Time for A Check Up of Your Firm's Compliance with Government Contracting Standards

February 19, 2016

By Patrick T. Rothwell

Some of you may recall that, back in the 1970s, the legendary actor John Wayne appeared in public service announcements urging people to undergo a “check-up.”  Now that the New Year has begun, it is a good time for small government contractors to undertake a “check-up” of their government contracting representations and certifications, as well as ethical compliance programs, to make sure they are still up to date. 

To begin, firms that pursue federal small business set-aside procurements should review, at the start of each new year, their federal tax returns, books of account, and internal financial statements and estimates for the last three completed fiscal years—as well as payroll records for the past 12 months—to determine whether they are near or over the SBA size standard(s) applicable to any small business set aside procurements which they may seek this year. Once the prior year ends, that year must now be included in your calculation of small business status. Therefore, it is important to assess as early as possible how the most recently-completed year will impact your small business status.

It is a common misconception that until a concern files a federal income tax return for its most recently completed fiscal year, its size is measured by the prior three fiscal years for which there are completed federal income tax returns. In fact, size is always measured based on the three most recently completed fiscal years (or the last 12 months for employee-based size standards).

Until your firm files its tax returns for the most recently-completed year, SBA will use any other available information to calculate your firm’s receipts for that year, including regular books of account, audited financial statements, and affidavits. SBA may also use your tax returns once they are filed later in the year. Thus, you cannot wait until after you file your tax returns to perform this calculation.

You need to consider now if whether, based upon on your financial statements and estimates for the past year, the previous year’s receipts will bump you over the size standard for your industry. While a mistaken self-certification of size may be inadvertent, there is, besides the potential loss of a contract, always the risk that SBA might consider the concern’s self-certification to be a false certification, which would compound the consequences.

Now is also a good time for your firm to review its System for Award Management (“SAM”) profile, including, but not limited to, its representations and certifications. The FAR generally requires that contractors, in order to keep their SAM registrations active, review and update the information contained in their SAM profiles on an annual basis to ensure that they are current, accurate and complete. Although the annual update requirement may take place at a different time during the year, it is a good idea to get into the habit of performing this review early in the New Year to ensure your firm’s SAM profile is current, accurate, and complete.

Your firm should also set aside time now to review its profile not only on SAM, but also on other databases and websites which have information about the company, including information regarding its key personnel or employees, business relationships, and even its relationship with individuals. Among the profiles that should be reviewed include your firm’s SBA Dynamic Small Business Search database profile, if it has one, Dun & Bradstreet report, LinkedIn profile, website, and any other similar source of information available to the public. A disappointed bidder or even a government contracting officer may well use any information contained within such databases, including SAM profiles, as a basis to allege that a particular concern is other than small.

Such information could include the contractor’s purported number of employees, its supposed revenues, its business, or other relationships that could allegedly give rise to an affiliation allegation. We have found that information on these databases or websites—even information which is seemingly innocuous—can, nonetheless, be misconstrued. Therefore, it is important that the information contained in these databases be current and accurate, so that a competitor does not use inaccurate or outdated information as a basis to challenge a contractor’s size, thereby requiring your firm to spend time and energy to set the record straight.

Finally, the New Year is a good time for your firm to review and update, if needed, its Code of Business Ethics and Conduct. With certain exceptions, a concern which has a federal contract, the value of which is expected to exceed $5.5 million and the performance period of which is 120 days or more, is required to develop a Code of Business Ethics and Conduct. If your firm does not have an ethics code, make a resolution to put one in place this year. If you already have one in place, spend some time now to review your ethics code to make sure it is realistic and up to date with your current business practices and the ever-changing regulatory and compliance landscape for small contractors.

You should also be aware that if your firm has a federal contract that is not for a commercial item and for which your firm has not represented itself as a small business, you are also required to develop an ongoing business ethics awareness and compliance program and internal control requirements that comply with the standards in the FAR. If you have an ongoing ethics compliance program and internal controls, it is particularly timely for you to review them now to make sure that they both meet the standards set forth in the FAR and the particular needs of your firm.

About the Author: Patrick Rothwell is an associate with PilieroMazza in the Government Contracts Group. He may be reached at prothwell@pilieromazza.com.

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