Read Beyond the Title: Important “Other” Changes Contained in SBA’s 8(a) Final Rule

by Alan Chvotkin, Partner

  • Government Contracting

On April 27, 2023, SBA published a final rule, effective May 30, 2023, making significant and some long-overdue changes in the ownership and control requirements for SBA’s 8(a) business development program. But while there are only so many words that can be included in the Federal Register title of a rule, this publication is another example of why practitioners always need to read the entire rule. In this rule, there are numerous important revisions to other SBA program parameters that benefit small business but also change the compliance landscape for them.

For example, for set-aside contracts and orders, size status will now be determined at the time of initial offer for a multiple award contract and not at the time of each individual order, unless a contracting officer requires size recertification for an individual order. Previously the initial offer had to include the submission of pricing; however, other procurement innovations may give authority to an agency to eliminate the need for pricing at contract formation for certain multiple-award contracts. This is a valuable change that aligns with agency procurement authorities, even if that authority has been temporarily limited by the Court of Federal Claims April 2023 decision in SH Synergy, LLC on the scope of the statutory flexibility to not require a pricing submission at contract formation.

The rule for recertification of a joint venture has changed. Now, a JV can recertify its status as small where all parties to the JV qualify as small at the time of recertification, or if the protégé small business in a still-active mentor-protégé JV qualifies as small at the time of recertification.

Size eligibility is also revised under the SBIR or STTR programs. This rule treats a prime contractor and its subcontractor or subgrantee as a JV when the sub performs “primary and vital requirements” of an SBIR or STTR funding agreement. In this case, all of the JV rules under the SBA regulations will be applied, such as those relating to ownership and control requirements.

Populated joint ventures are back and authorized. Now, a populated JV could be awarded a contract set-aside or reserved for small business where each of the partners to the JV are “similarly situated.” However, SBA will aggregate the revenues (or employees) of all of the JV partners when the size of a populated JV is questioned.

Prime contractors must now include their indirect costs in their subcontracting plans for contracts valued at or above $7.5 million. If there are multiple contracts covered by the subcontracting plan, the prime may rely on a pro rata formula it develops to allocate indirect costs to covered individual contracts if there is not already an allocation formula in use.

Finally, this rule establishes a new requirement that the determination of a small business’ compliance with the Limitation on Subcontracting (LOS) mandate will now be measured solely on an order-by-order basis, particularly in a multi-agency ordering environment, rather than at the end of performance of the underlying contract. And there are now consequences to a small business when a contracting officer determines at the conclusion of performance of an individual order that the business did not meet the applicable LOS.

There are far too many nuances to the 8(a) changes and these other adjustments than can be covered here. If you have any questions, please contact the author or the Centre Law Group attorney with whom you normally work.