BLOG: FAR Council Rulemaking Error Requires GSA Contractors to Qualify As Small at Time of Award for Certain Orders

May 6, 2020

By Samuel S. Finnerty
Practice Areas: Government Contracts Claims and Appeals, Government Contracts Law and Small Business Programs & Advisory Services

As we recently wrote, the FAR Council published a final rule (Rule) on February 27, 2020 that amends the Federal Acquisition Regulation (FAR) to capture regulatory changes made by the Small Business Administration (SBA) in 2013, including those pertaining to size representation/certification. However, in drafting the Rule, the FAR Council made a critical change that not only deviate from SBA regulations, but also run counter to everything we know about when the size status of a contractor is determined.  All small business concerns should be aware of this Rule change and should consult with counsel regarding their small business representation duties.

Specifically, the FAR Council amended FAR 19.301–1(c) (Representation by the offeror) to provide that in order to be eligible for award of an order set aside for small business under a Basic Ordering Agreement (BOA) or Blanket Purchase Agreement (BPA) issued pursuant to FAR Part 13, the offeror must be a small business at the time of award of the order

The foregoing Rule deviates from two well-established principles of law regarding size representation. First, the Rule ignores the fact that size is generally determined as of the date a concern submits its initial offer, including price—and not at the time of award. In fact, apart from a few narrow exceptions that do not apply in the present context, size is never determined at the time of award. As it relates here, it is important to note that because agreements, like BOAs and BPAs, are not contracts, offerors cannot rely on their size representations made in connection with the same when pursuing set-aside orders issued thereunder; but, rather, must rerepresent their size in connection with each order. Critically, however, under SBA regulations, such offerors represent their size at the time of their offer for any such order—not at the time of award.[1] Thus, by requiring such offers to also qualify as small at the time of award, the Rule imposes a new requirement that is inconsistent with SBA regulations.

Second, the Rule fails to recognize SBA’s regulations pertaining to BPAs established under FAR Part 13 with General Services Administration (GSA) Federal Supply Schedule (FSS) contractors. Indeed, because GSA schedules are contracts, and offerors represent their size status at the time of offer for the same, SBA regulations expressly provide that such contractors are not required to rerepresent their size status in connection with orders under BPAs issued against GSA schedule contracts. In others words, SBA rules, after which the new FAR Rule was purportedly modeled, do not require a concern to qualify as small at the time of offer, much less award, for a FAR Part 13 GSA Schedule order issued against a BPA.

In sum, the FAR amendment outlined above is significant because, unlike SBA regulations, it requires all GSA schedule contractors to qualify as small at the time of award for any BPA orders issued under their schedule contracts. Since GSA schedules can extend for a number of years, and, subject to certain exceptions, a contractor maintains its size status for the life of a contract, this Rule could have major consequences for schedule contractors wishing to pursue set-aside orders issued against BPAs. 

Unfortunately, those in the industry that are impacted by this rule change had no opportunity to comment on the same before it was enacted, because the FAR amendment discussed herein was not included in the Rule, as first proposed in 2016. And, because this new FAR provision is not explained in the final Rule’s preamble, we can only guess what the FAR Council’s intent was in enacting this conspicuous regulation. While it is possible the FAR Council intended to model FAR 19.301–1(c) after SBA’s regulations pertaining to FAR Part 13 agreements[2], the Rule, as drafted, falls short of that goal and creates a number of questions that will create headaches for federal contractors. 

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

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

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