On 2 November 2011, the Federal Acquisition Regulation (FAR) Council published an interim rule that allows federal agencies to set aside task and delivery orders placed under a multiple-award contract (MAC), such a GSA Federal Supply Schedule (FSS) contract, for small businesses or any small business subcategory (i.e., women-owned, service-disabled veteran-owned, 8(a), HUBZone). In addition, for small businesses or any small business subcategory, agencies can now set aside parts of a MAC, or reserve awards under full and open multiple-award procurements. The new regulation took effect immediately, amending relevant provisions in the FAR to implement Section 1331 of the Small Business Jobs Act of 2010.
New opportunities for small businesses
Although the new set-aside authority is discretionary, opportunities for small businesses in the federal marketplace are likely to significantly increase as a result of the interim rule, as agencies have increasingly used MACs in recent years and must meet annual small business contracting goals. Federal agencies are now expected to identify existing and prospective MACs with small business holders where order set-asides may be appropriate, and to maximize opportunities for small businesses by using order set-asides under the FSS program. The interim rule encourages contracting officers to modify existing MACs to allow for set-aside orders if the outstanding period of performance exceeds six months and the amount of work or number of orders remaining under the MAC is substantial. More than 350,000 registered small business contractors can potentially benefit from the rule, according to the FAR Council.
Heightened compliance awareness for large and small contractors
Although the interim rule imposes no new compliance requirements, it may result in unexpected hurdles for both small and large contractors. For instance, new set-aside opportunities reserved for small businesses may increase the likelihood that their size or status is challenged in a protest to the Small Business Administration (SBA). In addition, although a small business certifies that it is small at the time it submits its offer for a contract, contracting officers have the discretion to ask small businesses to recertify their size as small at the time a task or delivery order is issued. For large companies, the new rule signifies the potential loss of federal sector work to small businesses. But it also raises important considerations for large firms that partner with or acquire small businesses. For example, when large and small businesses team on set-aside orders, both must ensure compliance with the applicable limitations on subcontracting to the large business. Likewise, with small government contractors being acquired at the fastest pace in over a decade, a large firm pursuing an acquisition should carefully consider if MAC set-aside contracts or orders would continue or terminate when the deal is consummated, as this may affect a small firm's value.
Although the interim rule went into effect immediately, the FAR Council is accepting written comments until 3 January 2012, which will be considered in developing a final rule. The interim rule may also be reshaped somewhat by the SBA, which is currently drafting a proposed rule to provide added detail on implementing the new MAC set-asides. The interim rule is available at www.gpo.gov/fdsys/pkg/FR-2011-11-02/pdf/2011-27786.pdf.