When a federal contractor is required to certify or recertify its small business size status can be confusing and depends on several factors, including the type of contract it is bidding on and whether the solicitation is restricted to or otherwise set aside for small business concerns.[1] This blog is intended to help businesses better understand the SBA size certification and recertification requirements that may impact them as they move through the contracting lifecycle.
Initial Certifications of Size
To be eligible for award as a small business concern, an offeror is required to represent in good faith that:
- It meets the small business size standard corresponding to the North American Industry Classification System (“NAICS”) code identified in the solicitation;[2] and
- The Small Business Administration (“SBA”) has not issued a written determination stating otherwise pursuant to 13 C.F.R. § 121.1009.[3]
An offeror is required to represent its size and socioeconomic status in writing to the contracting officer at the time it submits its initial offer. While a contracting officer will accept an offeror’s representation in a specific bid or proposal that it is a small business, such representation is not binding on the SBA and can be challenged by another offeror or the contracting officer if there is reason to question the representation. Challenges and questions concerning a specific representation are referred to the SBA. If an offeror’s small business status is challenged, the SBA will evaluate the status of the concern and make a determination, which will be binding on the contracting officer, as to whether the offeror is a small business.[4]
In general, the SBA determines the size status of a business concern, including its affiliates, as of the date the concern submits an initial offer or response that includes pricing.[5] This rule also generally applies to multiple award contracts (“MACs”) such that a business that represents itself as small at the time of its initial offer for the contract is considered small for each order issued under the contract.[6] There are several exceptions to this rule, which are discussed in more detail below. However, absent one of these listed exceptions, even where a business concern grows to be other than small during the performance of a contract, the procuring agency may exercise options and still count the award as an award to a small business.[7]
Size Recertifications
Because of the general rule that business concerns are considered to be small throughout the life of an awarded contract, there are only a few instances in which a contractor will be required to recertify its size and/or socioeconomic status under an already-awarded contract. These circumstances include when: (1) a contract’s duration is longer than five years; (2) the contractor undergoes a triggering event, such as a merger, sale, acquisition, or contract novation (“Triggering Event”); or (3) the contracting officer requests a new size certification in connection with a specific order under a MAC. The SBA Office of Hearings and Appeals (“OHA”) has clarified that the recertification rules apply to both single-award contracts and MACs.[8]
- Long-term Contracts
- Contractors are required to recertify their size and socioeconomic status for long-term contracts.[9] Specifically, contracting officers are required to request size status recertifications no more than 120 days before the end of the fifth year of the contract and no more than 120 days before exercising any option thereafter. A contracting officer may—but is not required to—also request size recertification, as he or she deems appropriate, prior to the 120–day point in the fifth year of a long-term MAC. If the contractor certifies that it is other than small, the agency can no longer count the options or orders issued pursuant to the contract towards its small business prime contracting goals, but the contractor can continue performance.
- Contractor Undergoes Triggering Event
- Contractors are required to recertify their size and socioeconomic status as a result of a Triggering Event, which includes a merger, sale, acquisition, or contract novation. Specifically, a contractor must recertify its size and socioeconomic status:
- Within 30 days of an approved contract novation. If the contractor is other than small, the agency can no longer count the options or orders issued under the contract towards its small business goals from that point forward.[10]
- Within 30 days of the finalization of a merger, acquisition, or sale that results in a change in controlling interest but does not require a novation. If the contractor is other than small, the agency can no longer count the options or orders issued under the contract towards its small business goals from that point forward.[11]
- OHA has confirmed that, generally speaking, under SBA’s regulations, recertification as other than small as a result of a Triggering Event only impacts an agency’s ability to get small business credit and is not an exception to the general rule that size is determined as of the date of the initial offer, including price. Size Appeal of Mod. Healthcare Servs., J.V. LLC, SBA No. SIZ-6114 (Nov. 29, 2021). Thus, recertification as other than small after a Triggering Event does not generally affect a contractor’s eligibility to continue performing an already awarded contract in most instances.
- If a Triggering Event occurs while a proposal is pending (i.e. after an offer is submitted but prior to award), contractors must recertify their size to the contracting officer prior to award.[12] If the Triggering Event occurs within 180 days of the date the proposal was submitted and the contractor is no longer small, then the contractor is not eligible for award. However, if the Triggering Event is more than 180 days after the date the proposal was submitted, then an award can still be made, but it will not count as an award to a small business.
- Contractors are required to recertify their size and socioeconomic status as a result of a Triggering Event, which includes a merger, sale, acquisition, or contract novation. Specifically, a contractor must recertify its size and socioeconomic status:
- Contracting Officer Requests Recertification
- A contractor may also need to recertify its size and socioeconomic status for certain multiple award contracts. Whether a business concern must certify its size status only at the MAC contract level or for each order under the MAC is determined by whether the MAC is unrestricted or set aside for a small business.[13]
- If (1) the MAC is unrestricted but (2) the related order is set aside for a small business, then a business concern must recertify its size status and qualify as small at the time it submits its initial offer for the particular order or BPA.
- If (1) the underlying MAC was awarded to a pool of concerns for which small business status is required and (2) the order or BPA under the MAC is set aside exclusively for concerns in the small business pool, then a business concern does not need to recertify their size status (unless a CO requests size certifications with respect to a specific order or BPA).
- If (1) the MAC is set aside for a small business and (2) a business concern is small at the time of offer and contract-level recertification, then it is small for each order or BPA issued against the MAC (unless a CO requests size certifications concerning a specific order or BPA).
- A contractor may also need to recertify its size and socioeconomic status for certain multiple award contracts. Whether a business concern must certify its size status only at the MAC contract level or for each order under the MAC is determined by whether the MAC is unrestricted or set aside for a small business.[13]
The above recertification rules govern MACs with either a single NAICS code or multiple NAICS codes. Id.
Relatedly, for “agreements,” including blanket purchase agreements (“BPAs”) (except those issued against a GSA schedule contract), basic agreements, basic ordering agreements, or any other agreement that a contracting officer sets aside for small businesses, a business concern must qualify as small for both the agreement and each order issued under the agreement. This is because “agreements” are not considered contracts.[14]
Please contact us if you would like to know more or have any questions about SBA’s rules regarding size and socioeconomic status certification and recertification.
Rachael Haley is an Associate Attorney at Berenzweig Leonard LLP. She can be reached at RHaley@BerenzweigLaw.com.
[1] A “business concern” is defined as, “a business entity organized for profit, with a place of business located in the United States, and which operates primarily within the United States or which makes a significant contribution to the U.S. economy through payment of taxes or use of American products, materials or labor.” 13 C.F.R. § 121.105(a)(1). A business concern can be in the legal form of an individual proprietorship, partnership, limited liability company, corporation, joint venture, association, trust or cooperative. Id. at § 121.105(b).
[2] For a multiple award contract (“MAC”) where there is more than one NAICS code assigned, the small business concern must certify that it meets the size standard for each distinct portion or category for which it submits an offer. If the small business concern submits an offer for the entire MAC, it must meet the size standard for each distinct portion or category. FAR § 19.301-1(a)(1)(B).
[3] FAR § 19.301-1(a). Contractors may also be required to make additional representations based on socioeconomic status (e.g., woman-owned, service-disabled veteran-owned, 8(a), HUBZone, etc.).
[4] Id. at § 19.301-1(f)-(g).
[5] 13 C.F.R. § 121.404(a).
[6] FAR 19.301-1(e).
[7] 13 C.F.R. § 121.404(g). In contrast to the exercise of options, follow-on and renewal contracts are considered new contracting actions. 13 C.F.R. § 121.404(h). Accordingly, for follow-on and renewal contracts, contractors must recertify their size and socioeconomic status, and their status is determined as of the date the initial offer for the follow-on or renewal contract is submitted.
[8] Size Appeal of Mod. Healthcare Servs., J.V. LLC, SBA No. SIZ-6114 (Nov. 29, 2021).
[9] 13 C.F.R. § 121.404(g)(3).
[10] 13 C.F.R. § 121.404(g)(1).
[11] 13 C.F.R. § 121.404(g)(2).
[12] 13 C.F.R. § 121.404(g)(2)(iii).
[13] 13 C.F.R. § 121.404(a)(1)(i)(A) and § 121.404(a)(1)(ii)(A).
[14] 13 C.F.R. § 121.404(a)(2).