The Small Business Administration (“SBA”) has had a very busy week. First, on May 24, 2016, the agency issued “Statement of General Policy No. 3” (“the Statement”) clarifying the hotly debated inter-affiliate sales exclusion (an issue relating to the counting of annual receipts for purposes of determining size). Then, yesterday, the agency published a lengthy final rule, which implements the long-awaited small business regulation changes mandated by the National Defense Authorization Act (“NDAA”) of 2013. Collectively, the Statement and the rule make a number of very important changes affecting Federal contractors. Some of the most important changes are:
- Changes regarding small business self-performance requirements and limitations on subcontracting pursuant to 13 C.F.R. § 125.6 (which we previously wrote about when the SBA issued its proposed rule, in December of 2014, and blogged about all the way back when the 2013 NDAA was enacted);
- Expansion of exception to affiliation for all joint ventures where both concerns are individually “small” in connection with 13 C.F.R. § 121.103(h);
- Clarification regarding what types of familial relationships will result in a rebuttable presumption of “identify of interest” affiliation pursuant to 13 C.F.R. § 121.103(f) (previously discussed here);
- Addition of a rebuttable presumption of “identify of interest” affiliation pursuant to 13 C.F.R. § 121.103(f) based on 70% economic dependence between companies (previously discussed here);
- Clarification regarding the calculation of annual receipts pursuant to 13 C.F.R. § 121.104, and, specifically, the exclusion from that calculation of inter-affiliate sales from a broader variety of affiliates;
- Clarification regarding recertification following a merger or acquisition of a small business pursuant to 13 C.F.R. § 121.404(g)(2)(ii);
- Changes regarding HUBZone certification pursuant to 13 C.F.R. § 126.200; and
- Changes regarding who may file a size protest pursuant to 13 C.F.R. § 121.1001(a)
Unfortunately, the expansion of the Mentor-Protégé program – which everyone has anxiously been awaiting since the proposed rule was issued back in February, 2015 – was not addressed. In a March 4th interview, SBA’s Associate Administrator of Government indicated that the mentor-protégé final rule should be issued this summer, with a pilot program to start in the fall.
Over the next week or so, we will be publishing a series of blogs explaining each of the above-listed changes in more detail. Stay tuned!
Michael H. Payne is the Chairman of the firm’s Federal Contracting Practice Group and, together with other experienced members of the group, frequently advises contractors on federal contracting matters including bid protests, claims and appeals, procurement issues, small business issues, and dispute resolution.
Maria L. Panichelli is an Associate in the firm’s Federal Contracting Practice Group. Her practice includes a wide variety of federal contracting and construction matters, as well as all aspects of small business procurement.