"Small Business"

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The Small Business Administration is continuing the task of implementing several regulatory changes required by the National Defense Authorization Act for Fiscal Year 2013 (NDAA) [pdf]. One such change occurred on May 7th when the SBA published an interim final rule (RIN 3245-AG55) [pdf] enacting section 1697 of the NDAA and amending 13 CFR 127.503 [pdf]. The interim final rule removes  the statutory cap on set-aside contracts for Women Owned Small Businesses (WOSB) and Economically Disadvantaged Women Owned Small Businesses (EDWOSBs).

Congress continues to promote opportunities for small business contractors to do business with the federal government. It also continues to increase the penalties for those taking unfair advantage of small business opportunities. Here is a look at the most recent set of carrots and sticks, which appear in the National Defense Authorization Act for Fiscal Year 2013.

1. Subcontracts with “similarly situated” small businesses

Section 1651 of the 2013 NDAA provides a new exception to the small business subcontracting cap, which restricts small businesses from subcontracting more than 50 percent of the amount paid under a services contract. With the passage of NDAA, the amount paid under any subcontract with a small business concern that has the same small business status as the prime contractor is excluded from the small business subcontracting cap. The term “similarly situated entities” includes service-disabled veteran-owned small businesses, HUBZone small businesses, women-owned small businesses, and economically disadvantaged women-owned small businesses.

This provision also changes the method for calculating the 50-percent subcontracting cap. Previously, the subcontracting limits in FAR 52.219-14 counted only direct labor costs. Under section 1651, “amount paid” under a subcontract, including labor, material, and other direct costs, is used to determine the 50-percent subcontracting cap. This is a strong incentive for small business prime contractors to award subcontracts to similarly situated small businesses. The old formula continues to govern subcontracting limitations for construction contracts, but the NDAA directs the SBA to establish similar limitations on construction contracts.

The penalty for violating the subcontracting cap is the greater of $500,000 or the dollar amount expended over the cap. The “amount expended” clause is a new penalty.

The Veterans Administration can freely acquire goods and services from GSA’s Federal Supply Schedule, and it is not required to set-aside such procurements for veteran-owned small businesses (VOSBs) or service-disabled veteran-owned small businesses (SDVOSBs). Under the Veterans Benefits, Health Care, and Information Technology Act of 2006, the VA is required to set aside procurements for…

The SBA has released its Small Business Procurement Scorecards for 2011, and for the second year in a row the results paint a grim picture. In 2011 [pdf], small businesses were awarded an even smaller share of federal contract dollars than they received in 2010—$6.4 billion smaller. Prime contract awards to small businesses in 2011 totaled $91.5 billion, or 21.65 percent of federal agency contract expenditures. The previous year [pdf], small businesses were awarded 22.66 percent of all federal prime contracts, or $97.9 billion. It’s official: federal agencies have failed once again to meet the 23 percent government-wide goal for prime contract awards to small business concerns set by the Small Business Act.

The FAR Councils have adopted a final rule [pdf] revising the categories of veterans protected by federal equal opportunity laws. The rule updates the FAR to reflect Department of Labor regulations addressing equal opportunity requirements for veterans. The FAR amendments identify four categories of veterans: disabled veterans, recently separated veterans, armed forces service medal veterans,…

More legislation to address the recent high-profile abuses of the SBA contracting system is in the works. A bipartisan group led by Senator Olympia Snowe (R-ME) has introduced legislation called the Small Business Contracting Fraud Prevention Act of 2011 [pdf]. Among other things, the bill would amend the provisions of the Small Business Act relating to misrepresentations as to the status of companies as small business concerns, including HUBZone, 8(a), woman-owned, and service-disabled veteran-owned small businesses.

Do you think that small business contracts and subcontracts have been going to contractors that do not qualify as small businesses? If so, you may be interested in the new legislative changes intended to discourage and penalize fraud in small business contracting. The changes are in the Small Business Jobs Act of 2010, signed by the President on September 27, 2010.

A recent bid protest decision by the United States Court of Federal Claims is a reminder that HUBZone small business concerns must monitor their compliance with SBA rules. In Mission Critical Solutions v. United States, No. 10-810C (Fed. Cl. Feb 18, 2011) [pdf], the court held that a contractor was properly decertified as a HUBZone small business concern and ineligible for a contract set aside for HUBZone small businesses because fewer than 35 percent of its employees resided in HUBZones at the time of award.

The Small Business Administration has launched an informational website addressing its new Women-Owned Small Business Federal Contract Program. The website includes a step-by-step guide on how to participate in the new set-aside program, as well as links to explanatory statements and SBA contact information. The final regulations implementing the program were published on October 7…