As we dive into the next decade of small business matters (hello 2020!), we wanted to briefly review the key small business regulatory changes that took place at the end of 2019. We also want to discuss a December 2019 decision from the U.S. Small Business Administration's (SBA) Office of Hearings and Appeals (OHA) and a decision from the U.S. Government Accountability Office (GAO) that remind contractors of the importance of understanding and adhering to the basics" in filing protests at these forums.

End-of-Year 2019 Regulatory Changes

The end of 2019 saw a flurry of proposed and final small business regulatory changes. Below are two of the most notable changes that will impact contractors in the new year.

First, as we previously discussed in November 2019, the SBA issued a proposed rule that would impact multiple small business programs. Importantly, the proposed rule seeks to:

  • consolidate the Mentor-Protégé (M-P) Programs by eliminating the 8(a) M-P Program and allowing any small business – including 8(a) concerns – to participate in the All Small M-P Program; if implemented, this proposed change will eliminate the requirement for the SBA to approve joint venture agreements between a mentor and 8(a) protégé
  • consider whether to implement a size limitation on mentor eligibility following the SBA's receipt of suggestions that elimination of very large contractors from the pool of eligible mentors would benefit midsize contractors' ability to compete
  • eliminate the three-contract limit for joint ventures between small businesses or parties to an approved M-P agreement for two years following receipt of its first award (which includes a novated contract)
  • require the recertification of a contractor's size status under unrestricted Multiple Award Contracts (MAC) for:
    • (a) task order submissions of small business set-aside orders under an unrestricted MAC
    • (b) task order submissions for set-aside orders differing from the socioeconomic status of the underlying set-aside MAC
  • authorize size protests relating to the new proposed recertification of a contractor's size status discussed above

Comments were due on the proposed rule by Jan. 17, 2020. We will continue to monitor the proposed rule and will provide updates as needed. In the meantime, we have made available a comprehensive section-by-section summary of the SBA's proposed rule.

Second, in December 2019, the SBA issued the final rule implementing the Small Business Runway Extension Act of 2018. As we previously discussed, the SBA changed its regulations on the calculation of average annual receipts for all of the SBA's receipts-based size standards, and for other agencies' proposed receipts-based size standards, from a three-year averaging period to a five-year averaging period. Notably, for all programs other than the SBA Business Loan and Disaster Loan Programs, the SBA implemented a transition period until Jan. 6, 2022, allowing firms to choose either a three-year averaging period or a five-year averaging period for calculating average annual receipts for size standards purposes.

The rule became effective on Jan. 6, 2020.

December 2019 Decisions: Back to the Basics

OHA and the GAO issued these two noteworthy decisions in December 2019:

  • OHA held it had no authority or discretion to accept untimely filings, regardless of mitigating circumstances. See Size Appeal of Mid-Continent Group, LLC, SBA No. SIZ-6038 (2019).
  • GAO dismissed (in part) a protest challenging the merits of SBA's certificate of competency (COC) decision as being outside the scope of GAO's review. See Trade West Construction, Inc., B-418252, 2019 WL 6837973 (Comp. Gen. Dec. 10, 2019).

These decisions serve as important reminders of remembering the "basics" of filing protests – i.e., timeliness and filing at the appropriate forum. Each decision is discussed briefly below.

Size Appeal of Mid-Continent Group, LLC, SBA No. SIZ-6038 (2019)

In Size Appeal of Mid-Continent Group, LLC, SBA No. SIZ-6038 (2019), OHA stressed the importance (and strictness) of filing size protests within 15 days of a size determination – regardless of the extenuating circumstances.

In Mid-Continent Group, OHA dismissed a size appeal as being untimely when a protester filed its protest more than 15 days after receiving the SBA Area Office's determination. Id. at 2 (citing 13 C.F.R. § 134.304(a)). The protester argued that it filed the size appeal on time but that OHA did not receive the filing due to a poor internet connection. Id. at 1. Protester's counsel then suffered "a tragic incident involving ... [a] family member" that "caused [counsel's] ... failure to follow up with a call to insure the filing was received." Id. Protester alleged that OHA's consideration of the appeal would not result in prejudice because the filing was only one day late and would be the equivalent of a default judgment based on a technicality. Id. at 2. Protester requested OHA to find the one-day delay an "excusable neglect" on the firm's behalf and to extend the deadline to preserve the appeal for the small business protester. Id.

OHA acknowledged the "unfortunate circumstances" that played a part in the late filing but determined that it did not have the discretion to accept a late appeal. In making its ruling, OHA relied on the "clear" language of the regulation, which provides that "[a]n untimely appeal will be dismissed. 13 C.F.R. § 134.304(c)(emphasis supplied)." Id. OHA determined that "[t]he regulation thus affords a Judge no discretion in the case of an untimely size appeal, and the Judge must dismiss it." Id.

OHA's decision in Mid-Continent Group serves as reminder of the importance of adhering to filing deadlines in size protests. While a filing deadline seems like a "basic" requirement to meet, this case highlights the types of extenuating circumstances that can create challenges in complying with such requirements. It is therefore imperative that contractors and their counsel aim to file as early as possible – and to ensure confirmation of receipt of any filing made.

Trade West Construction, Inc., B-418252, 2019 WL 6837973 (Comp. Gen. Dec. 10, 2019)

In Trade West, GAO rejected a protester's challenge to the SBA's refusal to issue it a COC for its proposal under an invitation to bid (IFB). Trade West, 2019 WL 6837973, at *1-3. A COC is the certificate issued by the SBA stating that the holder is responsible for the purpose of receiving and performing a specific government contract. See FAR § 19.601(a). GAO held that it only has the ability to review the SBA's decision not to issue a COC in two limited circumstances:

  • "[T]here is a showing that the COC denial resulted from possible bad faith on the part of the government official ..." Trade West, 2019 WL 6837973, at *3 (internal citations omitted).
  • "[F]rom a failure to consider vital information because of how information was presented to, or withheld from, the SBA by the procuring agency." Id.

The protester did not argue that either of these situations occurred and instead protested the merits of the SBA's COC decision. GAO accordingly dismissed these protest arguments and emphasized the "conclusive authority" of the SBA to review contracting officers' non-responsibility determinations.