On September 9, 2022, the U.S. Small Business Administration (SBA) issued a proposed rule (the Rule) making substantial changes to the 8(a) Business Development program (covered here in a previous PilieroMazza alert). Scattered throughout the Rule are various protest-related changes for the Women-Owned Small Business (WOSB), Service-Disabled Veteran-Owned Small Business (SDVOSB), and Historically Underutilized Business Zone (HUBZone) Programs. The Rule expands and limits the ground rules for filing a size or status protest against an apparent successful offeror. To avoid losing contracting opportunities to ineligible contractors, contractors should know when they can file size or status protests. Below are the Rule’s key potential changes and the implications for those seeking to file a size or status protest. The deadline to submit a public comment is November 8, 2022.

Standing to Bring Size and Status Protests

Currently, SBA’s regulations do not contemplate if size or status protests can be brought under sealed bid procurements against the next lowest bidder after the original, apparent awardee is deemed ineligible due to a size or status protest. The Rule would allow concerns to protest the size or status of the next lowest bidder if filed within five (5) business days after notice of the identity of the next lowest bidder. There is no reason why the next lowest bidder should be protected against a potential protest. Accordingly, the Rule would expand a disappointed offeror’s ability to bring a size or status protest under sealed bid procurements.

The Rule would also create consistent rules for who can initiate a size or status protest across SBA’s small business programs. As of now, any WOSB or SDVOSB offeror can bring a size protest. Additionally, any HUBZone offeror not eliminated for reasons unrelated to size can file a size protest. In contrast, for small business set-aside contracts and competitive 8(a) contracts, only an offeror that the contracting officer has not eliminated from consideration for a procurement-related reason may initiate a size protest. The Rule would adopt this language to all of SBA’s small business programs. Thus, any offeror that the contracting officer has not eliminated from consideration for any procurement-related reason could initiate a size protest in each of those programs.

Pending Decisions at the Government Accountability Office (GAO)

The Rule would also make various changes and clarifications regarding size protests against firms who have related, pending bid protests against their contract awards at the GAO. In the event an agency takes corrective action in response to such a protest, the proposed rule would require SBA to automatically dismiss the size protests. If an agency re-evaluates offers, any disappointed offeror could then protest the new (or same) apparent successful offeror within five (5) business days of receiving notice of the awardee. The Rule avoids situations where SBA proceeds with a size determination against a company that, as a result of agency corrective action taken in response to a GAO bid protest, may no longer be the awardee.

In addition, the Rule would add that if a bid protest is pending at the GAO and SBA receives a size protest relating to the same procurement, SBA will suspend its proceedings until GAO has issued a decision. Once GAO’s decision is issued, SBA would resume proceedings and attempt to issue a formal size determination within fifteen (15) business days. SBA already follows this suspension policy, with the Rule simply codifying it.

Status Protests of Small Disadvantaged Businesses (SDBs)

Since the SDB Program was effectively eliminated a number of years ago, firms have been unable to protest an awardee’s SDB status. The SBA Office of Inspector General believes that general authority to protest a firm’s SDB status should exist. As such, the Rule would authorize SBA to review the SDB status of any firm that has represented itself to be an SDB on a prime contract (for goaling purposes or otherwise) or subcontract to a Federal prime contractor whenever it receives credible information calling into question the SDB’s status.

The Rule would also allow the contracting officer or SBA to launch their own protest against a proposed subcontractor’s or subcontract awardee’s SDB status. Other interested parties would also be permitted to submit information to the contracting officer or the SBA in an effort to persuade them to initiate a protest. However, in order to be considered timely, such protests would need to be submitted to the SBA prior to completion of performance by the intended subcontractor.

Where SBA determines that a subcontractor does not qualify as an SDB, the Rule would prevent the prime contractor from including subcontracts to that subcontractor as subcontracts to an SDB in its subcontracting reports, starting from the time that the protest was decided. As a result, prime contractors wanting to avoid the headache of not being able to count subcontracts to SDBs should pay closer attention to and investigate its SDB subcontractors’ status.

While the Rule’s focus is not on protests, the above changes alter the landscape for size and status protests, which can provide a quick, efficient way to challenge an award to an offeror who certifies as small under a certain category, but for whatever reason, may no longer be small or compliant with the SBA’s regulations. It is important for contractors to know when and what type of size or status protests can be filed. If your firm is affected by these proposed changes and would like to submit public comment to SBA, please make sure to do so before the deadline on November 8, 2022.

If you have questions about this client alert or SBA’s proposed changes in general, please contact the author, Sam Finnerty, or another member of PilieroMazza’s Government Contracts Group. Special thanks to Daniel Figuenick for his assistance with this client alert. Visit this link to access additional coverage on this major new SBA rulemaking.