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Did You Know?

On June 28, the US Supreme Court decided a case that overturned 40 years of precedent that has been in place since 1984. This precedent, referred to as the “Chevron Doctrine,” gave the power to interpret laws to subject matter experts in federal agencies who wrote the regulations to implement the law. As a result of this recent decision, Courts are no longer obligated to follow that Agency’s interpretation and can now give their own interpretation of the law or send the law back to Congress to rewrite.

This opens the door for legal challenges to any program implemented through regulation (including small business programs) that are not explicitly authorized in legislation. It also puts a wide array of health, environmental, and pollution standards, food and drug safety, workplace safety standards, financial services regulations, and education standards at risk of legal challenges if the specific standards were determined through regulation instead of explicitly outlined in statute.

This ruling essentially removes regulatory power from subject matter experts in Federal agencies that previously wrote regulations based on their interpretation of legislative language passed by Congress and places it in the hands of the Courts. The decision states that courts are better suited to determine what ambiguities in federal law may mean, even when those ambiguities involve technical or scientific questions that fall within an agency’s area of expertise. Further, the responsibility is now placed in the hands of Congress to draft legislation with very significant details and clarity, intended to avoid any ambiguity that could trigger a judicial review.

Reversal of the Chevron doctrine opens the doors for a significant increase in challenges to agency rule-making in wide-ranging policies regulating everything from energy, banking, and tax to healthcare, environment, workplace safety, etc. This shift in the agency interpretation and enforcement structure, with Congress being filled with elected officials who may not necessarily be technical or scientific, further empowers K Street lobbyists, who are subject matter experts, to play a more direct role in drafting legislation.

Key Points of this Decision:

1. Reevaluation of Deference: The Court emphasized that deference to agencies should not be automatic. It underscored the judiciary’s role in independently interpreting statutory language, especially when the language is clear and unambiguous.
2. Statutory Clarity: The decision reinforced the principle that if a statute’s language is clear, courts must give effect to the unambiguously expressed intent of Congress.
3. Limits on Agency Power: By limiting Chevron deference, the Court aimed to curtail what it perceived as overreach by federal agencies in interpreting laws beyond their expertise and statutory mandate.

Implications

1. Judicial Oversight: This decision reasserts the importance of judicial oversight over federal agencies. Courts are now expected to engage more deeply in statutory interpretation rather than deferring to agencies.
2. Impact on Agencies: Federal agencies are expected to face increased challenges in defending their interpretations of statutes, leading to a more rigorous scrutiny of agency rules and regulations, potentially slowing down the regulatory process.
3. Legislative Precision: The decision places greater responsibility on Congress to draft clear and precise legislation. Ambiguities in statutes are less likely to be resolved by agency interpretation, pushing Congress to provide detailed guidance within the legislative text.
4. Legal Uncertainty: The narrowing of Chevron’s deference is expected to lead to increased litigation as parties challenge agency interpretations more frequently, seeking judicial clarification.
   

Conclusion

The decision is likely to have a severe impact on the federal government’s ability to protect the public from all kinds of harm – environmental, economic, financial, social, etc. While some of the immediate impacts are clearer for agencies that have faced significant corporate push-back against their regulatory oversight, such as the Food and Drug Administration (FDA), Environmental Protection Agency (EPA), and Securities and Exchange Commission (SEC), this decision will likely have far-reaching implications for agency interpretation of laws and application of regulations throughout the federal government.

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Did You Know?

The Biden Administration has taken significant steps to enhance the participation of small businesses in
federal contracting, particularly through the expansion of the “Rule of Two” to multiple-award contracts.
This is especially important as an increasing number of contracts are being awarded through these
government-wide acquisition contract and multiple-award contract vehicles, reaching an all-time high in 2023. A recent independent, 3rd party report showed that almost 55.8% of all awards went through a
contract vehicle with the GSA OASIS and NASA’s SEWP V, seeing record awards of $13.4 billion and $10.5 billion, respectively. GSA says its schedules contract saw a record $46 billion in sales for 2023, a $4.6 billion increase over 2022.

The “Rule of Two” is a provision in Federal Acquisition Regulations (FAR 19.502-2) that requires that if
there are at least two small businesses that can offer their services at fair market prices and terms, the
government must set aside the contract specifically for small businesses. This rule traditionally applied
to single contracts but now, with the new directive, extends to task and delivery orders under multiple-
award contracts as well.

Key Changes Include:

• Application of Rule of Two to Task and Delivery Orders: The Office of Management and Budget (OMB) has directed federal agencies to apply the Rule of Two when issuing task and delivery orders under multiple-award contracts. This directive seeks to increase small business participation significantly by making it mandatory to consider small businesses for these orders unless specific exceptions apply.
• Documentation Requirements: If an agency decides not to set aside an order for small businesses, contracting officers must now document their reasoning in detail. This includes showing the market research conducted, the rationale for the contract vehicle selected, and inputs from agency small business specialists.
• Long-term Strategy and Regulatory Updates: The Small Business Administration (SBA) and the FAR Council are working on regulatory amendments to firmly establish these changes, indicating a long-term strategic shift towards enhancing small business access to federal contracts. There are even ongoing efforts by the House Small Business Committee to codify the rule, making it a permanent law requiring set-aside considerations for small businesses prior to contract release.

These adjustments are part of a broader initiative under the Biden Administration to empower small
businesses and ensure they have greater access to the vast market of federal contracting. This
expansion of the “Rule of Two” is seen as a crucial step in creating a more inclusive and accessible
contracting environment for small businesses across the country.

What Will it Allow You To Do?

Once the final rule is promulgated, it will empower RMSDC Councils to directly impact the availability of
opportunities to member companies within the same NAICS code and interested in competing for
Federal contracts.

Pursuant to FAR 19.502-3, a small business set-aside “shall not be made unless such a reasonable
expectation exists” that they will receive “offers from at least two responsible small businesses
concerns… at fair market prices.” With the intimate knowledge of its member companies and
communicating opportunities among other Councils, Presidents and member companies will be able to
send correspondence to agency contracting officers that identifies at least two “responsible small
business concerns” that are available to submit offers at “fair market prices” and therefore triggering a
set-aside. This includes a deferential provision to FAR 19.203, which prioritizes set-asides for 8(a),
women owned, service disabled veteran, and HUBZone firms.

You can find a copy of the memo from the Office of Management and Budget (OMB) here.

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Did You Know?

The National Defense Authorization Act (NDAA) includes three key provisions that could have a significant business impact on the member companies.

1. Increased Goal for Service-Disabled Veteran Firms
   • The Act phases out the self-certification of Small Business Concerns Owned and Controlled by Service-Disabled Veterans (SDVoB) and increased the government-wide goal for federal contracting with from 3% to 5%. In 2023, the federal government awarded a record $765 billion in contracts in fiscal year 2023, a 9.5% increase over 2022. If we use the total 2023 spend, it could reflect an additional $15.3B in Federal spend available to SDV owned businesses. Implementation regulations for this provision are due by Wednesday, June 19, 2024.
2. Prompt Payment 
   • The Act amends the Small Business Act to reduce the payment duration to subcontractors from 90 days to 30 days, ensuring faster payment processes for small business subcontractors. The provision also empowers contracting officers, in coordination with the agency Director of Small Business Programs or OSDBU to develop correcting and mitigation for prime contractors that failure by the prime contractor to make a full or timely payment to a subcontractor. Prime contractor cooperation continues until the subcontractor is made whole or the determination of the contracting officer is no longer effective – regardless of performance or close-out status of the covered contract. Implementation regulations for this provision are due by Wednesday, June 19, 2024.
3. Past Performance of Affiliates of Small businesses
   • Effective no later than July 1, 2024 – when small business concerns bid on Defense contracts, the past performance evaluation and source selection processes will consider the past performance information of affiliate companies of the small business concerns, if relevant. This provision aims to support small businesses with affiliate companies in securing contracts by leveraging their collective past performance.

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