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Federal Market Intelligence for Small Business |
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Set-Aside Alert news analysis:SBA adds to year-end flood of new small business regulationsBroad-ranging new final rule goes into effect Dec. 30 for subcontracting plans, disaster contracts, size certs., etc.The Small Business Administration published a super-sized final rule covering multiple small business contracting subjects including subcontracting plans and limitations on subcontracting, disaster contracting, the non-manufacturer rule, IT Value-Added Resellers and more. The rule goes into effect on Dec. 30. It comes as the SBA is also implementing several other major final rules (see timeline on page 2). The final rule implements provisions of the National Defense Authorization Acts of 2016 and 2017 and the “RISE” Act. It includes these provisions: Subcontracting plans Section 1821 of the NDAA of 2017 ordered that if a contractor or a subcon- tractor does not make a good faith effort to cooperate with government efforts to audit compliance with a subcontracting plan, then that would be considered a material breach of the contract or subcontract. An example of a failed “good faith effort” would be failure to achieve subcontracting plan goals, the rule stated. Such a breach may be considered in any past performance evaluation. Disaster contract set-asides To implement Section 2108 of the RISE Act, the SBA is authorizing federal agencies to create set-asides for small business concerns located in localities declared major disaster areas, and allowing federal agencies to take “double credit” for those awards. An agency would receive double credit for an “emergency response” contract awarded to a local firm that qualifies as small in a disaster zone. The value of the contract would be doubled for the purposes of reporting small business procurement through the SBA annual scorecard. A commentator wrote that the double credit was confusing and would lead to two different sets of data for the annual small business procurement scorecard. SBA agreed but said it must comply with what Congress approved. Set-asides for MAC orders SBA is authorizing agencies to set aside task orders for HUBZone, 8(a), women-owned or veteran-owned small firms within a multiple-award contract set aside for small firms. It would be a socioeconomic set-aside within a small business set-aside. This can be done by (1) establishing socioeconomic set-asides at the task order solicitation level; or (2) establishing socioeconomic set-aside pools at the master contract solicitation level. Several people who commented opposed the change saying it would reduce the number of bidders on task orders if only socioeconomic categories may bid. They also said it would discourage bidding on small business MACs in general if future task orders were to be aside for specific categories. SBA said the rule would not affect already-awarded MACs, unless set-asides were already contemplated in the solicitation. But, as attorney Samuel S. Finnerty notes (see page 4), the rule does not indicate how agencies are supposed to communicate to potential bidders that there may be future set-asides within a set-aside. Recertification of size and status SBA is clarifying that recertification of small business size and status is required for all long-term (over 5 years) contracts, including IDIQ contracts and full-and-open competition contracts. SBA is adding this requirement to 8(a) regulations. It’s already in HUBZone, SDVOSB and WOSB regulations. SBA received 32 comments, of which 25 comments were opposed to the changes. The complaint was that the proposed requirements were too burdensome and complicated, especially for 8(a)s. SBA “respectfully” disagreed with the commenters and defended the changes in detail in the rule. Limitations on subcontracting In a lengthy section of the new rule, SBA explained that there have been gaps in oversight of limitations on subcontracting. While SBA requested comments on whether mandatory reporting is needed, after reviewing comments, the agency concluded that such reporting is not needed. However, the final rule states that contracting officers have the discretion to request demonstration of compliance at any point during performance or upon completion of a contract. Ostensible Subcontractor Under the final rule, SBA for the first time will allow size and/or status protests regarding a socioeconomic set-aside or a sole-source award to a prime contractor that is unduly reliant on a small, but not similarly situated subcontractor, or where the small, non-similarly situated subcontractor is performing the primary requirements of the contract (commonly referred to as ostensible subcontractor affiliation). SBA provides more details in the rule. Exclusions From the Limitations on Subcontracting SBA named several circumstances in which contractors are excluded from limitations on subcontracting:
“Certain direct costs” in additional industries also may be excluded if they are not the principal purpose of the acquisition and if small businesses do not provide the service. Indirect costs Under the new rule, other-than-small businesses that have a commercial subcontracting plan must include indirect costs in their subcontracting plan goals. Previously, they were required only to report such costs. Definition of employee The proposed rule clarifies that for contracts with an employee-based size standard an independent contractor would be deemed an employee. For contracts with receipts-based size standard, an independent contractor would be considered a subcontractor. SBA offered further details in the rule. The agency received 13 comments, with 10 opposed, and offered further details. Additional sections Additional sections of the rule cover topics including:
More information:
Final rule: https://bit.ly/2Ryqb3s
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