Are You TAA Compliant? Vendor Fined $6 Million

Are You TAA Compliant? Vendor Fined $6 Million

Capitol Supply, Inc. was fined more than $6m in penalties and fees for lacking proper procedures to track country of origin compliance.  Under the Qui Tam provision, the original whistleblower act, a former employee alleged that Capitol Supply falsely certified products sold to the government as compliant with the Trade Agreement Act (TAA). The courts requested information to certify or demonstrate the country of origin of products sold. Although the original request was sent in 2010, Capitol Supply failed to fully respond.

A full audit was performed, and it was discovered that country of origin (COO) information was neither recorded nor retained prior to the auditors’ initial request . Further, GSA conducted several Contractor Assistance Visits (CAVS) without discovering that Capitol Supply did not retain COO information. Still, it was found that Capitol Supply controlled the scope of the visit but provided limited sample data.

In 2011, Capitol Supply received a “cure notice” to fix issues related to TAA in 2011. But a lack of supporting data, good report cards, and slow responses did not protect Capitol Supply from litigation or damages.

All GSA vendors should take time to review processes and procedure they have in place to ensure compliance with the TAA. A contractor must  regularly verify with the manufacturer that the country is within a designated country and meets the requirements of the GSA and TAA. You can check the latest list of TAA designated countries.

Determining TAA compliance isn’t always simple. There are complex issues that can affect whether a product is compliant. Review our post that talks about how to remain compliant.

Steps our team takes to help determine TAA compliance:

  • Provide guidance concerning TAA compliance
  • Work with government contractor and GSA to provide the required certifications
  • Process the required modifications to remove non-compliant products from your GSA Schedules

Request immediate help with our Consultation-on-Demand.

Supreme Court Rules in Favor of Veteran Owned Small Businesses

Department of Veterans Affairs MUST use Rule of Two for Orders Placed Under FSS/GSA Schedules

In the case of veteran-owned business,  Kingdomware Technologies, Inc. v. United States, the Supreme Court ruled on June 16, 2016 that the “Rule of Two” contracting procedures in 38 U.S.C. 8127(d) also applies to Department of Veterans Affairs (VA) orders placed under the Federal Supply Schedule (aka GSA Schedule).

The “Rule of Two” provides that “a contracting officer of the Department shall award contracts on the basis of competition restricted to small business concerns owned and controlled by veterans if the contracting officer has a reasonable expectation that two or more small business concerns owned and controlled by veterans will submit offers and that the award can be made at a fair and reasonable price that offers best value to the United States.” 38 U.S.C. 8127(d).

For years VA has circumvented the “Rule of Two” when ordering using the FSS/GSA Schedule because in their view FSS/GSA Schedules were exempt. This gave VA lots of latitude to order from other than Veteran owned small businesses (VOSB) [includes Service Disabled Veteran Owned Small Businesses (SDVOSB)] through the FSS/GSA Schedule even when VOSBs were available, able, and willing to meet VA requirements.

In 2012 Kingdomware Technologies protested the VA award of a FSS order that didn’t employ the Rule of Two. After three years of court cases and appeals, the case made its way to the Supreme Court where it ruled that Kingdomware Technologies was correct in its interpretation that VA is required to use the Rule of Two for ALL contracts, including FSS/GSA Schedules.

This is a major win for Veteran owned small businesses and means that many more opportunities in VA will be set aside for VOSBs and SDVOSBs under FSS/GSA Schedules.  If you’re not on GSA Schedule, consider getting started now.

Good Hunting!


Coley’s Government Contract Services at a Glance

Coley Government Contract Services simplify the complex and bring Government marketplace success into focus. Partnerships with our clients are forged on integrity and mutual success, that’s why we have long-term clients. For a fraction of the cost of hiring an expert in house, Coley’s experts become extensions of your staff to ensure compliance and tailor strategic marketing initiatives specific to your company. Coley helps you plan, pursue, and profit. (more…)

CAUTION: Beware of Predatory SAM Updates or Registration Charges

CAUTION: Beware of Predatory SAM Updates or Registration Charges

Deceptive Emails State You Must Complete SAM Updates…

-Then Charge for Work You Completed.

It has been a few years since GSA launched SAM and required all legacy CCR/ORCA users to migrate their information to the new SAM system.

To this day, contractors are still having trouble with the tedious and sometimes confusing registration process. Users are frustrated with the help desk and customer support they receive when trying to contact SAM directly – slow responses and long hold times.

Your time is limited and you want it done right, you’re trying to get business, not stumble through a painstaking registration process.  To avoid these time-consuming tasks, some businesses are turning to third-party firms for help. With the growing number of these firms popping-up to assist companies with SAM registration and SAM updates so do an increasing number of deceptive marketing schemes to get your money.

Some third-party firms are getting more and more creative in their marketing efforts by emulating the look of government websites and making it seem like their spam emails are from government entities. Once companies engage, they lead you through a questionnaire that can be as tedious as the SAM registration or SAM Updates themselves and end with a requirement of payment to complete the registration (We have seen prices exceeding $600!).

Not all third-party firms are bad and requesting assistance with the registration process can be good business to ensure expediency and accuracy; but don’t pay to do the work yourself and be aware of misleading offers.

Things you need to know about SAM Registration:

  1. There is no cost associated with submitting a SAM registration or SAM updates, just your time;
  2. Any email you receive about your SAM registration NOT from a “.gov” or “.mil” is a third-party vendor, not the government;
  3. SAM offers several free video training on their site: SAM User Help
  4. Beware of government look-alike sites. The official government website is ; see below:SAM updates

Only if the company administrator gives access to a third-party, can they go in and make changes.

Again, if you have the time, SAM offers several free video training on their site or through their youtube account.

Creating and updating your SAM record should not be problematic.  At Coley, our consultants include these updates to our client’s  profile as part of the contract management agreements at no additional cost.

VA CVE Challenges Veteran’s Ownership in Community Property States

By Jack Coley
Coley & Associates, Inc.

SDVOSB Business Owner
[email protected]

If you are a Veteran business owner and live in a community property state, then take heed: the VA Center for Veterans Entrepreneurship (CVE) is now enforcing the law that says your spouse owns 50% of your share in any business unless your business ownership has been established as separate property or the business was established before you were married.

I encourage all Veteran business owners located in a common property state to review their situation with their attorneys and take action as appropriate to ensure they can substantiate unconditional ownership.

Here’s my story. I am the 100% shareholder of my S Corporation that I founded in 2001, I am in the office every day intimately involved in every aspect of my business. As a small business developing learning and performance solutions for the government with a special focus on helping the VA better serve Veterans, my SDVOSB status is a critical component of my company’s growth strategy. So I worked hard to ensure my corporate documents were in order, that I was in control of the company, and that I didn’t have any affiliations or agreements that would disqualify me.

Over the past three years I’ve considered myself one of the fortunate companies that had sailed through the VA’s CVE SDVOSB verification and re-verification process with little to no delay. I had been verified by CVE in 2011 and again in 2012. I had even weathered an unannounced office visit by an examiner one morning who asked to see all of the paperwork I had previously submitted and went on to ask me a number of questions to confirm my status and involvement in the company. All three events had gone smoothly. I had been quick to defend CVE to others saying that if one had their paperwork in order that the verification process could go pretty smoothly. That had been my experience—until recently.

Given that I had been verified twice and gone through an onsite, unannounced site visit by a VA examiner, you can imagine my shock when I received a Notice of Proposed Cancellation of my verified status the CVE. The letter informed me that the CVE could not confirm that I had “unconditional ownership” of 51% of my company in accordance with 38 CFR 74 because I was incorporated in Texas, a community property state and “technically” my wife owned 50% of the company. They gave me 30 days to prove otherwise or I would lose my verified status.

The letter caught me by surprise—we were in the middle of competing for a VA-solicited SDVOSB set-aside and the loss of our verified status could have been significant. I immediately shifted my time and attention to researching what all of this meant and what I needed to do to prevent my verified status from being cancelled.

Through my research I found out that the CVE actually had a document on their website about community property challenges, but for some reason had not included this in their letter and I had to find it myself. I would have been less stressed and expended less time had they simply provided a link to the additional information on the subject that they had available on their website.

I also discovered that 38 CFR 74.3(4)(f) had always required CVE to consider a spouses legal claim to ownership of a company in common property states. So why had they approved me twice before without questioning my unconditional ownership?

To prove unconditional ownership and save my verified status I needed to retain an attorney specializing in Texas Community Property laws. My attorney constructed a legal agreement separating the minimum amount of property required to show me as having an unconditional ownership of 51%. My wife and I signed it, voided my stock, reissued the stock, and then she “gifted” her stock to me to make my ownership unconditional. I submitted the agreement and stock certificates to CVE who reviewed and accepted it as proof of unconditional ownership saving my verified status until my next re-verification.

Of course there are always unintended consequences and costs associated with the enforcement of laws. In my case not only did I pay attorney fees, I also lost several weeks of momentum in my business. But the real cost of this event to my estate will come if I were to die before my wife. Under those circumstances my wife would lose the benefit of stepping up the basis value of the business to fair-market value on that portion of the business that is now separated property and will owe the IRS taxes when she assumes ownership where otherwise no taxes would have been due.

The enforcement of 38 CFR 74.3(4)(f) also brings another unintended consequence in the form of potentially increased protests. There are nine community property States, including Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Puerto Rico, Texas, Washington, and Wisconsin. If one were to lose a SDVOSB set-aside bid to a company in one of the common property States, it would be reasonable to protest the SDVOSB status of the winner based on them not having 51% “unconditional” ownership. My guess is that most Veterans are unaware of this requirement and haven’t put agreements in place according to their respective State’s laws that separate their and their spouse’s property to establish unconditional ownership and support majority ownership. The complexity of such a transaction would be compounded when there are multiple Veteran owners involved.

This appears to be another case where CVE is enforcing an extreme interpretation of the law rather than considering business realities. Until such time as my death, my wife has absolutely no involvement or interest in my business making this a ridiculous exercise to say the least.

I encourage all Veteran business owners located in a common property state to 1) review their situation with their attorneys and take action as appropriate to ensure unconditional ownership before you receive the dreaded “Notice of Intent to Cancel” letter from CVE or win an award to lose it in protest; and 2) to write their congressperson asking them to put a little common sense back into the verification process.

Contractor FAQ’s on Obtaining a Facility Clearance License

Recently, we have been asked by several clients how to obtain a facility clearance.  In the interest of communicating helpful information to all our clients, we created the following advisory.

What is a Facility Clearance License?
A Facility Clearance License (FCL) is not clearing a physical facility, but it is an administrative determination that a company or individual can be entrusted with classified information. It is also a prerequisite for personnel clearances and a clearance of Key Management Personnel who must have clearances at the same level as the FCL.

There are 3 types of classified information:
Confidential – Information in which, if improperly divulged could cause some measurable damage to national security. Majority of military personnel are given this basic level of clearance.
Secret – Information in which, if improperly divulged could cause grave damage to national security.
Top Secret – Information in which, if improperly divulged (without authorization) could cause exceptional grave damage to national security.

Why is a Facility Clearance License Needed? – FCL’s are needed for contracts that may be classified, require access to classified information/data, or work is performed in a classified location.

How does a Company get a Facility Clearance License? – To get a FCL a company must be sponsored by either a Prime Contractor who already has their FCL or the Government Contract Agency. After a sponsorship letter along with a DD Form 254 is submitted, DSS* will conduct an investigation appropriate to the level of classified material. DSS will ensure the company is not debarred, identify the organizations structure (i.e. Corporation, Partnership, or Sole Proprietorship), identify Foreign Ownership, Control, or Interest, and will identify and assist with security applications for Key Management Personnel (i.e. President/CEO, Chairman of Board, and Facility Security Officer). Also, the company will sign a Security Agreement stating they will comply with NISPOM, National Industrial Security Program Operating Manual, security requirements. Processing times range from 35 days to 1 year.

Five Essential Elements of FCL Process:
– Sponsorship
– Business Structure / Organization
– Foreign Ownership, Control, Interest (FOCI)
– Key Management Personnel
– Security Agreement

Additional Information: For additional information, please visit the following site: Facility Security Clearance (FAQs):

*The Defense Security Service (DSS) is an agency of the Department of Defense (DoD) located in Virginia with field offices throughout the US. DSS provides the military services, Defense agencies, 24 federal agencies and approximately 13,300 cleared contractor facilities with security support services.

If you have any questions, feel free to contact Coley GSA at 210-402-6766 or at i[email protected].

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