Type: Law Bulletins
Date: 11/11/2011

Recent Small Business Regulation Issues

The Small Business Administration (“SBA”) proposed two rules, one on October 5, 2011 and the other just two days later, regarding the SBA’s oversight of small business subcontractors and preference program participants.

One of the proposed rules identifies additional penalties for those companies that misrepresent their size or status on certain small business set-aside procurements. The SBA proposes to establish a presumption of loss equal to the value of the contract, or other instrument, when a concern willfully seeks and receives a federal government award by misrepresentation of its size or socioeconomic status. In addition to the presumption of loss, the SBA may pursue debarment, suspension, or a False Claims Act action.

The SBA will make the determination of misrepresentation based on the concern’s own certifications, or lack thereof, as the proposed rule requires a company applying for the 8(a) Business Development or HubZone program to certify that it meets the size and status requirements of that program.

Further, the concern must annually certify its size or status. Those that do not make the annual certification shall no longer be identified as small or some other socioeconomic status, until the representation is updated.

Finally, each concern submitting a response to a solicitation, bid, or application for a Federal contract, or other instrument, which is set aside, reserved, or otherwise classified as intended for award to small disadvantaged business concerns, will be deemed certified as to its size or status.

Comments on this proposed rule were to be originally received by November 7, 2011, but due to immense interest, the comment period is reopening for an additional 30 days. Comments now must be received on or before December 8, 2011.

Another important small business change affects the Department of Labor’s “Final Rule on Nondisplacement of Qualified Workers Under Service Contracts,” which we discussed in our September 13, 2011 ebulletin

The final rule states that a contractor who wins a follow-on services contract for performance of the same or similar services at the same location, and its subcontractors, must offer workers employed under the predecessor contract (other than managerial and supervisory employees) the right of first refusal of employment under the successor contract in positions for which they are qualified if their employment would otherwise be terminated as a result of the award of a successor contract to another company.

The SBA had concerns for HUBZone businesses due to the requirement needing 35% of their workforce to live in a HUBZone area. If the predecessor contractor was not a HUBZone company, it could potentially put the current HUBZone contractor in danger of not meeting the residency requirement. The same would be true if a current HUBZone firm lost a contract. They would be at risk of losing their workforce and potentially their HUBZone status. The Labor Department recognized this conflict and agreed that their final rule should not change any current laws or requirements.

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