When the FAR Council issued its long-awaited rewrite of FAR Part 19 as part of the Revolutionary FAR Overhaul, many in the government contracting community focused on headline issues like the preservation of the “Rule of Two” and the streamlining of small business policies. But tucked within the reorganization is one of the most impactful—and potentially disruptive—changes for contractors: the treatment of size recertification. While the new FAR attempts to simplify the rules by anchoring size status at the master contract level, it creates significant tension with Small Business Administration (SBA) existing regulations, leaving contractors, investors, and contracting officers navigating uncertain terrain when it comes to contract eligibility, option exercises, and M&A.
For many government contractors, recertification is not just a compliance box. Recertification drives whether companies qualify for pending proposals, remain eligible for future contract options, and can continue to compete for orders under existing contracts. It also determines whether agencies may continue to claim small business credit, and whether buyers and sellers can transact with confidence in the M&A market. In short, the stakes are high.
What Changed in FAR 19 on Recertification?
The new FAR Part 19 relocates and consolidates the size recertification rules from former §§ 19.301-2 and 19.301-3 into a single provision at § 19.301. In doing so, it made a major shift:
- Order-level recertification removed. Contracting officers (COs) are no longer required to re-verify a contractor’s size at the order level under IDIQs. Instead, size is generally locked at the master contract level.
- Agency credit tied to master contract size status. Agencies now get small business credit at the master contract level, except when a disqualifying recertification occurs in connection with certain contract events (e.g., exercise of a long-term contract option, novation, or merger/acquisition).
- CO discretion pared back. Unlike the prior version of FAR Part 19, the new rule does not expressly allow contracting officers to request order-level recertification.
At first glance, this appears to loosen the rules in a way that could materially affect the M&A market for small business owners looking to sell, especially after SBA’s 2024 rule changes. But that conclusion may be premature.
Why This Doesn’t Square with SBA Regulations
Here’s the problem: SBA’s regulations—including the recently revised recertification rule at 13 C.F.R. § 125.12—are not aligned with the FAR overhaul. The FAR, even after revision, only addresses the effect of recertification on agency small business credit. It states:
After a contractor rerepresents it is other than small in accordance with 52.219-28, the agency may no longer include the value of options exercised, modifications issued, orders issued, or purchases made under blanket purchase agreements on that contract in its small business prime contracting goal achievements. Agencies should issue a modification to the contract capturing the rerepresentation and report it to FPDS within 30 days after notification of the rerepresentation. FAR 19.301(c).
But the FAR does not address eligibility for options or new awards after a disqualifying recertification (e.g., when a firm recertifies as “other than small” following a merger, acquisition, or novation). By contrast, SBA’s rules explicitly govern how such recertification affects current and future contracts.
Moreover, while the new FAR omits language expressly allowing contracting officers to request recertification at the order level, it does not expressly prohibit them from doing so. SBA regulations, meanwhile, still permit such requests. Given this regulatory disconnect—and the fact that order-level recertification requests are common in practice—it remains unclear how this change will be implemented in real-world procurements.
Order-Level Protests Still Survive
Adding further confusion, the FAR retains language allowing size and socioeconomic protests at the order level in situations:
- where recertification was requested (despite the FAR deleting the explicit authority for such requests);
- where a small business set-aside order is issued under an unrestricted MAC—even though the new FAR says COs do not need to re-verify size in such cases; and
- where an order is issued under a MAC set aside for small businesses but further set aside for a different socioeconomic category (e.g., a HUBZone order under a small business MAC)—again, even though the new FAR says COs do not need to re-verify size in such cases.
That means order-level size questions are still very much alive—even though the FAR overhaul attempted to establish a general rule that size is determined at the master contract level.
What This Means for M&A
For buyers and investors: does the FAR change mean a buyer can acquire a small business with IDIQ vehicles and reliably continue competing for options and set-aside orders after recertification? The practical answer remains no—not without careful analysis and risk mitigation.
- The FAR’s shift to master-contract status could be read as more permissive, but it still expressly requires recertification in connection with mergers, acquisitions, and novations—i.e., it contemplates transaction-driven recertification.
- SBA’s rules—specifically 13 C.F.R. § 125.12—remain the operative source for how recertification affects eligibility under current and future contracts.
- Until SBA issues clarifying guidance or amends its rules to align with the FAR, buyers and sellers must assume SBA’s recertification consequences remain in effect and should structure deals and novations accordingly.
Bottom Line
The FAR Part 19 overhaul attempts to simplify recertification, but in doing so it created more questions than answers—particularly regarding M&A and its interplay with 13 C.F.R. § 125.12. For now:
- SBA’s rules still control in practice. Contractors should not assume the FAR’s new language supersedes SBA’s recertification and eligibility rules.
- M&A remains a material risk area. Because the FAR still contemplates recertification on M&A/novation, it is unclear whether the FAR changes meaningfully alter the real-world effects of SBA’s revised § 125.12. Buyers and sellers must continue to perform robust due diligence and structure deals with SBA rules in mind.
- Expect inconsistent CO practice. Some contracting officers may apply the FAR text strictly; others may defer to SBA rules.
Until SBA reconciles its recertification rules with the FAR overhaul, contractors should tread carefully and not assume the rules of the game have fundamentally changed for recertification, M&A, or post-award eligibility.
If you have questions about the FAR Overhaul, recertification, or how to structure government contracting M&A, please contact Sam Finnerty or another member of PilieroMazza’s Government Contracts Group.
