One Size Does Not Fit All: Hidden Size Certification Issues for 8(a) Contractors With Multiple Award Contracts

June 30, 2017

By Kathryn V. Flood

Savvy small business contractors holding Multiple Award Contracts (“MAC”) know that the small business size representations that they make at the outset of contract award will typically last the “life” of the contract, absent other size status recertification triggering events, such as a merger, acquisition, or contract novation. See, e.g., 13 C.F.R. § 121.404(g). This means that a contractor that represented itself as a small business at the time of contract award may continue to rely upon that small business size representation for task orders issued pursuant to the MAC even after the contractor has outgrown this size standard, so long as it is natural growth and the subject task order does not otherwise require the offeror to rerepresent its size status.

Somewhat surprisingly, we have recently seen the SBA take an interesting position regarding the size of an 8(a) contractor submitting an offer for an order under a MAC such as GSA Schedule contract, where the 8(a) contractor has otherwise exceeded the size standard assigned to the Schedule due to natural growth but is not otherwise required to recertify its size. Under the 8(a) regulations found at 13 C.F.R. § 124.503(h)(2), when a MAC has not be competed exclusively amongst 8(a) participants, such as in the case of a GSA Schedule contract award, SBA may allow an order to be set aside and awarded to an 8(a) participant and be considered an 8(a) award when the following conditions are met:
  1. the order is offered to and accepted into the 8(a) program;
  2. the order is competed exclusively among 8(a) concerns;
  3. the order requires the concern to comply with the applicable limitations on subcontracting provisions and nonmanufacturing rule provisions, if applicable, in the performance of the individual order, and
  4. SBA verifies that the concern is an eligible 8(a) concern prior to the award of the order in accordance with 13 C.F.R. § 124.507.
Under 13 C.F.R. § 124.507(b)(2)(i), SBA is required to verify that the 8(a) concern “a small business under the NAICS code assigned to the requirement.”

However, we have recently seen SBA take the position that this eligibility requirement mandates that the 8(a) participant actually be, in fact, a small business at the time the order is awarded, and that the 8(a) concern may not rely upon the small business status representation made at the MAC contract level. This regulatory interpretation has the perverse result of providing that an 8(a) contractor essentially has two size status representations for an award of an 8(a) set-aside order: one for size purposes, and one for 8(a) eligibility purposes. Moreover, this interpretation of the 8(a) regulations also conflicts with mandates directly found in the size regulations, which provide that SBA will be guided by “§ 121.404 for the time at which size is determined for . . . 8(a) BD procurements.” 13 C.F.R. § 121.603(a).

Hopefully SBA will reconsider this position and not put 8(a) contractors in the awkward position of having to verify their size on two separate fronts for 8(a) set-aside orders under MACs.

About the Author: Katie Flood is counsel with PilieroMazza in the Government Contracts Group. She may be reached at kflood@pilieromazza.com.
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