On November 8, 2019, the U.S. Small Business Administration (SBA) issued an extensive proposed rule that would make numerous revisions to its small business regulations, including the Mentor Protégé Programs, the current limits on the use of joint ventures, and the size status certification rules for orders issued under multiple award contracts. (See 84 Fed. Reg. 60846-60881.) This proposed rule is a direct response to President Trump’s January 30, 2017 Executive Order (No. 13771) designed to reduce unnecessary and burdensome regulations and to control costs associated with regulations. The SBA’s review of its regulations led to dozens of proposed regulation changes, the most significant of which are described below.
First, the SBA proposes to consolidate the 8(a) Business Development Mentor-Protégé Program and the All Small Mentor-Protégé Programs. Because the benefits and purposes of the two programs are viewed as identical, the SBA concluded that having two separate mentor-protégé programs is unnecessary and causes needless confusion in the small business community and duplication of effort for the SBA. The SBA is also considering whether to limit mentors to those firms having average annual revenues of less than $100 million. Under the SBA’s current regulations, any concern—regardless of size—that demonstrates a commitment and the ability to assist small business concerns may act as a mentor. This proposed rule is a direct response to comments made to SBA from ‘‘mid-size’’ companies that a mentor-protégé program that excluded very large businesses would be beneficial to the mid-size firms and allow them to more effectively compete.
Second, the SBA proposes to eliminate the three-contract limit for a joint venture. This proposed rule responds to concerns that the three-contract limit unduly restricts small business and disrupts normal business operations. Under SBA’s current regulations, a joint-venture entity can be awarded no more than three contracts over a two-year period. If the parties comprising the joint venture intend to jointly seek work beyond three contracts during that period, they must form a new joint-venture entity. That new entity would then be able to perform an additional three contracts over two years from the date of its first award. Under the proposed rule, the three-contract limit for a joint venture would be eliminated, but the rule would continue to prescribe that a joint venture cannot exceed two years from the date of its first award. This proposed rule seeks to strike a balance between reducing the burden on small businesses while preserving the SBA’s belief that a joint venture is not intended to be an ongoing business entity.
Third, the SBA attempts to address criticism concerning the situation where a firm self-certifies as small for an unrestricted multiple award contract (MAC) and can later receive orders even when the firm no longer qualifies as small. Under the SBA’s current regulations, size status for an unrestricted MAC is generally determined as of the date a firm submits its offer for the MAC. If a firm self-certifies as small at the time of its offer for the underlying MAC, the firm is generally considered to be small for goaling purposes for each order issued against the contract, unless a contracting officer requests a new size certification in connection with a specific order. To address this situation, the proposed rule requires that, except for orders or Blanket Purchase Agreements issued under any Federal Supply Schedule contract, if an order under an unrestricted MAC is set aside exclusively for small business, a concern must recertify its size status for the particular order.
This Alert only addresses a few of the multitude of the SBA’s proposed revisions. We recommend that government contractors review these proposed regulations to assess how these changes could impact your company.
Comments on the proposed rule must be submitted to the SBA by January 17, 2020.