In the excerpt below from the Washington Business Journal article “What the DCSA’s Rejection of an SBA Regulation Means for Your Business,” PilieroMazza’s Cy Alba, a partner in the Firm’s Government Contracts Group, discusses how the Defense Counterintelligence and Security Agency’s refusal to follow a new Small Business Administration facility clearance mandate impacts small businesses, joint ventures, and the overall federal marketplace. To view the full article, please visit this link.
On November 16, 2020, a slew of Small Business Administration (SBA) regulations became final, including 13 C.F.R. 121.103(h)(4). This SBA regulation was beneficial for small business joint ventures (JV) because it allowed any JV to rely on the facility clearance (FCL) of the JV members and the clearance was required for non-primary and vital work, even to rely on a large business mentor or other non-qualified members of the JV. Facility clearances allow companies to work in and on government properties with high national security classification levels. They are a prerequisite to many government contracts. JVs, entities formed to perform on contracts within a two-year time period, are utilized by businesses in order to gain the advantages, whether that be skills or funding, of other companies.
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However, shortly after SBA’s release of its new regulations, the Defense Counterintelligence and Security Agency (DCSA), an arm of the Department of Defense (DOD), released a statement noting that DOD was refusing to follow the new SBA mandates, thereby requiring small businesses to continue to secure FCLs for the JV itself, as well as all members, unless and until DOD made its own determination as to the efficacy of the rules or issued its own guidance.
This inconsistent guidance from DOD and SBA sows confusion and acts to harm small businesses in the federal market.