National Defense Authorization Act of 2013 and the New Final Rule in 13 CFR 121.404.
Are you a small business that has recently sold, merged or been acquired by another entity? New promulgations of the federal rules may impact when you have to recertify your business’s size.
SBA determines the size status of a concern, including its affiliates, as of the date the concern submits a written self-certification that it is small to the procuring activity as part of its initial offer (or other formal response to a solicitation). See 13 CFR Part 121.404.
In prior years, the federal law offered a specific rule as to when a businesses’ size status was determined. For small businesses, size was determined at the initial receipt of offers. Once a contract was awarded, if a small business was sold, merged or acquired, recertification was required.
However, the old rule was silent as to whether companies should recertify size if a sale, merger or acquisition took place after receipt of offers and prior to the final award. This issue was addressed over the course of the past several years, with courts finding re-certification not required unless specifically requested by the agency or solicitation.
13 CFR 121.404 When does SBA determine the size status of a business concern?
(a) SBA determines the size status of a concern, including its affiliates, as of the date the concern submits a written self-certification that it is small to the procuring activity as part of its initial offer (or other formal response to a solicitation) which includes price.
(b) A concern applying to be certified as a Participant in SBA’s 8(a) Business Development program (under part 124, subpart A, of this chapter), as a small disadvantaged business (under part 124, subpart B, of this chapter), or as a HUBZone small business (under part 126 of this chapter) must qualify as a small business for its primary industry classification as of the date of its application and the date of certification by SBA.
(c) The size status of an applicant for a Certificate of Competency (COC) relating to an unrestricted procurement is determined as of the date of the concern’s application for the COC.
Recertification Under 13 CFR 121.404
In May 2016, a new recertification rule was released, amending the U.S. Small Business Administration’s regulations to implement provisions of the National Defense Authorization Act of 2013. The Final Rule now specifically requires that:
If the merger, sale or acquisition occurs after offer but prior to award, the offeror must re-certify its size to the contracting officer prior to award.
This new rule places the onus on the contractor to ensure that it maintains its size status throughout the proposal stage, and if not, the contractor can risk losing the contract and be subject to the same civil and criminal penalties for misrepresenting its size status.
Based on the new rule and restrictions embodied within, contractors should be concisely aware of the recertification requirements and its implications on business sales, snall business mergers and acquisitions during the proposal stage.
If you have questions surrounding the applicability of this new rule and 13 CFR 121.404 to your company and existing proposals, contact Watson & Associates, LLC’s lawyers today for a free consultation at 1-866-601-5518.