Updates to FAR Small Business Recertification Requirements: More Clarity, More Complexity

By Scott A. Freling on October 3, 2023

Posted in FAR, Government Contracts Regulatory Compliance, Size Protest, Small Business, Socio Economic Procurement Requirements

Last Friday, September 29, the FAR Council published a proposed rule that would update the Federal Acquisition Regulation (FAR) to implement the Small Business Administration’s (SBA) 2020 changes to rules on when small businesses must recertify their status in connection with orders under multiple-award contracts.

The SBA size and socioeconomic recertification rules are convoluted — especially in situations where a small business becomes a large business by virtue of an M&A transaction and wants to continue bidding on orders under a multiple-award contract. The proposed changes seek to provide greater clarity in the FAR on the situations in which small businesses must recertify their size status in connection with certain orders and take a much-needed step towards aligning the FAR small business requirements and clauses with SBA’s regulations. As is true with respect to small business representations more generally, contractors should pay attention to the situation-specific recertification requirements to avoid being inadvertently tripped up.

Like SBA’s regulations, the updates to the FAR recertification rules are scoped to certain orders issued under multiple-award contracts. So their reach is comparatively limited — for example, the updates would not be relevant to standalone contracts, or even to Indefinite Delivery, Indefinite Quantity (IDIQ) contracts that are not held by multiple contractors. The proposed FAR updates also carry forward SBA’s carve-out for Federal Supply Schedule (FSS) contracts, which could otherwise be considered multiple-award contracts.

Historically, for orders issued under multiple-award contracts, if a contractor represented as a small business or a specific socioeconomic status prior to award of the contract, the contractor only needed to rerepresent its size or socioeconomic status in connection with an order if the Contracting Officer required it.

The updated FAR text would preserve the Contracting Officer’s ability to require order-level recertification at their discretion (including for FSS contracts). But the updates also reflect three situations in which recertification would be mandatory when submitting an offer for orders issued under multiple-award contracts. These categories are generally focused on addressing situations where they may be a misalignment between the underlying multiple-award contract and the particular order:

Where the order is issued under an unrestricted multiple-award contract but is issued as a set-aside;
Where the order is issued under a set-aside multiple-award contract and is further set aside for a specific socioeconomic category that differs from the underlying multiple-award contract; and
Where the order is issued under the set-aside part of a multiple-award contract and is further set aside for a specific socioeconomic category that differs from the underlying set-aside part of the multiple-award contract.

The consequence of the proposed FAR updates is that if a small business is required to provide a recertification based on any of the above situations when submitting an offer for an order and cannot do so (whether due to a subsequent M&A transaction or size change or because the order is associated with a socioeconomic status the business cannot represent as), the business would not be eligible to bid on or receive the order.

More generally — and as also underscored by the Government’s recent settlements with respect to incorrect small business representations — the updates emphasize that the small business eligibility rules can be complex and situation-specific and serve as a reminder to government contractors that it is necessary to pay close attention to any certifications employees may be making or set-aside orders employees may be accepting on the contractor’s behalf.