News

2310, 2017

Jason Brandeis’ Recent Journal Article Explores Marijuana Law Changes

October 23rd, 2017|

Written by:  Jason Brandeis

In an article published in the most recent edition of The Bar Rag, the Alaska Bar Association’s quarterly journal, Birch Horton attorney Jason Brandeis writes about emerging legal issues and regulatory changes in Alaska’s marijuana industry.

In the piece, Brandeis discusses the expansion of the Alaska marijuana industry, which now includes over 100 licensed marijuana cultivators operating throughout the state and about forty retail stores open to the public.  During the first half of 2017, the industry conducted $17 million in retail sales and generated over $1 million of state tax revenue.

The article also examines how regulators and businesses have responded to the industry’s growth. Regulators, for example, have been busy addressing the practical realities of managing a new industry in a state with unique geographic and supply chain concerns. Over the past few months, the State of Alaska’s Marijuana Control Board (MCB) and Alcohol & Marijuana Control Office (AMCO) have released a slate of new regulations intended to streamline and improve industry operations. Similarly, new marijuana businesses have similarly had to adjust on-the-fly. Having only recently navigated their way through complex local land use codes and a rigorous state licensing process, marijuana start-ups now find themselves having to quickly get up to speed on traditional business law practices such as corporate governance, tax collection, and employment law matters.

Finally, the article discusses how inconsistencies between state and federal law still pose problems for marijuana businesses in Alaska. The continued federal prohibition means that industry participants often do not have access to traditional banking services, requiring them to operate mostly in cash. Some of the challenges facing cash-only businesses were anticipated (such as security concerns and the inability to accept credit card payments), but others were not (such as the U.S. Postal Service’s refusal to mail a cultivator’s cash tax payments to the processing center in Anchorage).

The full article, “Federal rules complicate growing Alaska marijuana business,” explores these topics and other aspects of the Alaska marijuana industry in more detail.  You can read the article here.

2310, 2017

BHBC Welcomes Associate Katie Davies’ New Daughter to Our Family

October 23rd, 2017|

Big sister Molly checks Paige’s reflexive breathing.

Please welcome the newest member of the BHBC family, Paige Taylor Davies. Mom, associate Katie Davies, and dad Bryn, welcomed Paige into the world on September 28, 2017. Paige and her big sister, Molly, are excited to be two of the firm’s most junior associates!

1810, 2017

Big Victory for the SBA 8(a) Program and Small Businesses

October 18th, 2017|

Written by:  Jon M. DeVore

On October 13, 2017, the U.S. Supreme Court denied the Writ of Certiorari in the case of Rothe v. Department of Defense/U.S. Small Business Administration (SBA), letting stand a DC Circuit Court of Appeals decision finding that the SBA 8(a) Program constitutional because the Federal government has a legitimate interest in remedying the effects of discrimination in Federal contracting, and that the Program is rationally related to achieving that goal. This is a significant victory for qualifying individuals and businesses, including many Alaska Native Corporations, Tribal, and NHO communities that participate in the SBA 8(a) program, as well as Women Owned Small Businesses and Service Disabled Veteran Owned Businesses that have benefited by the business development assistance provided by the SBA including access to set-aside contracts in the Federal procurement system.

Contested for nearly a two decades, Rothe is the latest in a series of cases challenging the constitutionality of the SBA’s 8(a) Program, alleging that the Program’s contracting preferences for certain entities violate the Fifth Amendment’s equal protection clause.  In 2015, the DC District Court upheld the Program, finding the Program to survive strict constitutional scrutiny as the government had a compelling state interest in remediating discriminatory treatment and that Program was narrowly tailored to that interest.  The matter was appealed to DC Circuit Court of Appeals on the questions of whether the Program included an impermissible racial classification and provides race-based preferences in federal contracting, and whether the Program indeed met the constitutional standard of review under “strict scrutiny.”

In September 2016, the DC Circuit Court of Appeals subsequently held the Program to be facially constitutional, finding that Section 8(a) itself does not contain a racial classification, and there are no racial or ethnic presumptions built into the statute itself; rather, the statute focuses on socially and economically disadvantaged small businesses.  In a significant departure from the lower court’s decision the Circuit Court found a lower constitutional standard applicable, the “rational basis test,” requiring only that the Program be “rationally related to a legitimate state interest.”  Additionally notable, the Circuit Court focused on the fact that Rothe challenged the underlying federal statute and not the SBA regulations that actually implement the 8(a) Program, indicating that a challenge to the SBA regulations might have yielded a different analysis.

Petitioning for a hearing before the United States Supreme Court this past April, Rothe argued that the Court erred in applying the lower standard and questioned, (1) whether a statutory program that requires an agency to distribute benefits to “socially disadvantaged individuals,” and defines “socially disadvantaged” in terms of membership in certain racial minority groups, classifies on the basis of race and is thus subject to strict scrutiny; and (2) whether a statute that may not classify exclusively on the basis of race, but uses race as a factor in determining eligibility for benefits, is subject to strict scrutiny.  In denying the Petition for Certiorari without comment, the Supreme Court leaves the current application of the 8(a) Program intact.

809, 2017

Jon DeVore Interviewed by National Publication Set-Aside Alert on SBA Mentor-Protégé Programs

September 8th, 2017|

Written by:  Jon M. DeVore

Birch Horton Bittner & Cherot Shareholder Jon DeVore was recently interviewed by Set-Aside Alert regarding the United States Small Business Administration’s (“SBA”) new Small Business Mentor-Protégé Program. A frequent speaker at national small business conventions and corporate trainings on the topic of the Federal procurement system, Mr. DeVore has also shared his expertise in assisting clients navigating the requirements of the long-established Minority Business Development 8(a) Program Mentor-Protégé Program.

Congress more recently directed the SBA to create the new mentor-protégé program specifically for small businesses, women-owned small businesses, HUBZone businesses, and Service Disabled Veteran Small Businesses.  The new regulations for the all-small program went into effect late last year and the SBA has approved over 150 all-small mentor-protégé agreements, where the small business may team with large business as mentors providing a basis for them to compete for larger Federal contracts and quickly acquire past performance experience.  This new program significantly broadens the competition for the SBA 8(a) Mentor-Protégé Program and provides Federal agencies more alternatives for procurements.

Reprint of Set-Aside Alert

 

 

1708, 2017

Real Estate Law Provides Unexpected Rewards

August 17th, 2017|

Written by:  Suzanne Cherot

Real estate law has been the focus of my practice for many years.  I have represented commercial real estate owners and developers of office buildings, medical buildings, hotels and retail stores, owners and developers of residential subdivisions, owners of mobile home parks, and nonprofit corporations that develop housing projects.  The legal work has covered the entire gamut of drafting and negotiating documents for purchases, sales, leases and financing of a variety of real estate projects throughout Alaska. The organization and closing of these transactions with clients, lenders, and title companies are always interesting and each transaction presents its own unique issues.

Early in this practice, I did not anticipate an unexpected reward of real estate practice – seeing the completed construction of projects in the community.

Over 30 years ago, we assisted a small group of visionary residents of Seward, Alaska during the inception and development of the Alaska SeaLife Center.  What was a dream of a small group of people became a reality.  The project involved agreements with the Exxon Valdez Trustee’s Council, the State of Alaska, and the City of Seward.  In spite of construction and early operational challenges, the SeaLife Center is now a wonderful and vibrant tourist destination and is renown for its environmental and scientific research of Alaska’s marine ecosystem and its species, and a learning center for children.  When I visit Seward and the SeaLife Center, I experience a great sense of  satisfaction knowing the role we played in making this happen.

I experience the same sense of satisfaction as I drive around Anchorage and see some of the commercial and real estate developments in which I played a small part but which have had a big impact on Anchorage families and businesses.

Low income tax credit housing projects are particularly rewarding. During the last ten years, I have had the opportunity to work with community-focused organizations such as Cook Inlet Housing Authority and RurAL CAP during the initial financing and investment stage through the closing of loan term financing.  All of these owners and developers are dedicated to improving the neighborhoods where the projects are located.  The projects help the elderly, disabled, and low income individuals who want to provide safe, clean, and well located housing for their families and children.  The projects have transformed neighborhoods and improved the quality of life for hundreds of Alaskans.

The legal representation for all real estate work, and particularly for low income tax credit projects is technical, complex and demanding.  However, the unexpected reward is seeing the tangible completed results.

 

 

 

1208, 2017

Changes in Regulations by the Federal Government Are the Real Impact on Procurement

August 12th, 2017|

Written by Jon M. DeVore

The Trump Administration just released its first Unified Regulatory Agenda.  This is one of the primary tools that the White House uses to control agency actions and has real impact on doing business with the government.  Most agency rules must be submitted to a White House office called Office of Information and Regulatory Affairs (OIRA) for review before they can be published.  OIRA’s primary role is to look at nonpartisan issues like a regulation’s costs and benefits.  But, because it is housed directly under the White House, it also allows the President to control the regulatory agenda.  Congress and the Administration are expected to push procurement reform for the Department of Defense (DoD) and other large agencies.  The SBA has been asked to be involved in many of these regulatory and policy reforms.

The Unified Agenda reports that federal agencies have withdrawn 469 proposed rules, reconsidered 391 active regulations, and reduced economically significant regulations by 50%.  As many commentators have noted, it is fairly easy and cost free for Pres. Trump to cancel rulemakings Pres. Obama was considering.  It is a useful reminder, however, to expect more deregulation than regulation from this White House.  That said, the Administration is not doing a complete about face on all rules that are near completion.  For example, the “Buy American, Hire American” is going to be a major policy push and will find itself in new regulations.

The Federal Acquisition Regulations (FARs) are on track to be amended to reflect several recent items that may impact the Federal Contracting.  The changes are expected to address the following issues:

  • Changes in SBA Regulations on Status Determinations (To be proposed Sept. 2017 and open for comment until Dec.) – These clarifications are expected to relieve the burden on both industry and government by reducing the number of protests related to inappropriate elimination from competition of offers from 8(a) joint ventures and inappropriate awards to ineligible 8(a) joint ventures. This will reduce the risk for fraud by clarifying the role of SBA as the authority for making eligibility determination. The rule is also expected to facilitate competition by clarifying the circumstances under which a joint venture is eligible for award under the 8(a) program.
  • Clarify that Overseas Contracting Is Not Excluded from Agency Responsibilities to Foster Small Business Participation (to be proposed Oct 2017 and open for comment until Dec.) In its final rule, SBA has clarified that, as a general matter, its small business contracting regulations apply regardless of the place of performance. There is a need to amend the FAR both to bring its coverage into alignment with SBA’s regulation and to give agencies the tools they need, especially the ability to use set-asides to maximize opportunities for small businesses overseas.  SBA intends to include contracts performed outside of the US in agencies’ prime contracting goals beginning in FY 2016. Although inclusion for goaling purposes is not dependent on FAR changes, amending FAR part 19 will allow agencies to take advantage of the tools authorized for providing small business opportunities for contracts awarded outside of the US.  This will make it easier for small businesses to receive additional opportunities for contracts performed outside of the US.  The new FAR regulation has significant implications for opening more markets for small businesses.
  • Revise Limits on Subcontracting (to be proposed Aug 2017 and open for comment until Oct) This FAR change incorporates SBA final rule which implemented the statutory requirements of sec. 1651 of the National Defense Authorization Act (NDAA) for FY 2013. This action is necessary to meet the Congressional intent of clarifying the limitations on subcontracting with which small businesses must comply, as well as the ways in which they can comply.  Failure to implement sec. 1651 promptly will prevent small businesses from taking advantage of subcontracts with similarly situated entities.  This new FAR update is critical to the changes mandated by the NDAA and significantly changes the manner in which contract performance is measured.
  • Changes to Section 811 There will be new FAR regulations adding Controls on Sole Source 8(a) Contracts Exceeding $22 Million (final rule expected in Oct.) – This rule implements guidance from a Government Accountability Office report entitled “Federal Contracting: Slow Start to Implementation of Justifications for 8{a) Sole-Source Contracts” (GA0-13-118, December 2012). Sole-source contracting regulations are statutory and are found in sec. 811 of the NDAA for FY 2010 (Pub. L. 11184) (see 77 FR 23369).  These clarifications improve the contracting officer’s ability to comply with the sole source contracts and statutory requirements.  This rule provides such guidance, including when justification is necessary, how contracting officers should comply, and when a separate sole-source justification is necessary for out-of-scope modifications to 8(a) sole-source contracts.
  • Partial Set Asides, Reserves, and Multiple-Award Contracts (final rule expected in Sept.) This rule incorporates statutory requirements discussed at sec.1331 of the Small Business Jobs Act of 2010 (15 U.S.C. 644(r)) and the SBA’s final rule at 78 FR 61114, dated October 2, 2013. The rule increases small business participation in Federal prime contracts by ensuring that small businesses have greater access to multiple award contracts and clarifying the procedures for submitting proposals for partial set-asides, reserves, and orders placed under such contracts.
  • HUBZone Regulations (proposed rule expected in Sept) SBA has been reviewing its processes and procedures for implementing the HUBZone program and has determined that several of the regulations governing the program should be amended in order to resolve certain issues that have arisen. As a result, the proposed rule would constitute a comprehensive revision of part 126 of SBA’s regulations to clarify current HUBZone Program regulations, and implement various new procedures. The SBA will focus on the principles of Executive Orders 12866, 13771 and 13563 to determine whether portions of regulations should be modified, streamlined, expanded or repealed to make the HUBZone program more effective and/or less burdensome on small business concerns.
  • Updates to Reflect Last Year’s NDAA (proposed rule expected in Sept.) – Sec.1822 of the NDAA for FY 2017, Public Law 114-328, Dec. 23, 2016, establishes a pilot program for qualified subcontractors to obtain past performance ratings that can be used to compete for prime contracts. 1811 of the NDAA of 2017 also limits the scope of review of Procurement Center Representatives for certain DoD procurements performed outside of the U.S.  Sec. 1821 of the NDAA of 2017, establishes that failure to act in good faith in providing timely subcontracting reports shall be considered a material breach of the contract.  Sec. 863 of the NDAA for FY 2016, Public Law 114-92, Nov. 25, 2015, establishes procedures for the publication of acquisition strategies if the acquisition involves consolidation or substantial bundling. SBA also intends to request comment on various proposed changes requested by industry or other agencies, including those pertaining to exclusions from calculating compliance with the limitations on subcontracting, an agency’s ability to set aside orders under set-aside contracts, and a contracting officer’s authority to request reports on a prime contractor’s compliance with the limitations on subcontracting.

As is obvious by the list of anticipated regulations, the new Administration will not be hesitant to propose new regulations and policies.  What is less clear is how this administration will consider small business and minority, Alaska Native, NHO and Native American owned businesses in the complexity of the Federal Procurement System.  Monitoring these regulations is extremely critical and commenting on the new proposal is crucial.  We recommend working with the Congressional Delegations in assisting in crafting the FAR clarifications.