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Desparado

Size standard and options

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Situation (with fictional dollar amounts)

An award is to be made to a company that is currently a Small Business ($5M in gross sales) when compared to the standard ($7M in gross sales). The solicitation was released as a Small Business Set-Aside. The contract is a Requirements-type contract that, if all options are exercised, will cause the gross sales amount to be $8.5M per year (base+4).

Before someone asks why it was set-aside when the annual amount will be $8.5M, the IGE was way off (big surprise) and it was thought that the amount would only be $6M.

Question: When it comes time to exercise the Options, is the Contracting Officer required to annually verify that the business still qualifies as a Small Business before it can pick up an Option? Or is the verification only at time of award of the base contract? Can this contract be awarded knowing that the amount is likely to exceed the size standard?

Thank you.

B)

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I don't believe this has been changed despite a lot of controversy. If the company receiving the award is small, you can continue to exercise options despite it outgrowing the size standard later on.

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I don't believe this has been changed despite a lot of controversy. If the company receiving the award is small, you can continue to exercise options despite it outgrowing the size standard later on.

Well, wouldn't that defeat one of the purposes of setting things aside? To help the small business grow. If this is the case, a small business could never receive an award for a contract that would put them out of the small category... Don't most small businesses wish to make more money? Just thinking out loud.

I tried to do some searching through decisions, but can't find anything that references this specifically.

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Are you that certain that you will fully utilize the capacity of each year? You maybe worried about nothing.

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I had to research this because I knew some change was made. 13 CFR was amended effective June 20, 2007 that requires the contractor to recertify their size for long term contracts (those exceeding five years in duration.) The contractor must certify their size statuus at the end of five years and prior to exercise of each option after that time. Contracts aren't affected and options may continue to be exercised if the contractor becomes large. However the agency can do longer recieved credit for a small business award once that happens.

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Guest carl r culham

Just a couple of comments. They do not change the general conclusions contained in this thread but may be useful to anyone reading the thread in the future.

The measure is "Annual Receipts" which is defined in FAR part 19.1.

Representation and rerepresetnation is discussed in FAR 19.3.

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Just a couple of comments. They do not change the general conclusions contained in this thread but may be useful to anyone reading the thread in the future.

The measure is "Annual Receipts" which is defined in FAR part 19.1.

Representation and rerepresetnation is discussed in FAR 19.3.

Just an addemdum to what Carl stated, for revenue based size standards, size is usually determined by the contractor's average annual receipts for the last three fiscal years of the contractor as shown on the contractor's tax returns for those years. Also, what says you cannot or should not award a small business set-aside contract that exceeds the size standard for the NAICS assigned the procurement?

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Also, what says you cannot or should not award a small business set-aside contract that exceeds the size standard for the NAICS assigned the procurement?

Nothing. The whole idea is to make small businesses into big businesses.

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I had to research this because I knew some change was made. 13 CFR was amended effective June 20, 2007 that requires the contractor to recertify their size for long term contracts (those exceeding five years in duration.) The contractor must certify their size statuus at the end of five years and prior to exercise of each option after that time. Contracts aren't affected and options may continue to be exercised if the contractor becomes large. However the agency can do longer recieved credit for a small business award once that happens.

Formerfed. I tried to find that amendment to 13 CFR but was unsuccessful. Do you have a link to it by chance?

Thank you!

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Nothing. The whole idea is to make small businesses into big businesses.

Vern, I should have been more precise in my question. It was directed to Desparado as the second paragraph in his/her initial post seemed to indicate some concerns in this regard. If (s)he did have such concerns, I hope your answer removes them.

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Desparado,

Just to add more on Retreadfed and Vern said - It's absolutely fine to do a small business setaside with the anticipated value of the contract larger than the size code. All you do with the size code is restrict the competition to firms that are "small" at that time per the size standard.

I worked on an acquisition for IT support (network, help desk, software support, PC/laptop deployment, etc.) with an annual value of $50 million. That's roughly three times the size of the NAICS code used. We talked with several small businesses prior to finalizing the acquisition strategy and found many small companies capable and qualified to do the work. They all indicated they need to subcontract portions of the work to other firms but we felt a number could perform.

One of the things we looked for in the evaluation was their ability and experience to manage the work of other companies but that's fine. The important thing is they could provide the needed resources and had evidence they could perform.

So the company that won this likely will grow to a "large" business status in a few years. The value of this contract combined with their other business will cause their average receipts over three years to exceed the NAICS size standard.

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