SBA proposes rule to recertify small businesses

Small businesses that receive a multiple-award schedule or other multiple-award contract will have to annually certify that they continue to meet the size standard for a small business, according to a proposed rule published by the Small Business Administration in the Federal Register April 25.

Once a firm is recertified, it will be considered a small business with respect to any order it receives with a North American Industry Classification Code having the same or higher size standard during that one-year period. Each order issued under the multiple-award contract could be counted by the purchasing agency as an award to small business, according to the SBA's Federal Register statement. Twenty-three percent of federal prime contract dollars are supposed to go to small businesses each year. Small businesses have complained to the SBA that they are losing multiple-award contracting opportunities because agencies are counting orders given to large businesses toward their small business contracting goals.

Comments on the proposed rule are due by June 24. Comments should be sent via e-mail to Linda.Williams@sba.gov or submitted at http://www.regulations.gov.

Under the proposed rule, procuring agencies would publish a list of the re-certifications they received, within 10 days of receipt. The list would be published on their Web site, in the Federal Register or in another appropriate venue. Any interested party could protest the size of the business seeking recertification, and the SBA would perform a formal size determination. The SBA could also initiate a formal size determination absent any protest. The proposed rule would allow protests to be made any time prior to the expiration of the underlying multiple award or schedule contract.

Currently, the SBA determines the size of a business when the business certifies it is small to the procuring agency as part of its initial offer. Therefore, on multiple-award schedule, Federal Supply Schedule, multiple-award contract or governmentwide acquisition contracts, small businesses are considered small for the length of the contract, which could run five, 10 or 20 years, even if the business had grown large during that time.

"This [practice] has led to skewed and, in SBA's view, misleading results," the agency's statement in the Federal Register states.

For example, SBA reviewed four technology companies that received contracts as small businesses under the GSA's Multiple Award Schedules Program but have grown out of the small-business size standards since then, said Linda Williams, SBA's associate administrator for government contracting. In 2000 the businesses collectively received more than $190 million in orders that could be counted as awards to small businesses, and in 2001 they received more than $200 million in awards, according to the Federal Register statement. Williams did not name the companies SBA reviewed.

The proposed rule would expand a White House policy announced in February that required agencies holding governmentwide acquisition contracts have vendors recertify their size and type of business annually. If agencies failed to add the recertification clause to their contracts, the OMB's Office of Federal Procurement policy would not renew their executive GWAC designation, which allows other agencies to use the contracts.

"We had been working on this rule before OFPP put its memo out. This rule is consistent with what they are trying to do under the GWACs," Williams said.

Protests under the proposed rule should not unduly slow the procurement process, the SBA said, because contracting officers will award orders under multiple-award contracts based on the best value to the government. If it turns out that the business receiving the award is no longer small, the procuring agency can still make the award, but it will not be able to count that award toward its small business contracting goal, Williams said.