Small Business Administration

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

The Small Business Administration’s Office of Hearing Appeals (“OHA”) recently issued a ruling affirming the SBA’s termination of a contractor from participation in the 8(a) Business Development Program (“8(a) Program”). Yet the OHA’s opinion in The DESA Group, Inc., SBA No. BDPT-543 (2015), is notable not for this conclusion, but rather for the discussion that preceded it. Although the OHA ultimately affirmed the termination of the contractor from the 8(a) Program, it did so only on narrow grounds, and only after subjecting the SBA’s underlying determination to extended (and unusually pointed) criticism. For 8(a) Program participants and their mentors—a class of federal contractors that the SBA has recently proposed to expand—the ruling may serve as a useful roadmap on pushing back against potential overreaching by the SBA.
Continue Reading SBA 8(a) Ruling: Connections Not the Same as Control

On November 7, 2014, the U.S. Small Business Administration (SBA) issued an Advanced Notice seeking comments on potential revisions to policies governing the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) Programs, which facilitate the commercialization of technology through small business entrepreneurship.  The Programs require certain federal agencies to reserve a minimum percentage of their budgets to fund research and development activities that have potential commercial applications.  The government’s initial investment under the Programs is relatively minimal, but participants are able to secure increased funding through three successive phases of development, eventually resulting in the commercialization of a technology with non-Program funds.  The Programs encourage sustained development of a technology by requiring that first-, second-, and third-phase awards generally be made to the same concern, and by establishing broad protections for data produced in the performance of an award.  The SBA is specifically seeking comments on potential revisions to its policies with respect to these two key features of the Programs.
Continue Reading SBA Seeks Comments on Third-Phase Awards and Data Rights under the Small Business Innovation Research and Technology Transfer Programs

On September 10, 2014, the U.S. Small Business Administration (“SBA”) issued two proposed rules to increase employee-based size standards for manufacturing and various other industries in connection with the agency’s ongoing review of existing size standards.  The SBA has the discretion to establish size standards as a threshold under which firms are eligible to participate in small business programs, including contract set-asides.  The SBA analyzes the characteristics of specific industries, such as average firm size and the small business share of revenue from federal contracts, to determine which size standard is most appropriate for a particular industry.  Based on an application of this analysis to recent data, the SBA is proposing to increase size standards for 239 industries, which would enable approximately 1,630 new firms to participate in small business programs.  In addition, the SBA is proposing to establish a new 1,250 employee size standard, allowing for a more precise classification of larger small businesses, and to remove or modify a number of unique size standards applicable to specific sub-industries.

The proposed rules are the products of a statutory mandate in 2010 requiring the SBA to review all size standards by 2015, after which the SBA must periodically review size standards every five years.  The last comprehensive review of existing employee-based size standards took place in the late 1970s and early 1980s.  Since that time, the vast majority of employee-based size standards have not been subject to review.  As the SBA itself recognizes, existing employee-based size standards are “no longer supportable” when compared to economic realities in a number of industries.Continue Reading SBA Increases Size Standards for Manufacturing and Various Other Industries

Rep. Anna G. Eshoo (D-Calif.) recently introduced the Reforming Federal Procurement of Information Technology (“RFP-IT”) Act. This Act is similar in many ways to earlier drafts of the FITARA bill on which we have previously reported, with a few notable differences. Among other things, the RFP-IT Act would:

  • significantly increase the Simplified Acquisition