Effective May 25, 2018, the Small Business Administration (“SBA”) amended its regulations regarding a contractor’s size and/or socio-economic status following a novation, merger, or acquisition. Specifically, through a “technical correction,” the SBA revised its regulations to dictate that when a company becomes “other than small” or no longer has a certain socio-economic status (veteran-owned, woman-owned, HUBZone, etc.) as a result of a novation, merger, or acquisition, the business is no longer eligible to compete for set-aside task orders on multiple-award contracts held by the company. This change in eligibility is applicable even where the contracting officer does not specifically request a recertification.
Prior to the issuance of the SBA’s recent amendment, it was generally understood that following a novation, merger, or acquisition by a non-qualifying entity, a contractor could continue to perform existing orders and receive new set-aside orders against a multiple-award contract unless the contracting officer requested a new size or status certification. In other words, the novation, merger, or acquisition did not impact the entity’s ability to perform under an existing multiple-award contract.
The SBA’s recent amendment was issued in response to the Office of Hearing and Appeals (“OHA”) decision in In The Matter of: Analytic Strategies, Inc., No. VET-268. In this case, Analytic, an SDVOSB, was awarded a multiple-award contract. Later, after a non-veteran owned concern acquired Analytic, Analytic was awarded an order under the existing multiple-award contract. Following a size protest concerning the award to Analytic, OHA ruled that Analytic qualified as an SDVOSB for the purposes of the order because the plain language of the existing regulation allowed for the award to Analytic. OHA’s decision vacated an earlier determination by the SBA that Analytic no longer qualified as an SDVOSB.
While the SBA’s recent amendment appears to be an attempt to negate the ruling in the Analytic matter, the SBA was not clear about its intentions, so the ultimate impact of the amendment remains unclear. In particular, it is not clear what the SBA’s “technical correction” will mean for multiple-award contracts that have already been awarded. Until the recent changes are better understood, contractors should carefully consider the potential impacts of a novation, merger, or acquisition on their ability to compete under multiple-award contracts.
Casey J. McKinnon is an associate in Cohen Seglias’ Federal Contracting Group and focuses his practice on government contracts and litigation. He supports clients in all aspects of the procurement process including solicitation review, proposal preparation and pre and post-award bid protests.