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Panoptic Enterprises' FEDERAL CONTRACTS DISPATCH

DATE: April 25, 2003

SUBJECT: Small Business Administration; Size Determination for the Multiple Award Schedule and 8(a) Business Development Programs

SOURCE: Federal Register, April 25, 2003, Vol. 68, No. 80, page 20350

AGENCIES: Small Business Administration (SBA)

ACTION: Proposed Rule

SYNOPSIS: SBA is proposing to amend its small business size regulations to require a small business contractor to recertify annually that it continues to be small. This would apply to contracts awarded under the General Services Administration's (GSA) Multiple Award Schedule (MAS) Program, including the Federal Supply Schedule (FSS), and other multiple award contracts, including governmentwide acquisition contracts (GWACs) and multi-agency contracts (MACs). Also, SBA proposes to amend its Section 8(a) Business Development regulations so they are is consistent with the size regulations changes.

EDITOR'S NOTE: The SBA's regulations are in Title 13 of the Code of Federal Regulations (CFR). The SBA small business size regulations are in Chapter 1, Small Business Administration; Part 121, Small Business Size Regulations. The SBA 8(a) program regulations are in Chapter 1, Part 124, 8(a) Business Development/Small Disadvantaged Business Status Determinations.

DATES: Comments must be received no later than June 24, 2003.

ADDRESSES: Comments should be sent to Linda G. Williams, Associate Administrator, Office of Government Contracting, U.S. Small Business Administration, 409 3rd Street, SW, Washington, DC 20416; fax: 202-205-6390; or by e-mail to Linda.Williams@sba.gov; or http://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Dean Koppel, Assistant Administrator, Office of Policy and Research, Office of Government Contracting, 202-205-7322, or e-mail: dean.koppel@sba.gov.

SUPPLEMENTAL INFORMATION: SBA's regulation at 13 CFR 121.404, When does SBA determine the size status of a business concern?, states that "generally, SBA determines the size status of a concern including its affiliates) as of the date the concern submits a written self-certification that it is small to the procuring agency as part of its initial offer including price." Therefore, for an MAS, FSS, MAC, or GWAC, size is determined as of the date of a concern's initial offer, including price. If a concern self-certifies it is a small business as of the date of its initial offer, agencies may consider orders placed against such contracts as awards to "small business" for the entire duration of the MAS, FSS, MAC, GWAC. However, such contracts can, with options, be in effect for up to 20 years, and can be amended to incorporate supplies and services with varying size standards, and produce during that time practically unlimited quantities of the supplies and services. Under SBA's regulations in 13 CFR 121.404, orders to concerns receiving such contracts would be considered to be awards to small business even though the firm had grown to be large (either through natural growth or by merger or acquisition) during the term of the contract, and even though the firm is not (and may never have been) small with respect to the size standard corresponding to the work to be performed under a particular order.

"SBA has reviewed Federal Procurement Data System (FPDS) statistics as they relate to four business concerns that received contracts as small businesses under the GSA's MAS Program, but which have become other than small since that time," SBA writes in the introduction to the proposed rule. "These four business concerns are continuing to receive orders issued pursuant to a MAS contract in which each certified that they were small at the time of the original MAS contract. In fiscal year 2000, these four business concerns received over $190 million in such orders. Because these concerns were considered small at the time of the original MAS contract, each of these 1,313 contracting actions, valued at over $190 million, could be counted as awards to small businesses. The figures for these same concerns in fiscal year 2001 are equally astounding -- 1,271 contracting actions amounting to over $200 million in awards to other than small businesses."

In March 2002, SBA's Office of Hearings and Appeals (OHA) decided in Size Appeals of SETA Corporation and Federal Emergency Management Agency, SBA No. SIZ-4477, that "in a small business set-aside procurement issued as Request For Quotations (RFQ) under a FSS or MAS contract, the size of a challenged firm is determined as of the date of its submission of its certification as an eligible business, with its price quotation in response to the RFQ." In other words, OHA decided that size should be determined as of the date of the firm's submission of its certification as an eligible small business with its price quotation in response to the RFQ, and not at the date of the firm's offer in response to the initial FSS solicitation.

In addition, the General Accounting Office (GAO) came to a similar decision in the protest CMS Information Services, Inc., B-290541, August 7, 2002. In this protest, the Missile Defense Agency limited competition to small businesses and required businesses to certify their size at the time they submitted their quotations. CMS argued that this certification requirement was improper because the offerors had each certified their size at the time they submitted their initial offer to GSA for award of its FSS contract. GAO ruled that when an agency limits competition to small business vendors under a competitive RFQ issued under the FSS program, the agency may properly require firms to certify as to their small business size status as of the time they submit their quotations.

Even GSA has come to acknowledge the presence of this "loophole" when it implemented a Federal Acquisition Regulation (FAR) deviation requiring contractors operating under the MAS program, or any other MAC, to recertify that they qualify as small businesses each time their contracts are up for renewal (see the November 18, 2002, FEDERAL CONTRACTS DISPATCH "General Services Administration (GSA); Federal Acquisition Regulation (FAR) Deviation Requiring Small Business Certification Upon Option Exercise").

Consequently, SBA is proposing to revise its regulations to specifically address size as it relates to awards issued under MASs, FSSs, MACs, or GWACs.

SBA is proposing to make the following changes to its small business size regulations:

Finally, SBA is proposing to amend its regulations governing the 8(a) program to make them consistent with the proposed changes in the small business size regulations. Currently, paragraph (h)(2) of 13 CFR 124.503, How does SBA accept a procurement for award through the 8(a) BD [Business Development] program?, states that "a concern may continue to accept new orders under a Multiple Award or Federal Supply Schedule contract even where a concern's program term expires, the concern otherwise exits the 8(a) BD program, or the concern becomes other than small for the SIC [Standard Industrial Classification, which has been replaced by the North American Industrial Classification System (NAICS)] code assigned under the contract subsequent to award of the contract." The proposed amendment to paragraph (h)(2) would state, "A concern can continue to receive orders as an 8(a) small business under the General Services Administration's Multiple Award Schedule (MAS) Program, including the Federal Supply Schedule, and other multiple award contracts, including Governmentwide Acquisition Contracts (GWACs) and multi-agency contracts, with respect to any orders issued pursuant to the MAS or other multiple award contract having a NAICS code with the same or higher size standard as the one(s) under which it qualified for a period of one year from the date of its certification or recertification as a small business." Also, the proposed amendment would make clear that a concern can continue to receive orders under MASs, FSSs, MACs, or GWACs even after it is unable to recertify that it is a small business, "but such award will not count as an award to an 8(a) small business."

FOR FURTHER INFORMATION CONTACT: Panoptic Enterprises at 703-451-5953 or by e-mail to Panoptic@FedGovContracts.com.

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