Nadler: How small is small?

Small Business Administration’s small-business recertification rule strikes the right balance

SBA's size standards

Related Links

The Small Business Administration’s new rule on small-business recertification becomes effective June 30 and will apply to new contracts and solicitations and those in place at that time.

Until that rule takes effect, companies will continue to self-certify their size in any contract proposal that includes a bid price. The designation as a small business applies for the life of a contract, even though the company might exceed the size standard for a small business because it grows or is acquired by or merged with another company before the contract term ends.

The existing rule creates problems because it allows a small business that wins a long-term multiple-award contract to continue to compete against small businesses for task orders reserved for small businesses, even after it has outgrown the size standard for small businesses.

Under the new rule, a small business must recertify its size status or inform a procuring agency if it is no longer a small business, and it must do so within 30 days of a contract’s approval or within 30 days of a finalized merger or acquisition. For long-term contracts of at least five years, companies must recertify their status within 120 days before the end of the fifth year of the contact, and after that, within 120 days before any contract option is exercised. The new rule affects long-term contracts such as General Services Administration schedule contracts, governmentwide acquisition contracts and multipleagency contracts.

SBA wrote the new rule in response to criticisms by small-business advocates that large companies were performing a significant amount of work intended for small businesses. The facts seem to bear that out.

GSA officials had favored a plan that would allow businesses to recertify each year before exercising a contract option. However, under the new SBA rule, companies will be required to recertify any time a small business is acquired by or merges with a large business, regardless of whether it occurs through a stock purchase or an asset deal. Companies will not be required to recertify, however, if the company simply grows beyond the size standard during the first five years of a contract, unless the contracting officer requires recertification for a task order.

Recertification does not affect the contract’s terms, and the contracting officer has discretion in awarding a task order or option year under the contract. However, if the vendor has become a large business, the agency can no longer count that company’s orders or options toward its annual small-business contracting goals. Thus, the company may lose some of those orders and options once it informs the agency that it is no longer a small business.

Some small-business advocates might be disappointed that SBA did not require annual recertification and that large businesses can continue to perform under small-business contracts, particularly during the first five years of a contract.

However, the new rule provides a reasonable approach to a difficult problem and strike the right balance between the competing considerations advanced by the small-business community and the government.

Dave Nadler is a partner in the law firm of Dickstein Shapiro. Contact him at nadlerd@dicksteinshapiro.com.

FCW in Print

In the latest issue: Looking back on three decades of big stories in federal IT.

Featured

  • Anne Rung -- Commerce Department Photo

    Exit interview with Anne Rung

    The government's departing top acquisition official said she leaves behind a solid foundation on which to build more effective and efficient federal IT.

  • Charles Phalen

    Administration appoints first head of NBIB

    The National Background Investigations Bureau announced the appointment of its first director as the agency prepares to take over processing government background checks.

  • Sen. James Lankford (R-Okla.)

    Senator: Rigid hiring process pushes millennials from federal work

    Sen. James Lankford (R-Okla.) said agencies are missing out on younger workers because of the government's rigidity, particularly its protracted hiring process.

  • FCW @ 30 GPS

    FCW @ 30

    Since 1987, FCW has covered it all -- the major contracts, the disruptive technologies, the picayune scandals and the many, many people who make federal IT function. Here's a look back at six of the most significant stories.

  • Shutterstock image.

    A 'minibus' appropriations package could be in the cards

    A short-term funding bill is expected by Sept. 30 to keep the federal government operating through early December, but after that the options get more complicated.

  • Defense Secretary Ash Carter speaks at the TechCrunch Disrupt conference in San Francisco

    DOD launches new tech hub in Austin

    The DOD is opening a new Defense Innovation Unit Experimental office in Austin, Texas, while Congress debates legislation that could defund DIUx.

Reader comments

Please post your comments here. Comments are moderated, so they may not appear immediately after submitting. We will not post comments that we consider abusive or off-topic.

Please type the letters/numbers you see above

More from 1105 Public Sector Media Group