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SBA Issues Extensive Final Rule Revising Several Small Business Contracting Regulations

by | Oct 20, 2020 | Government Contracts

On October 16, 2020, the SBA issued an extensive final rule that makes numerous revisions and clarifications to the small business procurement regulations.  This article provides a high-level overview of some of the most significant changes implemented by the new rule, and we will provide further analysis of these changes over the coming weeks. Most provisions of this final rule will take effect on November 16, 2020.

Changes to the SBA’s Mentor-Protégé Program

  • Merged the 8(a) Mentor-Protégé Program into the All Small Mentor-Protégé Program. This resulted in the update or removal of references to the former 8(a) Mentor-Protégé Program throughout the SBA’s regulations.
  • Clarified that the protégé firm must itself perform at least 40% of the work performed by the joint venture and cannot include work performed by similarly situated entities.
  • Amended regulations to not count any mentor-protégé relationship that is terminated within 18 months from the date SBA approved the agreement toward the protégé firm’s two permitted lifetime mentors. The final rule notes that SBA may determine that a firm has exhausted its participation in the mentor-protégé program if it appears to be using this 18-month test to have many short-term mentor-protégé relationships.
  • Added clarifying language regarding the annual review of mentor-protégé relationships.

Changes to Joint Venture Rules

  • Eliminated the 3-in-2 rule for a joint venture, and instead refocused the limitation only on the two-year period. Under the revised rule, a joint venture cannot continue to submit proposals for new contracts two years after the date of its first contract award. Joint ventures can be awarded contracts on proposals submitted before the end of that two year period.
  • Clarified how to account for joint venture receipts and employees during the process of determining size for a joint venture member.
  • Clarified the size recertification rule where a member of the joint venture has been acquired, is acquiring, or has merged with another business entity.
  • Amended regulations to provide that a joint venture may be awarded a contract requiring a facility security clearance whether either the joint venture itself or the individual partners to the joint venture that will perform the necessary security work have a facility clearance. If the facility security clearance is required to perform the primary requirements of the contract, the managing venturer of the joint venture must possess the required clearance.
  • Eliminated the need for 8(a) joint ventures to receive SBA approval of every initial joint venture agreement and each addendum to a joint venture agreement for competitive 8(a) contracts.

Changes to Rules Applying to Multiple-Award Contracts (MACs)

  • Changed the recertification requirements task orders set aside for small businesses under MACs that were awarded on an unrestricted basis (other than an FSS contract). A firm must recertify as small in connection with orders set-aside for small businesses if the firm was awarded an unrestricted MAC.
  • Similarly changed the recertification requirements for task orders set aside for certain socioeconomic status, where the required socioeconomic status for the order differs from that of the underlying MAC. Although size can flow down, socioeconomic status cannot.
  • Authorizes a size protest relating to an order issued against a MAC (other than an FSS contract) where the order is set-aside for small businesses and the underlying MAC was awarded on an unrestricted basis.
  • Authorizes a socioeconomic protest relating to orders set-aside for a different socioeconomic status from the underlying set-aside MAC.

Changes and Clarifications to 8(a) Program

  • Added a definition of a “follow-on requirement or contract,” which is an important concept in several contexts related to the 8(a) Program.
  • Provided guidance and clarifications where companies owned by different members of the same family apply for 8(a) status.
  • Clarified several provisions relating to tribally-owned, Native Hawaiian Organization owned, and Alaskan Native Corporation owned 8(a) applicants and Participants.
  • Shortened the waiting period for a concern that was declined for 8(a) Program participation to submit a new application from 12 months to 90 days from date of SBA’s final decision to decline.

 Additional Changes and Clarifications

  • Merger, Sale, or Acquisition of a Small Business. If a merger, sale, or acquisition occurs after a small business submits a proposal, but prior to award, the small business must recertify its size to the contracting officer prior to award. If the transaction occurs within 180 days of the date of the offer, the small business will be ineligible for award. If the transaction occurs more than 180 days after the date of the offer, the small business remains eligible for award.
  • Affiliation. Clarified provisions relating to affiliation based on identify of interest based upon economic dependence and newly organized concern rule.
  • Consideration of First-Tier Subcontractors. Agencies will be required to consider certifications, qualifications, capabilities, and past performance of a small business’s first-tier subcontractors, where those subcontractors are specifically identified in its proposal and the small business prime does not independently demonstrate capabilities and past performance necessary for award.

If you have questions about SBA’s final rule and how it impacts your business, please contact Berenzweig Leonard’s Government Contracts team.

Stephanie Wilson is a Partner and Co-Director of Government Contracts at Berenzweig Leonard. She can be reached at [email protected].