the
8(a) program.

I would appreciate it if you could respond to the questions
within the next two weeks. I sincerely appreciate your
cooperation with the Committee's oversight efforts. If you have
any difficulty in responding within two weeks please contact
Charles Rowe, Committee Counsel, at (202) 226-55821.

Thank you again for your assistance in this matter. I look
forward to reading your responses.

Sincerely,



&^ Jan Meyers '
Chair



encl



222

Questions for Ms. Bajaj

1) When was I-Net first started?

2) Who were your clients during your first year in business?

3) Was I-Net exceeding its 8(a) support levels at any time between 1991
and the end of its program participation?

4) When speaking with GAO you stated that you represented your
citizenship as a naturalized US citizen in your 8(a) application because you
felt that to do otherwise would hinder your application. Later your counsel,
in a meeting with Committee staff, stated that SBA employees told you to do
this. Is your counsel's statement correct? Do you recall which individual
advised you to do this?

5) In a June 14, 1995 letter to GAO your attorneys cited demands and
questions from NationsBank regarding a private placement as if
NationsBank had imposed new conditions on I-Net in June of 1993. In fact
weren't these conditions, regarding a private placement, preexisting
conditions from the original $25 million credit agreement negotiated by I-
Net with NationsBank? Would you please provide the Committee with a
copy of the original loan agreement.

6) In your letter to Betty Toulson of the SBA's Division of Program
Certification and Eligibility dated November 18, 1993 you requested that
that SBA not terminate I-Net' s 8(a) support. You told Ms. Toulson: "Our
current bank, NationsBank, has demanded that we have an improved
debt/equity ratio, by means of an equity sale, in order to extend our line of
credit. " Wasn't that requirement an original term of the line of credit dating
to the original lending agreement, and if so why didn't you inform Ms.
Toulson of this fact?



223



7) The letter from NationsBank to I-Net on June 15, 1993 indicates that a
private placement was an original condition of the credit agreement and that
NationsBank was concerned by I-Net' s apparent lack of effort in complying
with this condition. Why wasn't I-Net more prepared to have a private
placement in the works at that time? Isn't it fair to assume that I-Net' s
credit problems at that time were due to your failure to meet this specific
condition of the credit agreement?

8) I-Net' s adverse impact analysis notes a number of problems that would
arise from I-Net' s termination from the program. In particular, your letter
states "I-Net must disagree with the statement in SBA's October 5, 1993
letter that non-8(a) sales in 1992 were 75 percent of sales. The correct
figure for that period is 35.73%". Isn't that a very high level of dependence
on 8(a) contracts for a firm in the late stage of program participation? How
many years of options remained in each of these contracts?

9) Do you consider over-reliance on 8(a) sales to have been a contributing
factor to your efforts to remain in the program? In other words, do you
believe that if I-Net had been meeting its business-mix targets then early
termination from the program would not have had a serious negative effect?



224



l-NET



Entiwrsi Nftwww SotunoNS



April 18, 1996



VIA HAND DELIVERY

The Honorable Jan Meyers

Chair

Committee on Small Business

U.S. House of Representatives

2361 Rayburn House Office Building

Washington, D.C. 20004

Re: Committee Hearings of December 13. 1995

Dear Ms. Meyers:

On behalf of Kavelle Bajaj and I-NET, thank
you for the opportunity to respond to your letter of March 5,
1996. We appreciate very much that your staff granted
additional time to respond to your letter.

At the outset, we would like to point out that I-
NET, Inc. voluntarily withdrew from the Section 8(a) Program
twenty-two months ago in June of 1994. Additionally, much of
the information requested concerns events that in some cases
are over ten years old or for which some documentation is not
readily available. With that in mind, we have attempted to
answer your questions to the best of our ability.

1. I-NET, Inc. was first incorporated in 1985,
although a predecessor-in-interest, Information Networks, a
sole proprietorship established by Ms. Bajaj, existed earlier
and was the subject of the 8(a) application.

2. I-NET, Inc.'s early customers included the
Department of Transportation, the National Oceanographic and
Atmospheric Administration and the Navy Department.

3 . We have as of yet been unable to locate copies
of SBA's letters to I-NET indicating approved support levels
for the 91-94 period. We will continue to review our files
and will provide this material as soon as possible.

4. Ms. Bajaj recollects having discussions with
SBA personnel concerning her citizenship status during the

Corporate Headquarters: 6700 Rockledge Drive • Suite 100 • Betheada, UD 20817-1804 ■ (301)214-0900 ■ FAX (301)214-0001



225



Section 8(a) Application process which was over twelve years
ago. She does not recollect the names of the personnel to
whom she spoke.

5. It is important to put your questions /5-7 in
context. In late August 1992, NationsBank required that I-
NET obtain an equity investment by no later than June 1993.
The June 1993 NationsBank "conditions" your question refers
to are contained in a letter from NationsBank to I-NET of
June 1993. The letter clearly references the antecedent
August, 1992 credit agreement. (Copy of agreement attached) .
There was no intent to ignore or hide such a fact. The June
1993 NationsBank letter was cited to emphasize the additional
pressure I-NET was placed under by NationsBank. Finding an
equity investor, as is discussed further, is not easy and
takes time; further, I-NET had to pay additional fees until
it could successfully locate an investor and negotiate a


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Online LibraryUnited States. Congress. House. Committee on SmallThe abuses in the SBA's 8(a) Procurement Program : hearing before the Committee on Small Business, House of Representatives, One Hundred Fourth Congress, first session, Washington, DC, December 13, 1995 → online text (page 19 of 20)