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In this second part of our blog series about the July 25, 2016 SBA final rule implementing numerous changes to multiple SBA regulations and establishing a new small business Mentor-Protégé Program (SB MPP), we address how such implementation impacts the parallel 8(a) Business Development mentor-protégé program (8(a) MPP).  As the final rule points out, the 8(a) MPP will remain intact; however, the SBA has made several changes to the regulations governing that program, which largely represent the SBA’s efforts to harmonize the two programs.  The paragraphs below discuss some of these changes, including those impacting the requirements for entry, ongoing reviews and terminations, and reporting obligations.

Requirements for Entry into the 8(a) MPP

With the creation of the SB MPP, companies qualifying as an 8(a) have the option to participate in either the 8(a) or the SB MPP. Any current or future participant in the 8(a) MPP should be aware of the final rules’ numerous changes to this program, as discussed below. Continue Reading Living in Harmony: Notable Changes to Synchronize the 8(a) and Small Business Mentor-Protégé Programs

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On July 25, 2016, the SBA published its final rule establishing a government-wide mentor-protégé program for the benefit of all small businesses as protégés.  This widely-anticipated rule, implementing provisions of the Small Business Jobs Act of 2010 and the National Defense Authorization Act for Fiscal Year 2013, provides increased opportunity for small and large businesses to partner with one another.  Effective August 24, 2016, this new program is expected to unleash a flood of new mentor-protégé agreements (MPAs) as well as joint ventures eligible to compete on set-aside procurements, and it could likely result in an increase in the number of set-aside procurements.

Below we discuss the benefits from participating in this program, the requirements for the mentor-protégé agreement (“MPA”), the eligibility criteria for mentors and protégés, and the requirements for joint ventures established pursuant to the MPAs. Given the numerous benefits to participating in this program, including the opportunity to joint venture, the SBA has layered into this final rule the requirement for numerous express certifications of compliance and severe consequences for violation of the SBA’s regulations, MPAs, and/or joint venture agreements.  A separate blog post will address the changes that the SBA is implementing in the final rule to the SBA’s current regulations governing the 8(a) business development (BD) program.

Continue Reading SBA Opens the Floodgates: The Mentor-Protégé Program Expands to All Small Businesses

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In this part of our ongoing series (see Part I, Part II and Part III) on the Small Business Government Contracting and National Defense Authorization Act of 2013 Amendments implementing the National Defense Authorization Act of 2013 (FY2013 NDAA) Amendments, we address the new recertification requirement that is triggered following the merger, sale, or acquisition of a firm that has submitted an offer as a small business concern (SBC).

A concern that represents itself as a small business and qualifies as small at the time of proposal submission is considered to be a small business throughout the life of that contract.  This even applies for Multiple Award Contracts—the SBC is considered small for each order issued against the contract with the same NAICS code and size standard (unless a contracting officer chooses to request a new size certification in connection with a particular order).  In other words, even where a concern grows to be other than small, the procuring agency may exercise options and still count the award as an award to a SBC, unless a recertification requirement has been triggered.

Given the great boon that comes to a firm upon award of a contract where it has qualified as a SBC, the SBA has long sought to set the right balance for what should happen when a small business is involved in a merger, sale, or acquisition. The concern is that if a SBC could submit a proposal with pricing, certify that it is small, and actually qualify on that date of proposal submission as small, should that small business be able to sell itself following proposal submission or contract award to a large business and allow the large business to benefit for up to five years of contract performance as a “small business”?  The SBA’s answer to that is no.  The SBA’s regulations as currently drafted require recertification in certain circumstances following a merger, sale, or acquisition but only once award has already been made.  In the final rule, SBA imposes new recertification requirements aimed at changes that occur within the window between proposal submission and contract award.

Continue Reading The SBA Final Rule Implementing the FY2013 NDAA Part IV: New Recertification Requirement Following Mergers & Acquisitions

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As we have previously addressed, the Small Business Administration’s (SBA) final rule, Small Business Government Contracting and National Defense Authorization Act of 2013 Amendments, has implemented numerous changes to small business contracting contained in the National Defense Authorization Act of 2013 (FY2013 NDAA).  Below we discuss an important change to one affiliation test as well as newly introduced exclusions from affiliation.  On the whole, these changes make it easier for small businesses to work together without risking a finding of affiliation.

Affiliation is a central component of SBA’s regulations: in determining a concern’s size, SBA counts the receipts, employees, or other measure of size of the concern whose size is at issue and all of its affiliates (domestic and foreign).  In other words, these tests and (and exemptions or exclusions) affect whether SBA finds a concern to be small or other than small based on its relationships with other concerns.

Continue Reading The SBA Final Rule Implementing the FY2013 NDAA Part III: What You Need to Know About Affiliation and Joint Ventures

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The Small Business Administration’s (SBA) final rule, Small Business Government Contracting and National Defense Authorization Act of 2013 Amendments, implements changes regarding small business subcontracting plans contained in the National Defense Authorization Act of 2013 (FY2013 NDAA).  We discuss the key changes below.  This rule becomes effective June 30, 2016, but as some of the changes impact the proposal process which can involve planning and team selection months in advance of proposal submission, contractors need to focus on the new requirements now.

Continue Reading The SBA Final Rule Implementing the FY2013 NDAA Part II: The Changes to Small Business Subcontracting Plans Have Immediate Impacts on Small and Large Businesses

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The goal of the limitation on subcontracting requirement is to ensure that a certain amount of work is performed by a small business concern (SBC) when it qualifies for a small business program set-aside or sole source procurement due to its socioeconomic program status. SBA’s final rule, Small Business Government Contracting and National Defense Authorization Act of 2013 Amendments, implements numerous changes to this requirement contained in the National Defense Authorization Act of 2013 (FY2013 NDAA).  This rule becomes effective June 30, 2016. However, changes to the parallel FAR requirements are still needed for regulatory consistency and implementation.

Continue Reading The SBA Final Rule Implementing the FY2013 NDAA Part I: SBA Overhauls the Method for Calculating Compliance with the Limitation on Subcontracting Requirement

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Far too often, investors, including venture capital companies, assume that as long as they do not retain the largest shareholder interest in a company, that they cannot create affiliation problems impacting what is a key to companies’ initial success in government contracting: small business status. Wrong. A recent U.S. Small Business Administration (SBA) Office of Hearings and Appeals (OHA) decision makes this a stark reality, upholding a determination that an apparent awardee in a set-aside procurement is other-than-small based on affiliation arising from its mere 4.16 percent stock ownership interest in another company.

Affiliation Generally
If a contractor has ever thought about certifying its size as small under a particular NAICS code, hopefully they reviewed the SBA regulations on affiliation in advance. The analysis of whether a company is small in size does not start and end with the receipts or number of employees for that company, but is instead considered as a spiderweb of connections with other individuals and entities. In order to determine a concern’s size, SBA counts not only the receipts or employees of the concern but also the receipts or employees of each of the concern’s domestic and foreign affiliates.

Concerns and entities are affiliates of each other when one controls or even has the power to control the other, or a third party or parties controls or has the power to control both. 13 C.F.R. § 121.103(a). In determining affiliation, there are numerous factors that the SBA must consider – including, ownership, management, and previous relationships with or ties to other concerns. SBA’s analysis concerns the totality of the circumstances; the absence of any single factor will not be considered dispositive.
Continue Reading Investors Beware: Minority Ownership Interests Can Create Affiliation and Defeat Small Business Size Status

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On December 29, 2014, the Small Business Administration issued long overdue proposed amendments to its regulations (with 60 days for comments) to implement many of the provisions of the National Defense Authorization Act of 2013 relevant to small business contracting.

Most notable is the complete overhaul of the calculation of the limitations on subcontracting requirement. The amendment proposes a major shift in the way the calculation is performed. The current method requires the prime contractor to be responsible for the specified percentage of cost of performing the contract (with variations depending on whether it is a contract for services, supplies, construction, or specialty trade construction). The amendment proposes shifting the calculation from this cost-based approach to the amount paid to the prime, which must be more than the specified percentage paid to other than “similarly situated” subcontractors. The proposed revision is intended to be easier to calculate, but complexities remain. Continue Reading Significant Changes on the Horizon to Key SBA Regulations, Including the Limitations on Subcontracting

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New York became the first state in the nation to establish a six-percent goal for participation in state contracts for service-disabled veteran-owned small businesses when Governor Andrew Cuomo signed into law the Service Disabled Veteran-Owned Business Act last week. Similar to the federal government’s procurement program for Service-Disabled Veteran-Owned Small Business Concerns (SDVOSBC), New York’s law is designed to promote small businesses – in New York defined as companies with 300 employees or less – that are majority-owned and independently operated by a service-disabled veteran. Notably, the legislation doubles the federal government’s three-percent goal for awarding contracts to veteran-owned small businesses. However, the most recent data from the U.S. Small Business Administration’s Fiscal Year 2012 Goaling Report reflects that at the federal level, the three-percent goal was just barely achieved at 3.0324 percent.

The Act creates the Division of Service Disabled Veterans’ Business Development within the New York Office of General Services to oversee the program and certify eligible businesses. It calls for the new office to “develop a comprehensive statewide plan and operational guidelines to promote service-disabled veteran-owned business enterprises and to assist them in obtaining opportunities to participate in the procurement of goods and services by the state.” Rules and regulations detailing how the six-percent goal will be achieved are due out within 90 days from May 12. But, the legislation specifies in advance that the rules will provide for a set-aside of certain procurements by state agencies as one means of promoting the participation goal. Continue Reading New York Sets Six-Percent Contracting Goal for Veteran-Owned Small Businesses

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The FAR Council issued a proposed rule on March 7, 2013, that would amend the FAR to mirror recent changes to the Small Business Administration’s procedures for protests and appeals of small business size and status determinations.  The rule also seeks to provide uniformity for protests and appeals of status as a HUBZone small business concern, Service-Disabled Veteran-Owned Small Business (“SDVOSB”), Economically Disadvantaged Women-Owned Small Business (“EDWOSB”), or Women-Owned Small Business (“WOSB”).  Finally, the proposed rule also includes several other revisions, including changes to the requirements of the “nonmanufacturer rule,” updates to small business status following size determinations, and guidance on NAICS determinations.

Size Protests & Appeals.  The new rule would increase the time (from 10 to 15 days) for the SBA to make a size determination of a protested business concern.  It would also provide the contracting officer with the authority and discretion to authorize more time for the SBA to make its determination, and to award contracts, if necessary, when the SBA has not completed its determinations within 15 days.  For appeals, the proposed rule clarifies that it is entirely within the discretion of the SBA’s Office of Hearing and Appeals (“OHA”) whether to hear an appeal of a size determination, and within the contracting officer’s discretion whether to suspend an award to a party whose size determination has been appealed.  The proposed rule also allows for email delivery of written protests.

Continue Reading FAR Council Issues Proposed Rule Changes for Protests of Small Business Status