SBA Proposes Changes to Size Recertification Rules Could Impact Federal Contractors

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The Small Business Administration (SBA) proposed new regulations that could significantly impact federal contractors in small business programs.

The proposed changes aim to standardize size recertification requirements, potentially impacting small businesses involved in mergers, acquisitions, or capital infusions.

Key provisions include:

1. Consolidation of Regulations:

• The SBA plans to create a unified set of size recertification rules under 13 CFR 125.12, replacing the current program-specific requirements for more consistency across all SBA programs.

2. Size Determination Exceptions:

• Triggering Events: Mergers, acquisitions, or novations would require recertification. If a business can no longer be certified as small, it becomes ineligible for future set-aside orders under multiple award contracts (MACs) but can still compete for unrestricted orders.
• GSA Federal Supply Schedule (FSS) Contracts: Size would be determined at the date of the triggering event or recertification request for set-aside orders, eliminating the current exception for FSS contracts.
• 8(a) Sole-Source Awards: Businesses must qualify as small at the initial offer date for each order, regardless of the underlying contract type.

3. Impact on Contractors:

• Eligibility Risks: Contractors may lose eligibility for set-aside contracts if certain events lead to disqualification. This is a change from the current rule where size status is maintained for the contract’s duration unless recertification is requested.
• Early Affiliation Concerns: Preliminary agreements between two firms could trigger early affiliation with the large business, potentially disqualifying a business from small business contracts before an actual transaction.

4. Updates to HUBZone and Other Small Business Programs:

• The proposed changes aim to refine eligibility criteria for the Historically Underutilized Business Zone (HUBZone), Women-Owned Small Business (WOSB), and Veteran Small Business Certification (VetCert) programs and standardize recertification rules to ensure uniform application and reduce confusion for businesses holding multiple certifications.

These changes may discourage small businesses, contractors, and investors from engaging in transactions that could trigger disqualifying recertifications. Federal contractors should review the proposed rule, which could impact their eligibility for future contracts. Comments on the proposed rule are due by October 7, 2024.