5 Things You Should Know: SBA Certificates of Competency

If a contracting officer determines that a small business offeror is not qualified to perform under a solicitation, that usually means the offeror’s proposal will be rejected. In some instances, however, the offeror gets a second chance through the SBA’s Certificate of Competency (“COC”) program.

Here are five things you should know about the COC program.

1. What rules govern the COC program?

The Small Business Act, specifically 15 U.S.C. § 637(b)(7), introduces us to the COC program. Under the Small Business Act, contracting officers are required to provide small business concerns with reasoning for why they are denied award of a contract. The contracting officer must also refer small business concerns to the SBA if the concern is denied award due to their “capability, competency, capacity, credit, integrity, perseverance, [or] tenacity[.]”

13 C.F.R. § 125.5 establishes the regulatory framework for the SBA’s application of the COC program. The regulation addresses, among other things, an offeror’s eligibility for a COC, review of a COC application, appeals of a COC, and effect of a COC. Many of the regulatory topics will be addressed below.

FAR 9.1 instructs the contracting officer to make “an affirmative determination of responsibility” prior to any purchase or award. The subparts of FAR 9.1 set forth the FAR standards for determining responsibility which include a review of, among other things, past performance, financial resources, and organizational skills. In the event a purchase or award involves a small business, the contracting officer and small business must also comply with FAR 19.6. FAR 19.6 largely mirrors, and in fact defers to, the SBA’s method of managing the COC program.

2. Who is eligible for a COC review?

The first line to cross in determining eligibility is that you must be an offeror to be eligible for COC review. The offeror must also “qualify as a small business under the applicable size standard in accordance with” 13 C.F.R. § 121. If applicable, the offeror must also “have agreed to comply with the applicable limitations on subcontracting and the nonmanufacturer rule.”

If these steps are satisfied, the SBA will then review the concern, and its principals, to see if any appear in the “Parties Excluded From Federal Procurement Programs[” list, as administered by the General Services Administration. Inclusion on this list does not mean you are immediately ineligible for a COC review, but instead the SBA will make its eligibility determination “on a case-by-case basis.”

3. How does a COC review start?

A contracting officer is required to start the COC process under three circumstances. First, if the contracting officer denies an apparent successful small business offeror award on the basis of responsibility. Second, if the contracting officer refuses to consider a small business concern for award after evaluating the concern’s offer on a non-comparative basis under one or more responsibility type evaluation factor. Third, if the contracting officer refuses to consider a small business concern for award because it failed to meet a definitive responsibility criterion of the solicitation.

If one of these circumstances is present, the contracting officer must refer its nonresponsibility determination to the SBA. The referral must include the solicitation, the offer at issue, an abstract of all bids, any pre-award survey, the contracting officers written determination of nonresponsibility, the technical data package, and any other justification for its determination. With these items in hand, the SBA then conducts the COC review.

4. What are the offeror’s responsibilities during the COC review?

When the SBA receives referral from the contracting officer, it then notifies the offeror of the contracting officer’s determination and ask the offeror whether it wishes to apply for a COC. If the offeror wishes to apply for a COC, it must show the SBA that it is competent. While each case is different, the SBA generally requires the following documents from the offeror: SBA Form 1531 – Application for Certificate of Competency, SBA Form 355 – Application for Small Business Size Determination, SBA Form 74B – Monthly cash flow, and any other specific forms identified by the SBA.

As part of its review the SBA may, among other things, visit an offeror’s sites or contact an offeror’s suppliers, financial institutions, or other third parties directly to verify any part of the contracting officers determination of nonresponsibility.

Throughout the process, the offeror should respond to any communications from the SBA in a timely fashion. Failure to do so may result in the SBA closing its investigation and denying the COC.

5. What if SBA approves or denies a COC?

If the SBA issues a COC, the next steps are determined based on the value of the contract at issue.

For contracts valued at $100,000 or less, the SBA Area Director’s decision to approve or deny a COC is final. There are no rights to appeal.

For contracts valued between $100,000 and $25 million, the Area Director’s decision to deny a COC is final. There are no rights to appeal. If the Area Director approves a COC, the contracting officer has a few options. First, the contracting officer may accept the decision to issue the COC and award the contract to the concern. Second, the contracting officer may ask the Area Director to suspend the case to allow for a review period or so the contracting officer may appeal the decision. Third, the contracting officer may appeal the decision to SBA Headquarters.

For contracts valued at more than $25 million, the Area Director’s decision to deny a COC is final. There are no rights to appeal. If the Area Director wishes to approve the COC, it must first refer its recommendation to SBA Headquarters. SBA Headquarters then does its own due diligence by contacting the contracting agency at the secretariat level and allowing them to review the case file or submit additional evidence. After the contracting agency responds, the SBA’s Associate Administrator for Government Contracting will make a final determination. Regardless of the outcome, the final determination is just that – final.

As you can see, there are a lot of moving parts in the COC process.

If you are directly or indirectly impacted by a COC determination, and have any questions, give us a call.