SBA Doesn’t Fix Incorrect NAICS Code Regulation; Protester Pays The Price

A contractor’s NAICS code appeal was dismissed as untimely, even though it was filed within the time frame expressly established in an SBA regulation.

In a recent decision, the SBA Office of Hearings and Appeals confirmed its earlier ruling that a NAICS code appeal must be filed within ten calendar days, despite an SBA regulation establishing a filing deadline of ten business days.

SBA OHA’s decision isn’t surprising in light of its prior ruling.  However, in my mind, the decision raises a question of fundamental fairness: should protesters continue to be penalized for the SBA’s failure to fix its conflicting timeliness regulations?

SBA OHA’s decision in NAICS Appeal of RhinoCorps, Ltd., SBA No. NAICS-5481 (2013) involved an Army solicitation seeking a contractor to provide support for the System Simulation Development Directorate.  The solicitation was issued on June 7, 2013 as a small business set-aside under NAICS code 541712, with a corresponding 1,000-employee size standard.

On June 18, 2013, SBA OHA received a NAICS code appeal from RhinoCorps, Ltd.  RhinoCorps contended that the solicitation should have been designated with NAICS code 541330, with a corresponding $35.5 million size standard.

After receiving the NAICS code appeal, SBA OHA directed RhinoCorps to explain why its appeal should not be dismissed as untimely because it had not been filed within 10 calendar days, as provided in 13 C.F.R. 134.304(b).

RhinoCorps explained that it had relied upon a different SBA regulation, 13 C.F.R. 121.1103(b)(1), which states that “[a]n appeal from a contracting officer’s NAICS code or size standard designation must be served and filed within 10 business days after the issuance of the solicitation or amendment affecting the NAICS code or size standard.”  RhinoCorps noted that the version of 13 C.F.R. 121.1103(b)(1) establishing a deadline of ten business days had been in place for more than two years, and argued that it “should not suffer for SBA’s failure, over the course of twenty-eight months, to amend 13 C.F.R. 121.1103.”

SBA OHA wrote that it had previously determined that the language of 13 C.F.R. 121.1103 is “in the nature of a clerical or administrative error,” and that “the switch to business days in 13 C.F.R. 121.1103(b)(1) appears to have been inadvertent, not the result of any conscious intent by the agency to extend the deadline for NAICS code appeals.”  SBA OHA held that notwithstanding the plain language of 13 C.F.R. 121.1103, the deadline for NAICS code appeals is still ten calendar days.  Because RhinoCorps’ appeal was filed on the 11th calendar day, it was untimely, and SBA OHA dismissed it.

While I do not fault SBA OHA for its regulatory interpretation, the same cannot be said of the SBA’s regulators.  Assuming that the regulation is, in fact, incorrect, there is no excuse for it remaining on the books for twenty-eight months and counting–especially not when amending the regulation would require nothing more than replacing the word “business” with the word “calendar.”

As long as 13 C.F.R. 121.1103 expresses the NAICS code appeal deadline in terms of business days, contractors will continue to rely on the regulation, only to be caught by surprise when their NAICS code appeals are dismissed as untimely.  In my mind, that’s simply not fair, and it is past time for the SBA to fix the problem.

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