If a contracting officer determines that a small business offeror is not qualified to perform under a given solicitation, that typically means the offeror’s proposal will be rejected. But when the rejection deals with responsibility, the offeror may get a second bite at the apple through the SBA’s Certificate of Competency (“COC”) program. Whether this is news to you, or something you simply wish to understand a bit better, let’s take a look at the basics of the SBA’s COC Program, rules, and procedures.
Which laws establish and govern the COC program?
The Small Business Act or the “Act” (specifically 15 U.S.C. § 637(b)(7)) introduces us to the COC program. 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 specifically due to their “capability, competency, capacity, credit, integrity, perseverance, [or] tenacity[.]”
The COC process is easiest to understand by reviewing SBA’s own implementing regulations. They establish the regulatory framework for the SBA’s application of the COC program. They also cover offeror eligibility for a COC, review of a COC application, appeals of a COC determination, and effects of a COC. Don’t worry, we dive into most of these a bit deeper below.
But the Act and SBA’s regulations are not the only areas of federal law that speak to COCs, so does the FAR, in a subpart titled “Responsible Prospective Contractors.” The FAR instructs contracting officers to make “an affirmative determination of responsibility” prior to any purchase or award. Other sections of this FAR subpart set forth the 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 offeror must also comply with another FAR subpart, covering “Certificates of Competency and Determinations of Responsibility“–which largely mirrors, and in fact defers to, the SBA’s method of managing the COC program.
Who is eligible for a COC review?
The first requirement is that you must be an actual offeror on the solicitation at issue 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. part 121. If applicable, the offeror must also “have agreed to comply with the applicable limitations on subcontracting and the nonmanufacturer rule” for the subject contract.
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. Inclusion on this list does not mean you are immediately ineligible for a COC review, but instead, it might be a little tougher; the SBA will make its eligibility determination “on a case-by-case basis.”
How does a COC review start?
Even if the second-in-line apparent successful offeror is also a small business, SBA requires a contracting officer to start the COC process under any of the following three circumstances:
- If the contracting officer denies award to an apparent successful small business offeror based on responsibility;
- 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 factors; or
- If the contracting officer refuses to consider a small business concern for award because it failed to meet a definitive responsibility criterion in 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 would then conduct the COC review.
What are the offeror’s responsibilities during the COC review?
When the SBA receives a COC referral from the contracting officer, it notifies the offeror and asks 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 worksites and/or contact an offeror’s suppliers, financial institutions, or other relevant 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.
What if SBA approves or denies a COC?
If the SBA issues a COC for the offeror, 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 secretary 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, contact us via the options below.
Questions about this post? Email us. Need legal assistance? Give us a call at 785-200-8919.
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