Set-Aside Alert News Analysis:

SBA seeks 50+ updates to fed’l small business contracting rules

Affects size protests, 8(a)s, JVs, NMR, size certs & more

      The Small Business Administration released a wide-ranging proposed rule to update small business contracting programs, including dozens of provisions affecting 8(a) Business Development, Women-Owned Small Businesses (WOSBs), HUBZone small firms and more.

      Comments are due by Nov. 8.

      The ambitious 37-page rule includes more than 50 measures, with many intended to “clear up confusion” and make it easier to participate in 8(a) and other programs, as well as provisions to improve enforcement, implement Congress’ statutory changes and other modifications.

      Here is Set-Aside Alert’s list of major provisions in SBA’s proposed rule.

Size protests

1. Who can protest: SBA seeks to align size protest eligibility for WOSB, SDVOSB (service-disabled veteran-owned small firms) and HUBZone set-aside contracts with those of 8(a) set-asides. Under the rule, any offeror not eliminated by the contracting officer for any procurement-related reason could initiate a size protest;
2. Five-day timeliness rule: Protests generally must be filed within five days after a low bidder is named. But in cases where the initial low bidder is deemed ineligible for award, and another new low bidder is identified, SBA seeks to allow protests to be filed within five days of the notification of the new low bidder.
3. Protests of awardees only: The proposed rule would clarify that size protests may be filed only against an apparent successful offeror on a contract. SBA will not consider size protests relating to offerers not in line for award;
4. Pending before GAO: The rule clarifies that if a protest of an award is pending before the Government Accountability Office, the SBA Area Office willl suspend the size determination case;

8(a) updates

1. Ownership & Control: The rule would clarify that the SBA’s limited exception to the general ownership restriction for a former participant (or principal) in the same or similar line of business also applies to mentors in the same line of business as its 8(a) protege;
2. Ownership & Control: To ensure that an 8(a) owner’s family members do not divvy up ownership to avoid SBA's review of a change of ownership, the proposed rule would allow SBA to aggregate the interests of the family members to determine whether a non-disadvantaged individual involved in the change of ownership has more than a 20% interest in the business;
3. Potential for success: The rule would clarify that prior private sector work is not required to participate in 8(a). Prior public sector work is acceptable;
4. Unpaid taxes: The rule provides that an applicant will be ineligible for 8(a) if it has failed to pay significant obligations owed to the federal government;
5. 8(a) eligibility: The rule proposes that applicants to the 8(a) program must meet four criteria: must be a for-profit business; every individual claiming disadvantage must be a US citizen; applicants and principals must have no prior participation in 8(a); and the business must have generated some revenues;
6. Business plan: The proposed rule would clarify that SBA must approve an 8(a) participant's business plan before the firm is eligible to receive 8(a) contracts;
7. Business plan: Under the rule, 8(a) participants need not submit a business plan every year, but only when there are changes;
8. Limiting competition: The rule clarifies that agencies cannot limit bidding to companies that have 8(a) and another socio-economic certification (WOSB, HUBZone or SDVOSB);

Joint Ventures

1. Two-year rule: Clarifies that SBA's current policy is to allow orders to be issued under previously awarded contracts beyond the two-year period;
2. Unlimited contracts: Clarifies that SBA allows a joint venture to be awarded an unlimited number of contracts over the two-year period;
3. Populated JVs: If a joint venture exists as a separate legal entity, it must not be populated with individuals intended to perform contracts awarded to the joint venture. The rule would clarify that this requirement was meant to apply only to any small business set-aside contracts, including for 8(a)s, WOSBs, SDVOSBs and HUBZone small firms.

Ostensible subcontractors

1. Construction contracts: SBA clarifies that the ostensible subcontractor rule for general construction contracts should be applied only to the management and oversight of the project, not to the actual construction or specialty trade construction work performed.
2. Two factors added: SBA proposes to add two of the four factors described by the Office of Hearings and Appeals in recent cases to the ostensible subcontractor rule. The two factors are reliance on incumbent management and the reliance on the subcontractor's experience;

Size certifications

1. Changing SAM status: Implementing Sect. 863 of the National Defense Authorization Act for Fiscal Year 2022, the rule would require companies to update their status in SAM.gov within two days after a determination that they do not meet their purported size standard. SBA may make the change for them as well. The company also is required to notify the contracting officers on any contracts in which they have a pending bid, if it would be affected by their size determination.
2. Stock sales: SBA proposes to clarify that size recertification is required in connection with a company’s “sale” only when there is a change in control or negative control of the company. Small sales or acquisitions of stock do not qualify as sales.

Non-manufacturer rule

1. The proposed rule seeks to add language to clarify the effect of a waiver of the non-manufacturer rule (NMR) in a multiple item procurement;
2. The rule also proposes to prohibit contract-specific waivers of the NMR for contracts lasting over five years, including options;
3. The proposed rule would add language specifying that an individual waiver of the NMR applies only to a specific contract and does not apply to modifications outside the scope of the contract or other procurement actions.

More Information:
Proposed rule: https://bit.ly/3UrCJYr

SBA seeks 50+ updates to fed’l small business contracting rules

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