SBA Confirms GSA Schedule-Holders Who Outgrow Size Standard Can Still Get Awarded Set-Aside TOs and Options

Many contractors utilize a GSA schedule contract to provide the Government with their products and/or services. After all the effort it takes to get on a GSA schedule contract, a contractor would certainly not want to lose its chance at a small business task orders issued under it, just because it’s circumstances have changed since it first got the schedule contract as a small business. In a recent decision, the SBA’s Office of Hearings and Appeals (“OHA”) confirmed that even if a business changes size after being awarded a GSA schedule contract, it can still compete for small business task orders from a Blanket Purchase Agreement (“BPA”) awarded under it.

GSA schedule contracts are quite common, but take a lot of work to acquire. Then once on a GSA schedule, contractors can find that their size may change. Of course, small business contractors who have gone from small to “other than small” since their award of a schedule contact would love to still be able to compete for small business task orders after changing size. But is that even possible? In Lintech Global Inc., SBA No. SIZ-6287 (May 26, 2024), a contractor found themselves in that situation, and SBA OHA confirmed their ability to still be awarded small business set-aside task orders.

In Lintech the Contractor was awarded a GSA FSS Contract (i.e. schedule contract) in December of 2020, which had a five year base period with three additional five year options. At time of offer, the Contractor self-certified as a small business under NAICS code 541512, which at the time had a size stand of $30 Million. In July of 2021 the EPA issued a RFQ looking to award BPA to holders of schedule contracts, and this BPA was set aside entirely for small business. The Contractor was awarded that BPA by the EPA.

Two years after the award of the schedule contract, on December 29, 2022, the Contractor had 100% of its stock purchased and due to this became “other than small.” The Contractor did its duty and notified the GSA and EPA of this purchase in January of 2023.

In April of 2023 the EPA issued a task order request for proposals for a task order under the BPAs it had previously awarded. This task order was to be set aside for small businesses, with a size standard of $34 Million. This task order did not require a recertification of size. The Contractor at issue, was awarded this small business task order, and a protest followed.

While the protest was dismissed, the SBA decided to conduct a size protest on its own. In December of 2023, the SBA Area Office issued a size determination against the Contractor. The Area Office stated that because the task order was issued under a schedule contract, which is a Multiple Award Contract (“MAC”), the Contractor was no longer small as of the date it recertified as other than small due to its acquisition on its schedule contract, which was January 2023. The Contractor appealed this decision, bringing us to the recent SBA OHA ruling.

Upon review of the arguments and regulations, SBA OHA ruled in favor of the Contractor, not the Area Office. SBA OHA found that the Area Office’s interpretation of SBA regulations was incorrect. Everything hinged on 13 C.F.R. 121.404 but specifically section (g). This section (121.404) is all about when the size status of business is determined.

The general rule, as OHA put it, is that “a concern that is small at the time a contract is awarded remains small throughout the life of that contract.” But there are special rules for MACs, like schedule contracts. OHA confirmed that “when the underlying MAC was awarded on an unrestricted basis, a contractor must recertify its size if it chooses to compete for an order set aside for small businesses.” But this requirement “is inapplicable to orders under FSS contracts.” So, GSA schedule contracts are exempt from that specific recertification requirement.

The task order at issue in this case was set-aside for small business but the underlying MAC (the schedule contract) the Contractor had was unrestricted. Thus, “recertification at the task order level was not required” due to the GSA schedule contract exception.

Where the confusion stemmed from was the Area Office’s interpretation of section (g) of 121.404. This section, among other things, discusses what happens when a business is merged or acquired, and how an agency would treat any option or order issued to that company under an already awarded contract. This is exactly the situation the Contractor was in here. The Area Office incorrectly interpreted the regulation as actually barring a business from receiving any more small business orders or options after merging or being acquired and no longer being small. OHA corrected the Area Office.

OHA declared that while a contractor is required to recertify when acquired, any issuing of an order or option simply prevents the agency from counting that award towards its small business goals. It does not prevent the agency from awarding said option or task order to the contractor who is no longer small. While GSA schedule contracts are excluded from the task order recertification requirement, if the contractor does change its size it would recertify. Once recertified, if it is now “other than small” it still can compete for the small business set-aside task orders. The agency issuing the options or task orders simply can’t count it towards its small business goals.

When to determine size related to task orders or options comes up quite frequently at SBA OHA. In fact we blogged about another similar case related to a GSA contract just a few years ago, and we have discussed how acquisitions can affect size. Often there is confusion about what happens when a contract is awarded to a small business, but circumstances change to make that business no longer small. As SBA OHA noted, if the SBA wanted this to function differently, then the SBA would need to reword the regulation. But as it stands, when a business is sold or is merged, and becomes other than small, it could still receive task orders or options, it is the small business goals of the agency that take a hit.

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