On October 7, 2016, the Small Business Administration (SBA) issued a proposed rule in response to recent legislation authorizing the Office of Hearings and Appeals (OHA) to decide Petitions for Reconsideration of Size Standards. OHA now has the responsibility of reviewing petitions filed by parties adversely affected by a new, revised or modified size standard. Under the proposed rule, the SBA may be forced to re-evaluate its size determination if the petitioner can demonstrate that the decision to change or establish the size standard was not in accordance with the law.
The new legislation grants OHA and businesses greater involvement in setting SBA size standards. The right to file a petition arises only where the SBA has issued a final rule that modifies, revises or creates a new size standard – making existing and proposed size standards exempt from challenge. Further, only businesses that have been “adversely affected” have standing to file a petition in the first place. A party is deemed “adversely affected” if it conducts business in the industry associated with the challenged size standard, and it either qualified as a small business prior to the modified size standard, or it now qualifies as a small business as a result of the size standard determination.
Petitioners wishing to challenge the size standard have 30 calendar days after the SBA publishes the size standard in the Federal Registrar. A complete petition must include a copy of the final rule that changes or creates a size standard, an argument explaining the challenge to the rule, a copy of comments submitted during the proposed stages of the rule (or conversely a statement that no comments were submitted), and contact information of the petitioner or his attorney. While multiple size standards may be challenged in a single petition, each must satisfy these requirements. Following the filing, the SBA will be notified of the petition and will have seven calendar days to produce the complete administrative record on the final rule.
Once all the documents are submitted, OHA has 45 calendar days to issue its decision on the petition. In analyzing the protest, as with the procedures for size appeals, OHA will predominantly rely on the pleadings submitted in relation to the petition. Discovery and oral hearings will typically not be part of the evaluation of a protest unless OHA establishes there is good cause for such evidence. In its review, OHA must determine whether the petitioner has satisfied the burden of proof in illustrating that the administrator’s decision to revise, modify or establish a size standard was made arbitrarily, capriciously, through an abuse of discretion, or in a way not in accordance with the law.
If OHA decides to grant the petition and finds that the SBA improperly revised or modified the size standard, the SBA is required to revert back to the standard prior to the final rule. On the other hand, when the issue is over a newly created size standard, the SBA can maintain the contested rule while it is in the process of revising its size determination. Conversely, if the SBA believes OHA’s decision is contrary to the law, the SBA Chief Human Capital Officer, the General Counsel or the Inspector General may file a Petition for Review of the OHA decision with the Deputy Administrator.
The SBA is accepting written comments in response to the proposed rule through www.regulations.gov until December 6, 2016. Alternatively, comments may also be mailed to Delorice Price Ford, Assistant Administrator for Hearings and Appeals, U.S. Small Business Administration, 409 Third Street SW, Washington, D.C. 20416.