Are You Up-to-Date with Federal Small Business Rules Changes?

Small Business Rules Matter – and Change Regularly

Introduction

As regular readers of Centre Law’s blogs know, the federal contracting practice for small business is a rules-based system, comprised of the compilations in the Federal Acquisition Regulation (FAR), the agencies’ FAR supplements, and the additional and occasionally conflicting rules issued by the Small Business Administration (SBA). These rules can – and do – change regularly. Both the federal buying activities and the businesses who seek to compete for and perform federal contracts bear the responsibility for maintaining awareness of the changes and complying with them.

As part of Centre Law’s regular training courses offered, we provide a thorough update on the evolving legislative, regulatory, judicial and quasi-judicial changes in small business contracting. This blog will summarize key small business rules and decisions over the past several weeks and what they mean for businesses competing for U.S. Government contracts. But there is no substitute for reading the published rules or decisions to understand not just the highlights but the nuances and practical impact they have.

Two FAR Rules Issued

On June 7, 2024, a proposed rule was published[1] that would amend the FAR to implement HUBZone program changes made by SBA’s April 10, 2023, final rule. Among other changes, the proposed rule would remove an existing HUBZone small business concern’s representation since HUBZone concerns must now be certified by SBA to be eligible for sole-source and set-aside awards. It also adds to the FAR clause the requirement that the HUBZone concern will attempt to maintain an employment rate of 35 percent of HUBZone residents during performance of the HUBZone contract and specifies that SBA’s Office of Hearings and Appeals (OHA) is the sole forum for deciding appeals from formal size status protests determinations for HUBZone concerns. However, the rule makes no change to the requirement for the concern’s self-representation of a HUBZone joint venture status since SBA does not certify HUBZone JVs.

While this rule removes some of the repetitive representation language in the FAR, the program requirements still exist as part of SBA’s eligibility determination and affirmative certification process for HUBZone eligibility. But don’t over-read the removal of these duplicative requirements from the FAR or the addition to the FAR clause. Also be mindful of the new provision that designates SBA’s OHA as the sole forum for deciding appeals, and the strict timelines for companies to lodge protests there.

On February 23, 2024, an interim rule was published[2] amending the FAR to implement SBA’s November 29, 2022, and July 3, 2023, final rules that transferred the verification of small business concerns owned and controlled by veterans or service-disabled veterans from the VA to SBA, as of January 1, 2023. The interim rule also creates a new certification requirement for service-disabled, veteran-owned, small business concerns seeking sole-source and set-aside awards as veteran-owned concerns. The FAR rule also partially implements SBA’s April 27, 2024, final rule requiring a small business concern to update its status in SAM no later than 2 days after a final determination is issued that the concern does not meet the requirements of the applicable small business program; if the business does not timely update SAM, SBA is required to do so.

Two SBA Rules Issued

On June 6, 2024, SBA issued a direct final rule, effective August 5, 2024, unless sooner withdrawn,[3] to amend the SBA Veteran Small Business Certification (VetCert) Program to eliminate the self-certification for SDVOSB firms that are awarded contracts or subcontracts that count towards an agency’s prime or subcontracting goals. Thus, going forward, only those awards to firms that are affirmatively certified by SBA and listed in the SBA VetCert Program database are eligible to be counted. For firms not yet certified, however, the rule creates a grace period for firms that file an application for certification with SBA by December 22, 2024; these firms may continue to self-certify until SBA makes a final decision on the company’s eligibility. If you are not already certified by SBA under its VetCert program, and you believe you remain eligible for the program, don’t miss the December 2024 grace period for submitting your application for certification to SBA. If you are no longer eligible, be sure to update your SAM registration to reflect your valid status and avoid down-stream risks.

On May 16, 2024, SBA published a proposed rule[4] that would make several changes to SBA’s Women-Owned Small Business (WOSB) Federal Contract Program regulations, including adding definitions that are not currently included in the regulations and conforming the regulations to current statutes that had not yet been integrated. The rule would also adopt similar language to that used in SBA’s other government contracting program regulations regarding the length of time that a firm that has been declined three times must wait before reapplying to the WOSB Program and imposes limits on outside employment for the primary business owner. While consistency across all of SBA’s socio-economic programs is useful, women-owned small businesses should carefully assess these specific rules changes to evaluate their impact on continued eligibility and should comment on the proposed rule before the July 15 deadline for comments. Even (not too) late comments can still have an impact.

DoD DFARS Rule

On March 26, 2024, DoD issued a final rule, effective March 26, 2024,[5] to modify the DoD Mentor-Protégé Program to permanently authorizes the Program. The rule also modifies the Program to extend the term for program participation and removes the term limitation for mentors to incur costs under mentor-protégé agreements entered into after December 23, 2022. These long-overdue program updates – based on changes in the underlying law – create new incentives for companies to join the DoD mentor-protégé program.

Still “Small” Even if No Longer Small?

Many firms outgrow the size standard for their industry and thereafter no longer qualify as a small business for future procurements. But what is the “rule” about eligibility for set-aside task orders and options under the GSA Schedule program for firms that already have a GSA Schedule but go through a merger or acquisition? In a May 29, 2024, decision by SBA’s Office of Hearings and Appeals[6] (OHA) challenging the size eligibility of a contractor, OHA ruled that, with respect to the GSA Schedules program uniquely:

[T]he consequence of a merger or acquisition involving a prime contractor is not that the prime contractor becomes ineligible for award of pending or future task orders, but rather that the procuring agency cannot claim goaling credit for those orders.[7]

This is not the “rule” in other areas, so be sure to verify the size status eligibility requirements for each opportunity.

Pending Legislation Changes Goals for Veteran-Owned Businesses

A provision in the House-passed Fiscal Year 2025 National Defense Authorization Act (NDAA)[8] requires the Secretary of Defense to increase opportunities for small business concerns owned and controlled by veterans by establishing a goal for awards of DoD prime contracts, including subcontracts, at no less than the goal for small business concerns owned and controlled by service-disabled veterans, currently 5 percent. The bill also authorizes sole source and restricted source awards for veteran-owned concerns. If enacted unchanged, this provision could open up additional procurement opportunities for concerns who are veteran-owned but not service-disabled veteran-owned. We’ll be watching this and many others NDAA provisions throughout the legislative cycle.

Conclusion

If you have any questions or need any additional information about this blog, please do not hesitate to contact the author or the Centre Law attorney with whom you regularly work.

[1] FAR HUBZone Program proposed rule, available at https://www.govinfo.gov/content/pkg/FR-2024-06-07/pdf/2024-12570.pdf, last viewed 7/8/24.

[2] FAC 2024-03, Item #1, available at https://www.govinfo.gov/content/pkg/FR-2024-02-23/pdf/2024-02797.pdf, last viewed 7/8/24.

[3] SBA direct final rule: Eliminating Self-Certification for Service-Disabled Veteran-Owned Small Businesses , available at https://www.govinfo.gov/content/pkg/FR-2024-06-06/pdf/2024-12252.pdf, last viewed 7//24.

[4] SBA proposed rule: Women-Owned Small Business Federal Contract Program Updates and Clarifications, available at https://www.govinfo.gov/content/pkg/FR-2024-05-16/pdf/2024-10518.pdf, last viewed 7/8/24.

[5] DFARS final rule: DoD Mentor- Protege Program, available at https://www.govinfo.gov/content/pkg/FR-2024-03-26/pdf/2024-06005.pdf, last viewed 7/8/24.

[6] Lintech Global, Inc. SBA SIZ 6287 (5/29/24), available at https://govt.westlaw.com/sbaoha/Document/I8d9ea4a623ae11efbca2c5940cc64a9b?viewType=FullText&transitionType=Default&contextData=%28sc.Default%29, last viewed 7/8/24.

[7] Id at 17.

[8] Section 861of HR 8070, Fiscal Year 2025 National Defense Authorization Act, as passed the House of Representatives on June 14, 2024, available at https://www.congress.gov/118/bills/hr8070/BILLS-118hr8070eh.pdf, last viewed 7/8/24.