Shopping for a New Small Business: How Acquisitions Affect Size Status for Multiple-Award Contracts

As federal contracts attorneys, we often get questions about what happens in the event of an acquisition of a small business. Reporting requirements, whether before or after an acquisition, tend to vary from one type of small business socioeconomic program to another. And there are other considerations such as whether the small business in question is the one being acquired or the one acquiring another small business and the timing with regard to proposal submission, contract performance, task orders,  and other variables. Taking those together, and it can be, well, confusing, to say the least. In the case of Forward Slope, Inc., SBA’s Office of Hearings and Appeals (OHA) took a look at some of these variables to determine how an acquisition can affect the size of a concern awarded a multiple award contract.


In July 2021, the U.S. Department of the Navy awarded Forward Slope a place on the Seaport-NxG Multiple Award Contract (MAC). For those unfamiliar with Seaport-NxG, it is both a set of Indefinite Delivery Indefinite Quantity (IDIQ) MACs and the platform used by the Navy to solicit, award, and administer task orders under those IDIQ MACs. Once on the MAC, on November 29, 2022, Forward Slope, a self-certified small business, submitted its response to an RFQ for Seaport-NxG. Following Forward Slope’s response to the RFQ, the Navy made an award to Forward Slope on the 100% small business set aside task order.

Following award, SBA’s Area Office received a protest regarding Forward Slope’s size, alleging that Forward Slope was an “other than small” business. This led to the Area Office issuing a size determination stating that Forward Slope was, in fact, other than small and therefore it was ineligible for award. How did this happen, if Forward Slope was small when it was awarded a place on the MAC?

One word: acquisition.

You see, sometime between when Forward Slope was awarded the MAC and when it submitted its offer for the task order, it was acquired by another entity . And 13 C.F.R. § 121.404(g)(2)(i) states:

In the case of a merger, acquisition, or sale which results in a change in controlling interest under 13 C.F.R. §121.103, where contract novation is not required, the contractor must, within 30 days of the transaction becoming final, recertify its small business size status to the procuring agency, or inform the procuring agency that it is other than small. If the contractor is other than small, the agency can no longer count the options or orders issued pursuant to the contract, from that point forward, towards its small business goals. The agency and the contractor must immediately revise all applicable Federal contract databases to reflect the new size status.

Therefore, according to 13 C.F.R. § 121.404(g)(2)(i), the Area Office determined Forward Slope was required to recertify its size status to the procuring agency or inform the procuring agency that it was other than small. Forward Slope did not, it was found to be other than small, and any subsequent options or orders would not count towards the Navy’s small business goals.

Size Appeal

Fast forward to July 2023, when Forward Slope filed the appeal at issue here. The underlying MAC stated that it would be competed on the following bases: unrestricted or set-aside for small businesses, service-disabled veteran-owned small businesses (SDVOSB), women-owned small businesses (WOSB), 8(a) participants, or HUBZone participants. In its appeal, Forward Slope asserted that offerors on task orders set-aside for SDVOSBs, WOSBs, 8(a), and HUBZones were required to qualify as small at the time of offer submission, as stated in the MAC. But there was no similar requirement included for small business set-asides, nor was there in the task order solicitation. Therefore, according to Forward Slope, it was not required to recertify its size following its acquisition by the other company. So, who was right?

Forward Slope, but not for the reason they were arguing.

It is a longstanding policy (as we discussed here) that a concern that certifies itself as small, at the time it submits its initial offer, remains small for the life of the contract per 13 C.F.R. 121.404(g). However, contracting officers are also permitted to request recertification of size, if desired, at the time of the task order offer. In that case, the size of the offeror at the time of the initial offer, including price for the task order, will be the size that applies.

In this situation, the contracting officer never requested recertification. In fact, that was even affirmed by the contracting officer during the Area Office’s investigation. However, the Area Office incorrectly applied 13 C.F.R. § 121.404(g) when it determined that Forward Slope’s size was to be determined at the time of its submission in response to the RFQ for the task order. There was no requirement that offerors for small business set-asides recertify at task order bid submission—whether in the MAC or in the task order RFQ—and SBA policy does not require recertification to the procuring agency (here, the Navy) unless the contracting officer requests recertification.

But wait, there’s more!

The regulation clearly states that after a merger or acquisition that affects size, the contractor must recertify its size. So how can a contractor be required to recertify, but not have the new size, if other than small, apply to the rest of the contract?

Well, there is a rule that both parties seemed to overlook. Way down in 13 C.F.R. § 121.404(g)(4), it states,

[I]f the Multiple Award Contract was set-aside for small businesses, partially set-aside for small businesses, or reserved for small business, then in the case of a contract novation, or merger or acquisition where no novation is required, where the resulting contractor is now other than small, the agency cannot count any new or pending orders issued pursuant to the contract, from that point forward, towards its small business goals.

The distinguishing point here, and the point that OHA’s decision turned on, was that the requirement to recertify as a result of a merger, sale, or acquisition, per 13 C.F.R. § 121.404(g)(2) is not the same as a contracting officer’s request for size recertification for a task order under a MAC, as discussed in 13 C.F.R. 121.404(g)(4). 13 C.F.R. § 121.404(g)(4) only requires recertification on a MAC when the contracting officer requests. Therefore, because SBA rules allow an awardee to count as small for the first five years following the initial offer for the MAC, Forward Slope was still considered small for award eligibility purposes. This meant that Forward Slope would be eligible for small business awards under the MAC for five years from initial offer. A very interesting—and important—distinction to keep in your back pocket.

So, what have we learned?

  1. You can be eligible for small business task order awards on MACs, even when the agency cannot count the contract as one to a small business; and
  2. Task orders on MACs will continue to count as awards to small businesses following an acquisition, unless the contracting officer requests a recertification in relation to a task order under the MAC.

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