Tag Archives: small business set-asides

SBA OHA Provides Clarity on the Nonmanufacturer Rule

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To be eligible for a small business set-aside procurement seeking a manufactured product, an offeror has to either be the product’s manufacturer or otherwise qualify under the nonmanufacturer rule.

Determining whether a business qualifies—either as the manufacturer or nonmanufacturer—can be a fact-intensive and confusing task. But it’s a vitally important one, as the penalty for not qualifying can be the loss of an awarded contract.

Recently, however, the SBA Office of Hearings and Appeals provided important clarity on how a small business might qualify as a nonmanufacturer.

Let’s take a look.

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GAO: 8(a) Sole-Source Set-Aside Proper Notwithstanding Prior Intent

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As a general rule, the SBA is prohibited from accepting a solicitation into the 8(a) Business Development Program if the procuring agency previously expressed publicly a clear intent to award the contract as a small business set-aside.

On its face, this restriction seems clear. In practice, it can be anything but—the inquiry usually focuses on whether the agency’s prior intent was definitive enough to count.

In SKC, LLC, B-415151 (Nov. 20, 2017), GAO provided important clarity about this restriction.

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Agency Faces Sanctions For Backdating Market Research

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An agency backdated a market research memorandum to justify its set-aside decision–and when the backdating came to light, the Court of Federal Claims was none too pleased.

In a recent decision, the Court held that the backdated memorandum resulted in a “corrupted record,” which undermined a “fair and equitable procurement process,” and agreed that the agency’s self-imposed sanctions were appropriate.

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GAO: No Set Aside Required Where Offerors’ Prices Too High

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An agency was justified in canceling a small business set-aside solicitation–and reissuing the solicitation on an unrestricted basis–where the agency determined that the prices offered by small businesses were too high.

In a recent bid protest decision, the GAO confirmed that while the FAR’s “rule of two” set-aside requirement provides a powerful and important preference for small businesses, it doesn’t require an agency to pay more than fair market value for products or services.

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SBA OHA: Foreign Subsidiary Was “Small Business”

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When many people think of small business federal contractors, they probably picture a local business and not a subsidiary of a foreign entity. But this image isn’t always accurate—small business federal contractors don’t often neatly fit in the mold of local, mom-and-pop shops.

The SBA’s small business regulations confirm this to be true. Indeed, to qualify as a small business for most federal contracting purposes, a company can be a subsidiary of a foreign firm—so long as certain criteria are met. This point was recently affirmed by the SBA Office of Hearings and Appeals, when it found that a domestic affiliate of an international conglomerate qualified as a small business.

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SBA Insists That Small Business Rule Of Two Applies To Some FSS Orders

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Earlier this year, we wrote about an interesting issue brewing in federal contracting: whether the logic behind the Supreme Court’s June 2016 decision in Kingdomware Technologies means that the Small Business Act’s rule of two is mandatory for acquisitions under Federal Supply Schedules. In other words, does the Small Business Act require agencies to set aside orders under the FSS when two or more small business are likely to submit competitive offers?

The SBA believes that the rule of two (see FAR 19.502-2) is mandatory for such orders. GAO has disagreed, saying instead that the Small Business Jobs Act of 2010 and the exclusion of FSS contracts from the application of FAR Part 19 (see FAR 8.405-5(a)(1)(i)) make the small business rule of two discretionary for these orders.

This conflict—GAO believing the Small Business Act’s rule of two is discretionary for orders placed under multiple-award contracts; SBA believing it is mandatory—has existed for several years. But now the SBA is using the Supreme Court’s recent decision to bolster its case: according to a recent SBA internal memorandum, Kingdomware requires the small business rule of two to be given mandatory effect, at least with respect to orders valued between $3,500 and $150,000.

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Does Kingdomware Apply To Non-VA FSS Orders?

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Earlier this year, the United States Supreme Court issued its decision in Kingdomware Technologies v. United States. As we’ve noted, this case was a monumental win for veteran-owned small businesses—it requires the Department of Veterans Affairs to set-aside solicitations for SDVOSBs or VOSBs where two or more such offerors will submit a proposal at a fair and reasonable price, even if that solicitation is issued under the Federal Supply Schedule.

A recent GAO decision suggests, however, that Kingdomware’s impact could be felt beyond the world of VA procurements. Indeed, the Supreme Court’s rationale in Kingdomware might compel every agency to set aside any FSS order (or any other order, for that matter) valued between $3,000 and $150,000.

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