Lawyer Article

On November 15, 2006, the Small Business Administration issued new final regulations that addressed several small business issues three and one-half years and over 600 comments after its proposed rule was published. The new regulations are effective June 30, 2007 for all new and existing solicitations and contracts. The overall effect of the revised regulations will be to make it more difficult for companies that become no longer small during the course of a long term contract to keep receiving task orders that are set-aside for small businesses or that a federal agency is planning to count toward its small business contracting goals. The major changes are:

• In the case of a merger or acquisition, even if novation or name change is not required, the contractor must recertify its small business size status within 30 days of the transaction becoming final.
• For contracts with durations longer than five years, concerns must re-certify their small business size status prior to the sixth year of performance, and every time an option is exercised thereafter. Currently, contractor must only certify its size in its proposal for the original contract award.
• Each order under a long term contract must be assigned a North American Industry Classification System( NAICS) code, which must correspond to the NAICS code for the underlying long term contract.
• Where an agency exercises its discretion to require recertification of an order under a long term contract even when not required by regulation, the SBA will determine the size as of the date the concern submits its self-representation as part of its response to the solicitation for the order.

Except in the case of certain set-aside contracts, the federal agency is not required to terminate a contract when a company's size changes from small to other than small. The main purpose of these regulatory changes is for the government to assess the true percentage of its contracts that are awarded to small businesses. If the actual numbers are short of the government-wide goals of 23% for small businesses, 5% for small disadvantaged businesses, 5% for women-owned small businesses, 3% for HUBZone businesses and 3% for Service-Disabled Veteran-Owned Small Businesses, then the federal agencies will be pressured to award more contracts to companies that meet the size standards for small businesses.