Marta Anne Thompson, an Associate in Hogan Lovells’ Government Contracts Practice, contributed to this post.
On October 2, 2013, the Small Business Administration (SBA) issued a final rule amending the regulations that govern small business set-asides (full, partial and reserves) under Multiple Award Contracts (MAC), including procedures for setting aside task and delivery orders. The final rule implements sections of the Small Business Jobs Act of 2010, and finalizes, with some minor revisions, provisions set forth by the SBA in its May 2012 proposed rule. In addition to the changes to the procurement procedures, other important, related provisions implemented by the final rule include the following:
Measuring Compliance with Limitations on Subcontracting and Nonmanufacturer Rules
According to the final rule, the period of performance used to determine compliance with the limitation on subcontracting and nonmanufacturer rules will vary for a small business subcontractor depending on the type of contract the order is issued against. If an order is set aside for small business competition under a contract awarded pursuant to full and open competition or a reserve contract, then the contractor must meet the limitations on subcontracting and nonmanufacturer requirements for the term of the order. If a contract is a total or partial set-aside contract, the contractor must meet the limitation on subcontracting and non-manufacturer rule in each period of the contract – i.e., the base term and each option period. However, the contracting officer (CO) retains the discretion to require compliance at the order level. This is a departure from the proposed rule, which determined compliance on an order-by-order basis for all contract holders. In addition, the final rule confirms the new requirement for CO’s to document a small business concern’s compliance with the performance of work requirements as part of the small business’s performance evaluation (i.e., post in the PPIRS database).
On & Off Ramping
The final rule gives COs greater discretion to “on ramp” and “off ramp” contractors on small business contracts. The new regulations provide that when a small business with a total or partial set-aside MAC contract, becomes other than small, the CO has the choice to either terminate the contract or “off ramp” the contractor. SBA emphasizes that if the CO lets the contractor remain on the contract, it will not be eligible for set-aside orders, and any other orders placed with the contractor will not count as an award to a small business. SBA also noted that the CO retains the discretion to “on ramp”, or admit, eligible small businesses onto the contract when other concerns have been off ramped in order to ensure adequate small business competition.
Affiliation Exemption for Small Business Teams Pursuing Bundled Contracts
The final rule provides an exemption to the SBA affiliation rules for small businesses that enter into teaming agreements to compete for bundled contracts with a reserve. Bundled contracts are those which bundle the acquisition of supplies or services, which were previously provided for under smaller individual contracts, into a single contract or MAC that is likely to be unsuitable for award to a small business concern. Under the final rule, small businesses may become more competitive for these bundled contracts by entering a Small Business Teaming Arrangement with one or more other small businesses. The final rule amends the affiliation rules at 13 C.F.R. § 121.103 to allow small businesses to enter into such arrangements without becoming affiliated with their teaming partners. Each teaming partner must be a small business concern under the size standard corresponding to the NAICS code assigned to the contract, and the teaming agreement must be provided to the CO as part of the proposal.
The final rule provides some clarity to some lingering recertification questions. Generally, a concern that certifies as a small business when awarded a MAC remains small throughout the life of the contract. A concern is only required to recertify when it becomes other than small due to a novation, merger or acquisition or within 120 days prior to the expiration of a MAC with a duration of more than five years (including options), or the exercise of any option thereafter. Prior to the issuance of the final rule, questions were raised as to whether a concern only had to recertify when it was acquired. The final rule clarifies that a small business must recertify when it is acquired by another entity and when it acquires another entity. Additionally, the rule explains that when the concern is a member of a joint venture, the concern must recertify when the joint venture is involved in a merger or acquisition, regardless of whether it is the acquirer or is acquired. The final rule also reiterates that a CO may request recertification for any order issued against a MAC, but it is not required to do so. If the CO does require recertification, that certification applies only to the NAICS Code assigned to that specific order and will not change the concern’s status with respect to the underlying contract. Finally, the rule provides that concerns are not required to recertify their size status when responding to a BPA solicitation issued against a MAC.
The final rule is effective on or before December 31, 2013. For further details on how the revised SBA acquisition regulations will affect your business, please contact Todd Overman at email@example.com, or 202-637-3565.