Military bases must get approval from the Small Business Administration in order to transfer work from a current or former 8(a) contract to a cooperative agreement with a local agency, according to a new policy statement released by the SBA.

The policy statement was developed in response to concerns about Section 331 of the National Defense Authorization Act, which became law in January.

Under Section 331, military installations are authorized to enter into cooperative agreements with community agencies to enhance mission effectiveness. Small business advocates have raised concerns about a possible Section 331 pending cooperative agreement at Tinker Air Force Base in Oklahoma City, OK for waste management services. The work previously was a small business federal contract.

In the SBA’s view, Section 331 does not exempt military installations from the rules that apply to 8(a) contracts. Under those rules, agencies generally must obtain permission from the SBA to remove an 8(a) contract from the 8(a) program.

“Section 331 is not a general or blanket authorization for the Defense Department to except its departments from any and all procurement laws that may apply to installation support services,” the SBA said in its statement, which the agency provided to Set-Aside Alert. “As such, it is our view that the DoD must still comply with the procedures set forth in 13 CFR 124.504(d) whenever they wish to remove contracts for installation support services from the 8(a) Business Development program.”

SBA’s policy, while aligned with 8(a) regulations, could make it more difficult to carry out Section 331 agreements, according to small business specialists.

“It may make it harder for DOD to take work out of the 8(a) program to sole source it to state or local governments under Section 331,” Pamela Mazza, managing partner of PilieroMazza PLLC law firm, told Set-Aside Alert in a statement. She noted that SBA’s policy is in line with the existing 8(a) regulations

Contracts attorney Steven Koprince said Congress most likely did not intend to overturn SBA regulations when it approved Section 331. At the same time, he suggested that “if DOD wants to be wily” it may be able to work around the SBA rules by creative restructurings of contracts.

Kay Bills, president of the Mid-America Government Industry Coalition (MAGIC), has drawn public attention to Sect. 331 concerns.

“While we appreciate the SBA’s clarity on the 8(a) contracts, 8(a)’s are not the only small business contracts under consideration,” Bills told Set-Aside Alert.”

“The SBA must be vigilant now more than ever. In fact, given the current status of sequestration, we must all remain vigilant and aware of how Section 331 can impact all our businesses,” Bills said.

More information: 13 CFR 124.504d regulation http://goo.gl/5aLCW