Legal Meets Practical: Accessible Solutions

Rule Change Alert for Small Business Contractors!

On Tuesday, May 31, the Small Business Administration (“SBA”) published a final rule in the Federal Register, amending several of its regulations to implement provisions of the National Defense Authorization Act of 2013, as well as to make changes to its regulations concerning the nonmanufacturer rule, affiliation, and joint ventures. It isn’t the most interesting piece of reading you’ll ever encounter, but given its wide scope, it might be worth checking out to see if and how it affects how your small business.

Here are a few of the highlights:

  • Affiliation. The rule clarifies that one firm will be presumed to be “affiliated” with another for purposes of determining size if the concern in question derived 70% or more of its receipts from another concern over the previous three fiscal years (consistent with case law from the SBA’s Office of Hearings and Appeals). This presumption is rebuttable. (13 CFR 121.2013).
  • Annual Receipts. The rule further defines the definition of “annual receipts” (as it is used to determine size) (13 CFR 121.104). This has confused contractors and been a contentious issue in size protests.
  • Nonmanufacturer Rule. The rule clarifies the nonmanufacturer rule, further stating that the rental of an item qualifies as a “service” and will be treated as such in the application of the nonmanufacturer rule and the limitation on subcontracting (“LOS”). It also notes that the nonmanufacturer rule and the LOS performance requirements do not apply to set-asides with an estimated value between $3,500 and $150,000. (13 CFR 121.406).
  • Size Protest Standing. The rule clarifies standing for initiating a size protest or requesting a formal size determination, stating that this includes “any offeror that the contracting officer has not eliminated from consideration for any procurement-related reason, such as non-responsiveness, technical unacceptability, or outside of the competitive range.” The prior language included a double negative, which was confusing even for attorneys. (13 CFR 121.1001).
  • Limitations on Subcontracting. It clarifies that a prime contractor may subcontract work to a “similarly-situation” (i.e., in the same socioeconomic category) entity and have that count toward the LOS requirements. Not complying with LOS requirements is an easy way to either be found non-responsive in your offer, or to get into trouble (including such penalties as debarment), so it’s important to remain educated on this topic. (13 CFR 125.6).
  • Joint Ventures. It alters the rules for joint ventures, noting that the joint venture will be considered “small” so long as each concern is “small” under the NAICS code assigned to the procurement. It also notes the joint venture’s obligation to comply with the LOS requirements set forth at 13 CFR 125.6 (13 CFR 125.15).

For a detailed account of the originally-proposed rule, the comments received and the SBA’s response/analysis, and the final rule (which goes into effect on June 30, 2016), visit this page. Remember – as a small business contractor, it’s your obligation to stay informed on rule updates!

*Did you find this article informative? If so, sign up for Sarah Schauerte’s legal blog on veteran small business issues at: http://www.legalmeetspractical.com. Also, if you’re attending the National Veteran Small Business Coalition’s wonderful conference in Norfolk this year (June 20-23), please stop by for my presentations on VetBiz verification and bid protests!

Knowing the rules that apply to you can help your bottom line.

Knowing the rules that apply to you can help your bottom line.

One Response to “Rule Change Alert for Small Business Contractors!”

  1. Good for you, thank you for sharing it! 🙂

Leave a Reply

Mission Statement

My mission is to provide accessible, high-quality legal services to small business owners and to veterans. I will strive to clearly communicate, understand objectives, and formulate and execute effective legal solutions.

Disclaimer

No Attorney-Client Relationship

This website is maintained exclusively for informational purposes. It is not intended to provide legal or other professional advice and does not necessarily represent the opinions of the lawyer or her clients. Viewing this site, using information from it, or communicating with Sarah Schauerte through this site by email does not create an attorney-client relationship.

Non-Reliance

Online readers should not act nor decline to act, based on content from this site, without first consulting an attorney or other appropriate professional. Because the law changes frequently, this website's content may not indicate the current state of the law. Nothing on this site is meant to predict or guarantee future results. I am not liable for the use or interpretation of information contained on this website, and expressly disclaim all liability for any actions you take or fail to take, based on this website's content.

Links

I do not necessarily endorse and am not responsible for content accessed through this website's links to other Internet resources. Correctness and adequacy of information on those sites is not guaranteed, and unless otherwise stated, I am not associated with such linked sites.

Contacting Me

You may email me through the email address provided by this site, but information you send through email or this website is not secure and may not be confidential. Communications will not be treated as privileged unless I already represent you. Do not send confidential information until you have established a formal attorney-client relationship with me. Even if I represent you, please understand that email security is still uncertain and that you accept all risks of such uncertainty and potential lack of confidentiality when you send us unencrypted, sensitive, or confidential email. Email from me never constitutes an electronic signature, unless it expressly says so.