A new regulation announced by the Small Business Administration on November 15, 2006, to be effective on June 30, 2007, requires small businesses to recertify their size when they are purchased by or merged with a larger business, or at the end of the five-year point of a contract. The rules are intended to help small businesses obtain more federal contracts and to assure that contracts set aside for small businesses are not going to larger companies. As reported in the Thompson West publication, the Government Contractor Online Update, “According to SBA Administrator Steven Preston, the changes “will go a long way toward ensuring that contract awards get in the hands of small business owners, federal agencies get the proper credit toward their small business contracting goals and small business contracts are fairly and accurately reported..’”
There are critics of the new policy, however, who contend that the SBA has not gone far enough to prevent larges businesses from intruding into the small business marketplace. The American Small Business League has commented that “A new policy proposed by the Small Business Administration (SBA) and the Office of Federal Procurement Policy (OFPP) will allow the government to continue reporting awards to large companies as federal small business contracts.” (See the full article).
Pertinent parts of the new regulation are as follows:
g) * * *
(1) Within 30 days of an approved contract novation, a contractor
must recertify its small business size status to the procuring agency,
or inform the procuring agency that it is other than small. If the
contractor is other than small, the agency can no longer count the
options or orders issued pursuant to the contract, from that point
forward, towards its small business goals.
(2) In the case of a merger or acquisition, where contract novation
is not required, the contractor must, within 30 days of the transaction
becoming final, recertify its small business size status to the
procuring agency, or inform the procuring agency that it is other than
small. If the contractor is other than small, the agency can no longer
count the options or orders issued pursuant to the contract, from that
point forward, towards its small business goals. The agency and the
contractor must immediately revise all applicable Federal contract
databases to reflect the new size status.
(3) For the purposes of contracts with durations of more than five
years (including options), including Multiple Award Schedule (MAS)
Contracts, Multiple Agency Contracts (MACs) and Government-wide
Acquisition Contracts (GWACs), a contracting officer must request that
a business concern re-certify its small business size status no more
than 120 days prior to the end of the fifth year of the contract, and
no more than 120 days prior to exercising any option thereafter. 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. The agency and the
contractor must immediately revise all applicable Federal contract
databases to reflect the new size status.
(i) A business concern that certified itself as other than small,
either initially or prior to an option being exercised, may recertify
itself as small for a subsequent option period if it meets the
applicable size standard.
(ii) Re-certification does not change the terms and conditions of
the contract. The limitations on subcontracting, non-manufacturer and
subcontracting plan requirements in effect at the time of contract
award remain in effect throughout the life of the contract.