Insights

United States Attorneys’ Offices recently announced a number of False Claims Act (FCA) settlements arising out of the Paycheck Protection Program (PPP). These settlements reveal several trends that PPP loan recipients should be aware of.

On February 24, 2025, the Small Business Administration (SBA) issued a “Day One” memo outlining SBA Administrator Kelly Loeffler’s priorities. 

On December 18, 2024, the U.S. Attorney’s Office for the Western District of Texas announced a $680,000 False Claims Act (FCA) settlement with Lafayette RE Management LLC (Lafayette) in connection with the real estate investment firm’s receipt of a Paycheck Protection Program (PPP) loan at the height of the pandemic.  Crowell has previously reported on DOJ’s steady pursuit of PPP cases which have resulted in FCA settlements based on issues such as affiliation (discussed here) and ineligibility under the program’s rules (discussed here), but the Lafayette settlement is the first time that the government has intervened in a case based on the economic necessity certification that all PPP borrowers had to make on the initial loan application.  

Late on the night of January 21, 2025, President Trump signed the “Ending Illegal Discrimination And Restoring Merit-Based Opportunity” Executive Order (the “EO”). This EO, like a number of the executive orders issued on his first day in office, took aim at Diversity, Equity, and Inclusion (“DEI”) programs by, among other things, broadly directing executive agencies and departments to terminate all “discriminatory and illegal preferences, mandates, policies, programs, activities, guidance, regulations, enforcement actions, consent orders, and requirements;” curtailing the Office of Federal Contract Compliance Programs’ (OFCCP) operational authority and directing agencies to scrutinize the DEI practices of private sector employers. Additionally, this language raises questions about the future and status of certain programs, preferences, and set-aside procurements administered by the U.S. Small Business Administration, U.S. Department of Transportation, and other agencies. 

The term “bid protest” typically calls to mind challenges to an agency’s award of a contract.  But two recent GAO sustain decisions—Wilson 5 Service Company, Inc., B-422670, Sept. 25, 2024, 2024 CPD ¶ 230 and MAXIMUS Federal Services, Inc., B-422676, Sept. 16, 2024, 2024 CPD ¶ 222—highlight another impactful tool for protecting a contractor’s ability to compete fairly: pre-award challenges to ambiguous or unreasonably restrictive solicitation terms.

For the first time in nearly a decade, GAO in Knudsen Systems, Inc. sustained a protest challenging an agency’s decision to set aside a procurement for small businesses.  The decision involves the so-called “Rule of Two”:  under FAR 19.502-2(b), agencies must set aside for small businesses a procurement with an anticipated dollar value of more than $150,000 where the agency’s market research demonstrates there is a reasonable expectation at least two responsible small business offerors can meet the agency’s requirements at a fair market price.

When to file a protest challenging an agency’s corrective action is an issue that has confused protesters for over a decade since GAO’s Domain Name Alliance Registry, B‑310803.2, Aug. 18, 2008, 2008 CPD ¶ 168 decision.  In Domain Name, GAO held where a protester essentially challenges the “ground rules” of corrective action, that protest must be filed pre-award or risk being dismissed as untimely.  This has led to the proliferation of overly cautious protesters bringing pre-award challenges to corrective actions only to have GAO dismiss such protests as merely anticipating improper agency action and therefore premature.  Indeed, the line between a timely and untimely corrective action protest is unclear.  And that confusion persists, as evidenced in two recent GAO dismissals—General Dynamics Information Technology, Inc., B-422421.6, B-422421.7, July 17, 2024, and Peraton Inc., B-422409.2, B‑422409.3, July 22, 2024.

On January 30, 2024, the FAR Council issued a proposed rule entitled “Pay Equity and Transparency in Federal Contracting” (“Proposed Rule”). The Proposed Rule would: (1) prohibit contractors and subcontractors from seeking and considering information about job applicants’ compensation history when making employment decisions about personnel working on or in connection with a government contract; and (2) require contractors and subcontractors to disclose, in all advertisements for job openings involving work on or in connection with a government contract placed by or on behalf of the contractor or subcontractor, the compensation to be offered to the hired applicant for any position to perform work on or in connection with the contract.

On March 5, 2024, a federal judge in Texas struck down a federally-sponsored racial preference extended to minority groups seeking to access capital and government contracts. Nuziard v. Minority Business Development Agency (“Nuziard”). Plaintiffs, who are non-minority business owners, challenged a preference provided by the Minority Business Development Agency (“MBDA”), a bureau of the Department of Commerce, to “socially or economically disadvantaged individual[s],” defined to include African Americans, Hasidic Jews, Hispanic Americans, Native Americans and Pacific Islanders. The court struck down the MBDA’s presumption that such racial minorities are socially disadvantaged, finding the preference violated the Equal Protection Clause.   Nuziard, like the recent decision by a federal court in Tennessee in Ultima Services Corp. v. U.S. Department of Agriculture (“Ultima”), follows the Supreme Court’s decision in Students for Fair Admissions, Inc. v. Pres & Fellows of Harvard College, 600 U.S. 181 (2023) (“SFFA”) and, like Ultima, advances the mission of activist organizations across the country seeking to invalidate race-based presumptions in federally funded and sponsored entitlement programs.  

Following a January 29, 2024 White House announcement and Fact Sheet, on January 30, 2024, the Federal Acquisition Regulation (FAR) Council issued a Notice of Proposed Rulemaking (Proposed Rule) on salary-history bans and pay transparency for applicants and employees of federal contractors and subcontractors. On the same day, the Office of Federal Contract Compliance Programs (OFCCP) issued some FAQs on the compensation history issue. These actions by the federal government to ban prior salary information and require compensation information in job postings echo the efforts of multiple states and municipal governments that have enacted similar salary history bans and/or compensation disclosure requirements:

In its first published bid protest sustain decision of the new year, the Government Accountability Office (GAO) highlights agencies’ obligation to adequately document a substantive analysis of proposals against the solicitation requirements, even in FAR Part 16.5 procurements.  In SierTeK-Peerless JV LLC, B-422085, B-422085.2, Jan. 2, 2024, the Transportation Security Administration (TSA) conducted a task order competition for property management support services among OASIS 8(a) pool 1 contract holders.  The solicitation required TSA to assess the size and scope of offerors’ prior experience as compared to the solicited task order requirements.  SierTeK-Peerless, the unsuccessful offeror, challenged TSA’s award to Strativia, arguing in a supplemental protest that the agency’s evaluation of the awardee’s prior experience was flawed because TSA failed to reasonably assess the similarity of Strativia’s prior experience. 

On November 1, 2022, the U.S. Government Accountability Office (GAO) released its Annual Report on Bid Protests for Fiscal Year 2022.  While the number of protests GAO received dropped by 12% for the second year in a row, the overall protest “Effectiveness Rate”—meaning the percentage of cases in which the protester received some form of relief, such as voluntary corrective action by the agency or a GAO sustain—increased to 51%, tying Fiscal Year (FY) 2020 for the highest rate in the past five years.  

On October 26, 2022, the Department of Defense published a class deviation establishing alternative procedures for verifying the small business size and status of joint venture offerors.  This class deviation is necessary because, effective October 28, 2022, the Federal Acquisition Regulation has been updated to include new certifications for use by joint venture offerors in FAR solicitation provisions 52.212-3 and 52.219-1—via a FAR update on which Crowell previously reported.  Due to a lag in system implementation in the System for Award Management (SAM) and in the interface between SAM and the Small Business Administration, SAM will not reflect the new representations immediately.  As such, DoD’s class deviation provides language for contracting officers to use in solicitations in lieu of relying on SAM for size and status certifications of joint venture offerors.

Challenging an agency’s failure to award a “strength” for a proposal feature can prove to be an exercise in futility.  GAO frequently characterizes this oft-rejected argument as mere disagreement and defers to the agency’s conclusions.  But, following GAO’s decision in Tech Marine Business, Inc., B-420872, Oct. 14, 2022, the tide may be turning.  Agencies are now required to demonstrate that their decision not to award strength credit was reasonable and consistent with the stated evaluation criteria.

On September 23, 2022, the FAR Council issued a number of final rules amending the Federal Acquisition Regulation (FAR) to reflect changes previously implemented by the Small Business Administration (SBA) to its regulations on women-owned small businesses and HUBZones, as well as to clarify policy on joint ventures in small business contracting. 

On September 12, 2022, the Department of Justice (DOJ) announced the first-ever settlement with a Paycheck Protection Program (PPP) lender.  The lender, Prosperity Bank, agreed to pay $18,673.50 to resolve allegations it improperly processed a PPP loan on behalf of an ineligible applicant.  The announcement coincides with DOJ’s creation of three COVID-19 fraud “Strike Force” teams designed to enhanced DOJ’s efforts to combat and prevent COVID-19 related fraud.

The Department of Labor (“DOL”) recently announced in a July 29, 2022 Change Order notice that the Wage and Hour Division (“WHD”) had revised the Field Operations Handbook (“FOH”) by deleting the exemption under the Service Contract Act (“SCA”) for federal contracts to operate Job Corps Centers.  Prime contractors and subcontractors operating these centers will now be subject to the SCA and FAR 52.222-41, Service Contract Labor Standards, according to DOL. 

Major changes to the way small business contractors obtain, and agencies evaluate, past performance references are set to arrive on August 22, 2022. On July 22, 2022, the Small Business Administration (SBA) published a final rule implementing provisions of Section 868 of National Defense Authorization Act for Fiscal Year 2021. The rule provides two new methods for small business contractors to obtain past performance ratings upon which they may then rely when submitting offers on prime contracts with the Federal Government.

After a recent Court of Federal Claims (“COFC”) decision limited the circumstances under which a departure of key personnel may doom an offeror’s proposal, an even more recent GAO decision might have swung the pendulum right back. In Sehlke Consulting, LLC, GAO sustained a protest because the agency failed to penalize the awardee when a proposed key person employed under the incumbent contract provided notice that he planned to resign. Even though the key person was still employed on the date of award, GAO held that the agency’s failure to consider his “prospective unavailability” for the follow-on contract undermined the contract award.

On February 28, 2022, the Small Business Administration’s (SBA) Office of Inspector General (OIG) issued a report regarding the SBA’s Paycheck Protection Program (PPP) loan forgiveness process.