SBA and the FAR contain rules governing a situation where a small business is purchased by another entity and becomes a large business. SBA has recently updated those rules in a new regulation found at 13 C.F.R. § 125.12. In particular, there is a special scenario where a small business has submitted an offer on a small-business procurement and then is acquired within 180 days after that offer. But how does SBA define an “offer”? A recent SBA decision answers that question.
In Secise, LLC, SBA No. SIZ-6337 (2025), SBA OHA considered an appeal of a size protest of a Navy small business procurement for systems engineering support. The solicitation was assigned NAICS Code 541715 — Aircraft, Aircraft Engine and Engine Parts with a corresponding 1,500 employee size standard.
Secise, LLC (Appellant or Secise) argued that Sabre Systems, LLC (Sabre) was not a small business because Sabre was purchased by a private equity firm within the 180-day period after submitting its offer on the procurement. Initial proposals were due October 2, 2023. Final proposal revisions for the solicitation were due on May 17, 2024. Sabre was acquired on September 26, 2024, which was within 180 days after submitting final proposal revisions.
The general rule is that SBA determines a company’s size as of its initial offer date including price, and then that company is considered small throughout the life of the contract. 13 C.F.R. § 121.404(a). There are some exceptions, such as a contract going over 5 years or if a task order explicitly requests recertification. Under current rules, there will also be an exception if there is a triggering event such as an acquisition, but that rule is not going into effect until January 2026, as explained in our post here.
However, there is another exception when a company merges or is acquired by another company after offer but before award. SBA’s concern, as noted in the federal register commentary, was “that if a merger or acquisition causes a firm to recertify as an other than small business concern between time of offer and award, then the recertified firm is not considered a small business for the solicitation.” SBA set the time period for examining mergers or acquisitions after offer to 180 days, hence we often call this the “180-day rule.”
Under SBA regulations in effect at the time of this decision, the rule stated:
If the merger, sale or acquisition occurs after offer but prior to award, the offeror must recertify its size to the contracting officer prior to award. If the merger, sale or acquisition (including agreements in principle) occurs within 180 days of the date of an offer relating to the award of a contract, order or agreement and the offeror is unable to recertify as small, it will not be eligible as a small business to receive the award of the contract, order or agreement. If the merger, sale or acquisition (including agreements in principal) occurs more than 180 days after the date of an offer, award can be made, but it will not count as an award to small business.
13 C.F.R. § 121.404(g)(2)(iii) (Effective: May 30, 2023 to January 15, 2025). This rule has now moved to the new regulation at 13 C.F.R. § 125.12(e), but the language is similar in that it refers to “within 180 days after the date of an offer.” OHA noted: “The primary purpose of the regulation is to prevent firms which become other than small through merger or acquisition from benefiting from small business set-asides.”
However, the key term at issue in this appeal was “offer”. Specifically, what counts as an offer. Appellant argued that term offer, under its plain meaning, “must not be limited to initial offers, but include final proposal revisions.” It relied on the definition of “offer” in FAR 2.101: “[A] response to a solicitation that, if accepted, would bind the offeror to perform the resultant contract.”
OHA rejected this definition, because “it would lead to absurd results” and was contrary to the regulatory comments from SBA. The absurd result was that a company would have a new 180-day period after each proposal revision, and there could be many such revisions. “Every new offer made during a long procurement would create another 180-day period during which, if a sale or merger occurred, the concern would no longer be eligible for award.” In this case, the result would be that “Sabre would have been eligible for award in April 2024, and until May 16th, but the submission of its final proposal revisions would have rendered it ineligible for another 180 days.”
As for SBA’s intent based on the federal register commentary, OHA said:
The language of the preamble shows SBA’s concern over the need of businesses for some certainty, and an appreciation of their need for planning, and the changes in a business’s conditions that can arise over a long, drawn-out procurement process. The rule is meant to provide some certainty and leeway to grow for small businesses while dealing with the procurement process.
OHA concluded that “SBA clearly meant that the word ‘offer’ in the regulation meant a concern’s initial offer and that would create one single 180-day period within which a merger or acquisition which rendered the concern other than small would also make it ineligible for award.”
This decision creates some certainty for small businesses that an offer, for purposes of the 180-day rule, is the initial offer, not subsequent revisions. A company would do well to keep this in mind as it reviews timing of offer submissions, if there is a potential acquisition that could be on the way.
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