Size Protest

SBA’s “Rule of Two” often requires federal agencies to set aside an acquisition for small businesses whenever there is reasonable expectation that offers will be obtained from at least two small businesses that are competitive in terms of fair market prices, quality, and delivery. 

On Friday, SBA issued a Proposed Rule that would extend the reach of the Rule of Two by applying it to orders issued under many multiple-award contracts.  As such, under SBA’s proposal, agencies would be required to set aside an order under a multiple-award contract when there is a reasonable expectation of obtaining competitive offers from two or more small business contract holders, unless an exception – including an exception for Federal Supply Schedule (FSS) contracts – applies.

SBA believes that this rule, if adopted, would: (1) align multiple-award contract purchases with the Small Business Act’s requirement that a fair proportion of the total purchases and contracts for goods and services be awarded to small businesses; (2) resolve confusion created by contradictory interpretations of the Rule of Two; and (3) increase contracting opportunities for small businesses, particularly small disadvantaged businesses (SDBs).  

More details are below. Continue Reading It Takes Two: SBA Proposes Applying “Rule of Two” to Multiple-Award Contracts

The Small Business Administration (“SBA”) recently issued a proposed rule that would significantly change the rules concerning small business recertification in M&A transactions and other events (the “Proposed Rule”).  SBA has framed the Proposed Rule as a consolidation of what is currently a scattered set of regulations, but the rule goes further than consolidating and clarifying existing law.  It would expand recertification requirements in several key ways, including eliminating exemptions that currently allow contractors to continue to utilize set-aside multiple award vehicles after a so-called “disqualifying recertification” (i.e., a recertification as other than small or other than disadvantaged).

SBA invited public comment on the Proposed Rule.  The deadline for submitting comments passed last week.  We have spent some time reviewing the comments submitted thus far, which provide insight into the issues that affect both small business contractors and the industry writ large.  As discussed below, many of the comments describe the potential chilling effects of the Proposed Rule, which could deprive contractors of key income streams just as they graduate from small business status and discourage investors and other contractors from acquiring small businesses that hold multiple award contracts. 

The sections below describe the Proposed Rule in greater detail and provide an overview of the comments to the Proposed Rule.Continue Reading Public Comments to Proposed Rule Underscore the Need for Additional Clarity on SBA Recertification 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.Continue Reading Updates to FAR Small Business Recertification Requirements:  More Clarity, More Complexity

The Small Business Administration (“SBA”) has released a final rule revising many small business size and contracting program regulations found in 13 C.F.R. Parts 121, 124-127, effective on June 30, 2016.  The revisions, which implement reforms required by the FY2013 National Defense Authorization Act, include the following:
Continue Reading Final Rule Revises Many SBA Regulations

Recent decisions by the Small Business Administration (“SBA”) Office of Hearings and Appeals (“OHA”) and the Court of Federal Claims offer important advice to anyone in the process of drafting and negotiating a mentor/protégé joint venture agreement:  Be specific.  Those agreements, in many cases, are the crown jewel of the mentor-protégé program enabling mentors and protégés to work together on set-aside opportunities that they would not otherwise have been eligible.  And like anything of great value, it should not be taken for granted.  Instead, as a matter of meeting both regulatory requirements and best practice, mentor/protégé joint venture agreements should specifically list all resources, equipment and facilities (and their estimated values) that each party will provide and detail how work will be shared between the joint venture members.
Continue Reading OHA and COFC Agree: Mentor/Protégé JV Agreements Must Be Specific to Avoid Affiliation

In Size Appeal of NMC/Wollard Inc., SBA No. SIZ-5668, the Small Business Administration Office of Hearings and Appeals (“OHA”) clarified the three factor test used to determine whether a small business qualifies as a manufacturer of the end item being procured.  The decision confirmed that no single factor has greater weight than the others, and that a small business can be a manufacturer despite contributing a small percentage of the value of the end item if the contribution was essential to the end item’s function.

Under applicable SBA regulations, a small business manufacturer “is the concern which, with its own facilities, performs the primary activities in transforming inorganic or organic substances, including the assembly of parts and components, into the end item being acquired.”  13 C.F.R. § 121.406(b)(2).  The regulations set forth a three factor test to determine whether a small business is the manufacturer of the end item:

  1. The proportion of total value in the end item added by the efforts of the concern, excluding costs of overhead, testing, quality control, and profit;
  2. The importance of the elements added by the concern to the function of the end item, regardless of their relative value; and
  3. The concern’s technical capabilities; plant, facilities and equipment; production or assembly line processes; packaging and boxing operations; labeling of products; and product warranties.

13 C.F.R. § 121.406(b)(2)(i)(A)-(C).Continue Reading SBA OHA: In Three-Factor Test to Determine Small Business Manufacturers, No Single Factor is Determinative