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Duration of Validity of Small Business Representation


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As I was giving some training this morning, I addressed a contractor's requirement to rerepresent its business size when certain events occur (e.g. merger, novation) or after 5 years. I told everyone not to worry about recertification because my agency seldom administers contracts going past 5 years or discovers a merger or novation. I was under the impression that the 5 year rule was iron clad. Now, I am not sure that it is.

I walked back to my desk, went to WIFCON and read a newly issued COFC decision posted by Bob - Metters Industries, Inc. v. U. S., no. 13-116C, February 27, 2013. The decision includes this sentence: "Although under a provision of the Federal Acquisition Regulation (“FAR”), “[o]rdering activities should rely on the small business representations made by schedule contractors at the contract level,” 48 C.F.R. § 8.405-5( B) (2012), the SBA regulations recognize the discretion of a contracting officer to require schedule contract holders to show that they are still small when placing an order."

The COFC ruling appears to say that a contracting officer could, at his or her own discretion, require contractors to rerepresent each time he or she does a FAR 8 action. The SBA reg cited in the decision also seems to run head on into FAR 19.301-2( B):

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( B) A contractor that represented itself as a small business concern before contract award must rerepresent its size status for the North American Industry Classification System (NAICS) code in the contract upon the occurrence of any of the following:

(1) Within 30 days after execution of a novation agreement or within 30 days after modification of the contract to include the clause at 52.219-28, Post-Award Small Business Program Rerepresentation, if the novation agreement was executed prior to inclusion of this clause in the contract.

(2) Within 30 days after a merger or acquisition of the contractor that does not require novation or within 30 days after modification of the contract to include the clause at 52.219-28, Post-Award Small Business Program Rerepresentation, if the merger or acquisition occurred prior to inclusion of this clause in the contract.

(3) For long-term contracts—

(i) Within 60 to 120 days prior to the end of the fifth year of the contract; and

(ii) Within 60 to 120 days prior to the date specified in the contract for exercising any option thereafter.

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Am I interpreting the decision correctly in its application to FAR 8 and 16.5 actions?

While the CO has "discretion" do you think the CO must justify why he or she is not requiring a contractor to rerepresent when issuing a RFQ under FAR 8 or 16?

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Guest Vern Edwards

I thought that the only consequence of representation was its effect on an agency's ability to take credit toward its small business goals. See FAR 19.301-2(d). I did not think that it affected a contractor's eligibility for orders or for options. Am I wrong about that?

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I thought that the only consequence of representation was its effect on an agency's ability to take credit toward its small business goals. See FAR 19.301-2(d). I did not think that it affected a contractor's eligibility for orders or for options. Am I wrong about that?

The METTERS INDUSTRIES, INC. decision involves the application of a size standard to a task order under a long term contract. It involves a size determination for purpose of award, not of reporting.

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This case comes before the Court on plaintiff Metters Industries, Inc.’s motion for a preliminary injunction. In November, Metters was determined to be the “apparent awardee” of a task order for logistics support services to be issued by the U.S. Army Aviation and Missile Command (“AMCOM” or “agency”). See Ex. H to Pl.’s Mem. (“Pl.’s Ex.”) at 1; App. to Def.’s Opp’n (“Def.’s App.”) at A15. The task order was “a total set-aside for small business concerns,” solicited from holders of U.S. Army “Expedited Professional Engineering Support Services” (“EXPRESS”) Blanket Purchase Agreements (“BPAs”). Pl.’s Ex. B at 1; Pl.’s Ex. L at 1; Def.’s App. at A2. In response to the agency’s request for a formal size determination, on January 25, 2013, the Area II Office of Government Contracting (“Area Office”) of the U.S. Small Business Administration (“SBA”) issued a determination that the plaintiff was “not a small business concern for the subject procurement.” Pl.’s Ex. J at 11; Def.’s App. at A30.

The plaintiff has appealed that determination to SBA’s Office of Hearings and Appeals (“OHA”), see Pl.’s Ex. A, and has filed this bid protest seeking to enjoin AMCOM from awarding the task order to another contractor before OHA decides its appeal. At first blush, it did not appear to the Court that the plaintiff’s appeal had much likelihood of success. The North American Industry Classification System (“NAICS”) code for the task order limits the size of eligible contractors at $35.5 million in annual receipts, a level beyond which Metters has admittedly grown. See Compl. ¶ 20; Pl.’s Ex. F at 1; Pl.’s Ex. G at 2. And the Task Order Request for Quotations (“TORFQ”) advises offerors “that the quotation contents require you to provide the socio-economic status for yourself” and that “submission of this information serves as confirmation that the status shown is the same as that identified in the applicable GSA schedule . . . as of the date of your task order quotation submission.” Pl.’s Ex. B at 1; Def.’s App. at A2.

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Guest Vern Edwards

I understand what the decision is about. I just wanted to know the consequences of rerepresentation under 19.301-2.,

As for the decision, I presume that a CO can set aside an order under FAR 16.505 for small businesses that are small businesses at the time of solicitation for the order, and require competitors to rerepresent their status, as long as the contract permits. Why not? I don't know of any regulation that prohibits it. I presume that the CO would have established the government's right to do that by a contract term. I don't know about GSA Schedules. I gave up on understanding those rules some time ago.

I presume that the justification would be to give small business a chance at the order.

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This is an example of where contracting officers cannot rely only on the FAR when dealing with some topics such as small business contracting and the Service Contract Act. Instead, you have to look at the regulations of the agencies with primary jurisdiction in regard to implementation of specific statutes. Although the SBA's rules were changed to specifically give contracting officers the discretion to request a size certification before award of any order under a contract, OHA decisions had long recognized this ability. The earliest OHA decision that I remember on this subject was around 2002 and involved the award of a BPA under a GSA schedule contract. The contracting officer required recertification of size status before award of the BPA and a contractor that was small when it received its contract but was no longer small protested this requirement. OHA affirmed the contracting officer's requirement and I know that agencies have been following this practice ever since without any FAR coverage or explicit coverage in SBA rules.

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  • 2 weeks later...

I'm belatedly throwing in my two cents here. This is a very important case, and it hits on a number of issues that I've been grappling with recently. The re-representation definitely has bearing on whether an offeror can qualify as a small business (and thus be eligible to bid). GSA Schedules can last up to 20 years with all options, for example, so if a requirement is set aside for small businesses on a GSA Schedule, you don't want large companies bidding on it just because they were small 15 years ago when they originally received the Schedule. Consequently, the small business has to re-represent their size status on a long-term contract at least every 5 years, among other qualifying events. So even if a company has exceeded the applicable NAICS code on a long-term contract, they can continue to receive orders as a small business based on their representations at the IDIQ level, unless an ordering requires re-certification at the task order level, which they have the discretion to do but are not required to do. This is a wrinkle on the general rule that if a company is small at the time it submits its initial offer on a contract, it remains a small business throughout the life of that contract, including all options, for purposes of performing that contract.

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Guest Vern Edwards

GSA Schedules can last up to 20 years with all options, for example, so if a requirement is set aside for small businesses on a GSA Schedule, you don't want large companies bidding on it just because they were small 15 years ago when they originally received the Schedule. Consequently, the small business has to re-represent their size status on a long-term contract at least every 5 years, among other qualifying events.

I'm not sure what you meant by "consequently," but it is my understanding that the recertification requirement was introduced in order to get more accurate reporting about awards to small businesses, and not for any other reason. It was not introduced to limit eligibility under an existing contract in any way. Retread's point was that a CO can ask for certification at any time prior to the required recertification If he or she wants to set an order aside for firms that are currently small.

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Let me explain why representation is a crucial component of eligibility to bid on a small business set-aside.

First, It goes back to the definition of a small business:

SBA's size standards define whether a business entity is small and, thus, eligible for Government programs and preferences reserved for "small business" concerns. Size standards have been established for types of economic activity, or industry, generally under the North American Industry Classification System. (NAICS) (13 CFR 121.101). A concern must not exceed the size standard for the NAICS code in the solicitation. (13 CFR 121.402)

At what point does a small business need to meet the applicable size standard? "SBA determines the size status of a concern, including its affiliates, as of the date the concern submits a written self-certification that it is small to the procuring activity as part of its initial offer (or other formal response to a solicitation) which includes price." (13 CFR § 121.404(a))

Generally, once represented as small at the time of initial offer, the offeror remains small throughout the life of the contract: "A concern that qualified as a small business at the time it receives a contract is considered a small business throughout the life of that contract. Where a concern grows to be other than small, the procuring agency may exercise options and still count the award as an award to a small business. (13 CFR § 121.404(g))

The exception to this for long-term contracts (more than 5 years), which require an offeror to re-represent their size status every 5 years. (See 13 CFR § 121.404(g)). In effect, a long-term contract is treated as a series of individual 5-year contracts for small business representation purposes.

On an indefinite delivery contract, the KO may but is not required to ask for re-representation at the task order level. But if he does so, it must be "explicit": "Where the contracting officer explicitly requires concerns to recertify their size status in response to a solicitation for an order, SBA will determine size as of the date the concern submits its self-representation as part of its response to the solicitation for the order. (13 CFR § 121.404(g)(3)(v))

In the Metters case before the COFC, it appears that one of the crucial issues is whether or not the contracting officer "explicitly required" re-certification at the task order level. If he did not, the plaintiff should qualify as a small business, and the SBA erred in determining that they were other than small.

In short, representation (and re-representation) goes to the question of whether an offeror is qualified to bid, and it is a protestable issue.

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Guest Vern Edwards

Retread already wrote about that. I didn't ask you to tell me what I already know. I merely commented on your use (or misuse) of the word "consequently."

We all understand that if a CO sets an order under an IDIQ aside for small businesses and that if a company that won the contract as a small business is no longer a small business, then it is not eligible for the order that has been set aside. The implications of recertification in that situation are obvious.

I was pointing out that the way you wrote your previous post made it sound like recertification was introduced in order to affect eligibility for future orders. It was not. It was introduced to stop agencies from continuing to report an award to a contractor as an award to a small business when the company is in fact no longer a small business.

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