On February 27, 2020, the FAR Council published a final rule (Rule) that amends the Federal Acquisition Regulation (FAR) to implement regulatory changes made by the Small Business Administration (SBA) in 2013. See 78 Fed. Reg. 61114 (Oct. 2, 2013). Although these “new” rules have been reflected in SBA regulations for some time, their addition to the FAR is significant because, as any experienced government contractor knows, procurement officials do not always follow SBA’s rules, particularly if such rules are not incorporated in the FAR, and, in turn, are not incorporated in a subject contract. All small business concerns should be aware of this rule change and consult with counsel regarding their rerepresentation and recertification duties.

Among other things, the Rule amends the FAR’s requirements for small business contractor rerepresentation (referred to as “recertification” under SBA regulations). Currently, the FAR requires small business contractors to rerepresent their size status: 

  1. within 30 days of an approved contract novation;
  2. within 30 days of a merger or acquisition; and
  3. with respect to long-term contracts, within 60 to 120 days prior to
    1. the end of the contract’s fifth year, and
    2. the date specified for exercising any option thereafter (each a “Triggering Event” and collectively the “Triggering Events”). See 48 C.F.R. § 19.301-2 (2016 version). 

The Rule updates this regulation by making the following changes:

  • A contractor required to rerepresent as a result of a Triggering Event has to rerepresent its size and socioeconomic status (e.g., SDVOSB, HUBZone, WOSB/EDWOSB, 8(a)), as applicable. Currently, only size rerepresentation is expressly required.  
  • When a contractor undergoes a merger or acquisition, both the acquiring and acquired concerns must rerepresent their small business and/or socioeconomic status. This is significant because, although SBA regulations have imposed this requirement since 2013, the current version of the FAR does not expressly require an acquiring concern to rerepresent its status as a result of an acquisition.
  • Contracting officers are expressly authorized to request size and socioeconomic status rerepresentation for task orders.

While this Rule is a step toward regulatory conformance between the FAR and SBA regulations, inconsistencies will continue to abound.  Indeed, SBA has made a number of significant changes to its analogous recertification rules since 2013. Most notably, the Rule will continue to provide that when a contractor rerepresents that it no longer qualifies as a small business concern, the effect of such rerepresentaion is that the agency can no longer take small business credit for options exercised, modifications issued, orders issued, or purchases made under the contract. 

However, the Rule is silent as to whether such a concern would, nonetheless, be eligible to pursue/compete for such options, modifications, orders, and purchases. That being said, anyone that follows PilieroMazza’s coverage on this topic, will know that SBA recently amended its rules in an effort to make clear that when a concern recertifies that it no longer qualifies as a small business, not only can the agency not take small business credit from that point forward, but the concern is also no longer eligible to compete for orders and options issued under its former status. Thus, when the Rule takes effect on March 30, 2020, it will impose rerepresentation requirements on contractors that do not necessarily conform with those imposed by SBA. And, if history is any indication, it will likely be some time before the FAR is updated to address this inconsistency. Contractors should be mindful of this inconsistency and should consult with counsel regarding their rerepresentaion/recertification duties. 

In addition to the rerepresentation changes outlined above, we highlight some of the Rule’s other changes below.

  • NAICS codes must be assigned to all solicitations, contracts, and task/delivery orders.
  • The NAICS code assigned to a task or delivery order must be a NAICS code assigned to the MAC.
  • Contractor must rerepresent size status for each NAICS code assigned to a MAC.
  • For orders under basic ordering agreements (BOAs) and blanket purchase agreements (BPAs) issued under simplified acquisition procedures, an offeror must qualify as a small business at the time of award.
  • The HUBZone price evaluation preference will not be used for the reserved portion of a solicitation for a MAC. The price evaluation preference shall be used in the portion of a solicitation for a multiple-award contract that is not reserved.
  • The limitations on subcontracting (LOS) and the nonmanufacturer rule (NMR) apply to orders issued directly to one small business under a MAC with reserves.

If you would like to know more about the Rule and its potential impact on your company, please contact a member of PilieroMazza’s Government Contracts Group.

Sam Finnerty, the author of this Client Alert, is a member of the Government Contracts Small Business Programs & Advisory Services, and Government Contracts Claims and Appeals practice groups.