WOSB Self-Certification Elimination: The SBA Weighs In

The SBA has acknowledged that Congress eliminated WOSB self-certification in the 2015 NDAA–but suggests that WOSB self-certification may continue until the SBA adopts a regulatory framework for a formal certification program.

In a proposed rule released today, the SBA adopts a pragmatic approach that nonetheless may be legally problematic given that Congress did not authorize a continuation of WOSB self-certification pending SBA regulatory action.

The SBA’s proposed rule focuses primarily on the new WOSB sole source program.  However, the SBA also acknowledges that the 2015 NDAA eliminated WOSB self-certification.  The SBA writes:

SBA recognizes that Section 825 also created a requirement that a firm be certified as a WOSB or EDWOSB by a Federal Agency, a State government, SBA, or a national certifying entity approved by SBA. This statutory requirement appears to apply to both sole source and set asides under the WOSB Program, and may require substantial resources. Establishing a certification requirement and process will require a more prolonged rulemaking before SBA can establish such a program. In our view, there is no evidence that Congress intended to halt the existing WOSB Program until such time as SBA establishes the infrastructure and issues regulations implementing the statutory certification requirement. Instead, we maintain that the new WOSB sole source authority can and should be implemented as quickly as possible, using existing program rules and procedures, while SBA proceeds with implementing the certification requirement through a separate rulemaking.

I admit that I am sympathetic to the SBA, which may have been caught off-guard (as was I) by Congress’s elimination of WOSB self-certification.  As I noted in my December post on the topic, the WOSB self-certification provision was not included in the original NDAA bills passed by either the House or Senate.  Instead, it was adopted at the last minute, and with little or no debate, as part of the final conference version of the 2015 NDAA.  The SBA is also correct that it likely would require substantial resources to adopt a SBA-run WOSB self-certification program–which I believe would be the best approach over the long run.

That said, there are two potential problems with the SBA’s train of thought.

First, the SBA does not acknowledge that there is already a statutorily-compliant WOSB certification process in place: the third-party WOSB certification process described on the SBA’s own website.  These organizations are “national certifying [entities] approved by SBA,” and are presently able to certify WOSBs and EDWOSBs.  Therefore, while it may be preferable for the SBA to run the certification program now that certification is required, it is not the case (as the SBA suggests) that the elimination of self-certification would require a “halt” to the WOSB program until the SBA develops new infrastructure.

Second, the SBA’s suggestion that self-certification may continue pending the SBA’s regulatory action is inconsistent with the 2015 NDAA itself.  Nothing in the NDAA suggests that self-certification may remain in place until the SBA takes action.  As the Supreme Court itself has written, “it is well established that, absent a clear direction by Congress to the contrary, a law takes effect on the date of its enactment.”  Although it might have been wise for Congress to phase out WOSB self-certification over time, Congress did not do so.  Instead, the NDAA simply deleted the statutory language allowing for self-certification.  As a result, the Small Business Act–the statute under which the SBA derives its authority–no longer authorizes WOSB self-certification.  In my mind, it is very questionable whether the government still has authority to accept WOSB self-certifications in the absence of a statutory authorization.

I applaud the SBA’s decision to publicly acknowledge the elimination of WOSB self-certification, as well as its apparent willingness to consider major changes (perhaps to include a formal SBA WOSB certification) in response to Congressional action.  But I am concerned that the SBA’s apparent backing of continued self-certification may lack a solid legal foundation, and could result in adverse consequences for WOSBs who rely on the SBA’s statements.  If I was in charge of a WOSB (which obviously I am not, but bear with me here), I would strongly consider third-party certification through one of the SBA’s approved certifiers, just to be on the safe side.

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