Small Business

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

It’s that time of year again: the House and Senate have each passed their respective version of the National Defense Authorization Act for FY 2024 (“NDAA”) (H.R. 2670, S. 2226).  The NDAA is a “must pass” set of policy programs and discretionary authorizations to fund Department of Defense (“DoD”) operations.  Lawmakers are currently undertaking the arduous process of reconciling these bills, while jockeying to include topics of importance in the final legislation.  The engrossed bills contain a number of significant provisions for defense contractors, technology providers, life science companies and commercial-item contractors – many of which we discuss briefly below and others that we will analyze in more depth in our NDAA series in the coming weeks.  Subscribe to our blog here so that you do not miss these updates.Continue Reading Key Topics to Watch as Congress Works to Fund Next Year’s DoD Budget

The Department of Justice (“DOJ”) recently announced a $5.2 million settlement with Numet Machining Techniques, LLC and affiliated entities (collectively, “Numet”) concerning alleged misrepresentations of size and ownership in connection with pursuing U.S. Government contracts.  The Numet settlement is an important reminder to the contractor community that representations and certifications—particularly those concerning small business status—should be made with due caution and that the discovery of incorrect representations during M&A due diligence can be a significant finding.  In this post, we explore the recent Numet settlement, examine the Small Business Administration (“SBA”) size and affiliation rules, and offer guidance to companies assessing the significance of incorrect representations.Continue Reading DOJ Settlement Underscores the Significance of Incorrect Small Business Representations

On December 27, 2020, the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act opened up the Paycheck Protection Program (“PPP”) to additional organizations and authorized a second draw of PPP loans.  The U.S. Small Business Administration (“SBA”) has issued guidance on changes to the original Program and new second draw loans, and the Program has been partially reopened for both first and second draw loans as of January 13, 2021.  Loans will initially only be available through community financial institutions, but SBA has indicated that additional lenders will once again be able to participate in the Program on January 15, 2021, with a full reopening scheduled for January 19, 2021.

Similar to the Program’s original rollout, a number of questions remain with respect to SBA’s implementation of the Act.  SBA is also delaying guidance on changes to loan forgiveness, which may once again place borrowers in the position of taking out loans without knowing whether they will be fully forgiven.  However, SBA has now been managing the Program for almost ten months, and borrowers will hopefully not be subject to the same level of policy shifts and reversals that was experienced during the Program’s original rollout.

The Act makes first and second draw loans available until March 31, 2021, but there is a good chance that all available funds will be allocated before that date.Continue Reading Paycheck Protection Program Expands and Offers Opportunity for Second Draw Loans

A recently proposed rule would update the Federal Acquisition Regulation (“FAR”) to incorporate statutory changes to limitations on subcontracting that have been in effect since 2013. The U.S. Small Business Administration (“SBA”) has long since revised its own regulations to implement these changes, but some contracting officers have been reluctant to follow these changes in the SBA regulations because the FAR contains contradictory provisions.

The proposed rule is a sign of progress. In particular, it should add significant clarity to the current disconnect between the FAR and SBA regulations. However, the proposed rule is not perfect, and a number of recent developments highlight that outstanding questions remain.Continue Reading Signs of Progress with the Limitations on Subcontracting, but Outstanding Questions Remain

The Department of Defense Office of Inspector General (“OIG”) recently announced that it was initiating an audit to determine whether agencies within DoD awarded Service-Disabled Veteran-Owned Small Business (“SDVOSB”) set-aside and sole-source contracts to eligible companies. The audit is set to begin this month, and likely will evaluate the number and value of contracts awarded to SDVOSBs under set-asides and sole-source procurements, as well as whether and how agencies confirm that awardees qualify as SDVOSBs at the time of award. The audit, which comes six years after the OIG previously determined that DoD did not have adequate controls in place to ensure the integrity of the SDVOSB set-aside program, signals that SDVOSB eligibility issues are likely to become a greater point of emphasis in future enforcement proceedings.
Continue Reading DoD OIG Audit: What SDVOSBs Need to Know

On January 9, 2018, Department of Defense (“DoD”) issued Class Deviation 2018-O0009, designed to reduce barriers to entry for innovative entities through streamlining the awards process for research and development contracts. This Class Deviation allows for the use of simplified acquisition procedures and excuses certain procurement obligations when DoD…
Continue Reading DoD Implements Streamlining Awards for Innovative Technology Projects

On October 15, the Federal Acquisition Regulatory Council (FAR Council), issued a proposed rule to clarify contracting officer and agency responsibilities when justifying sole source awards exceeding $22 million dollars made through the Small Business Administration’s 8(a) program.  The revisions directly address recommendations from a December 2012 Government Accountability Office (GAO) report titled, “Slow Start to Implementation of Justifications for 8(a) Sole-Source Contracts,” which, among other things, highlighted agency “confusion” about the existing justification requirements in the FAR.
Continue Reading FAR Council Clarifies 8(a) Sole Source Justification Requirements for High Value Contracts