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Posted on Monday, May 07, 2018

Possible Relief for a Small Business’s “Growing Pains”

Success can actually be a real problem for a small business. The more that its success increases its revenue or work force, the closer a small business comes to outgrowing its status as a small business. Losing small business status forfeits many advantages a small business has in winning government contracts.

But a growing small business does not forfeit all advantages. The decisions of the SBA’s Office of Hearing and Appeals (OHA), which resolve disputes over a whether a small business is still a small business, show that a growing small business can still get some “small business” work.

Before getting into specific situations, here are some general principles.

  • Outgrowing its small business status does not automatically terminate a small business’s existing small business contracts or orders;
  • Small businesses that grow without the help of mergers and acquisitions have fewer growing pains, i.e., more possibilities for future small business work;
  • Some of the widely-used Government-Wide Acquisition Contracts (GWACs) such as CIO-SP3 and GSA’s OASIS SMALL BUSINESS, have specific rules on whether holders of those contracts remain eligible for small business work after they grow out of the GWAC’s small business size standard;
  • A contracting officer always has the right to demand that a small business certify that it is still a small business if it wants to win a task order for more small business work.

This last general principle is perhaps the one most difficult to work with. According to SBA regulations,

Where the contracting officer explicitly requires concerns to recertify their size status in response to a solicitation for an order, SBA will determine size as of the date the concern submits its self-representation as part of its response to the solicitation for the order.

13 C.F.R. § 121.404 When is the size status of a business concern determined?

Exactly how does a contracting officer “explicitly” require a small business to recertify its small business status?

In a series of decisions, the SBA OHA has described what “explicitly” means. These important decisions, however, show that trying to determine whether a solicitation “explicitly” requires rerepresentation is not so obvious or intuitive.

OHA has considered a number of solicitations that included FAR clauses mentioning “rerepresentation” or “small business.” OHA has concluded that these clauses are NOT explicit requests for rerepresentation. For example, FAR 52.219-28 Post-Award Small Business Program Rerepresentation says “If the Contractor represented that it was a small business concern prior to award of this contract, the Contractor shall rerepresent its size status according to paragraph (e) of this clause,” which in turn refers to a contractor’s size representation in SAM. This clause, however, is not an explicit request for rerepresentation. Size Appeal of Quality Technology, SBA No. SIZ-5611 (2014).

OHA has held that other FAR clauses likewise do not explicitly require rerepresentation:

  • Merely setting a task order aside for small businesses is not explicitly a request for recertification. Size Appeals of Safety and Ecology Corp., SBA No. SIZ-5177 (2010).
  • Incorporating standard FAR clause 52.219-6, “Notice of Total Small Business Set Aside (NOV 2011),” is not an explicit request for a small business rerepresentation. Size Appeal of Mistral, Inc., SBA No. SIZ-5737 (2016).
  • Inclusion of FAR clauses 52.212-1, 52.212-3, 52.212-4, and 52.212.5 is not an explicit request for recertification. Size Appeal of AIS Engineering, Inc., SBA No. SIZ-5614 (2014); Size Appeal of Reliasource, SBA No. SIZ-5536 (2014).

However, the words “certify” or “recertify” do not have to be in the RFQ/RFP to constitute an “explicit” requirement for rerepresentation. The OHA held that the following excerpt from an RFP was an explicit requirement for recertification:

The RFQ instructed each offeror to specify its size status in its task order proposal, and to verify whether its size “as of the date of your task order quotation submission” is the “same as” the offeror’s underlying GSA Schedule. If selected for award, the offeror was required to again confirm its size “as of the date of your signature on the task order award.” Further, the Army requested these representations in conjunction with a total small business set-aside, after repeatedly warning that proposals would be accepted only from small businesses. Thus, read in its entirety, the RFQ appears to be asking each offeror to verify, in writing, that it was a small business on its GSA Schedule contract, and that the offeror was still a small business at time of task order proposal submission and task order award.

One indication in this solicitation of an “explicit” rerepresentation request, according to the OHA, was the contracting officer’s use of the current size standards: “the fact that the RFQ stated that size would be governed by ‘current’ size standards is strong evidence that the RFQ was seeking recertification of size for the instant order.” Size Appeal of Metters Industries Inc., SBA No. SIZ-5456 (2013).

Bottom line: whether a small business that has outgrown its small business status can legally compete for a specific small business task order is not always an easy decision. It’s one that a contractor must carefully think through and that has to be based on a number of factors, some of which are not so obvious or intuitive.

Berenzweig Leonard is teaming up with Red Team Consulting for a monthly newsletter featuring upcoming contracts, key protest decisions, events, and more. This post was published in the May 2018 Monthly Insights newsletter. To sign up for Monthly Insights, please click here.

Terry O’Connor is a Partner at Berenzweig Leonard, LLP. Terry and Stephanie Wilson lead the firm’s Government Contracts practice. Terry can be reached at toconnor@berenzweiglaw.com.