While the end of the year can be quiet in government circles, the closing months of 2015 saw a number of decisions and proposed rules affecting small business contractors that should be borne in mind as the new year begins. Drawing on those developments, here are a few New Year's resolutions that small business contractors should consider as they plan for 2016:
- Resolve to provide input on new certification rules for WOSBs and EDWOSBs. The SBA has asked the contracting community for its thoughts on how best to implement changes to the certification rules for women-owned and economically disadvantaged women-owned small businesses. Of particular note, the 2015 National Defense Authorization Act removed statutory authority for self-certification, and WOSBs and EDWOSBs will be required to obtain certification once the SBA settles on new rules. Comments are due to the SBA by February 16, 2016, and may be submitted through regulations.gov under rulemaking number RIN-3245-AG75.
- Resolve to review governing documents to avoid affiliation risks. The SBA's Office of Hearings and Appeals (OHA) found that a small business limited liability company was affiliated with a corporationholding a 48.54% interest in the LLC because the LLC's operating agreement required approval of 75% of the ownership to undertake a number of actions. OHA found that this arrangement gave the corporation the power to block ordinary actions, or "negative control" over the LLC, and that the two therefore were affiliated, resulting in a finding that the LLC was not small under the relevant NAICS code. This decision is just one of many reminding small businesses to review their ownership and management structures to ensure that there are no affiliation risks lurking that could endanger contract awards.
- Resolve to clarify the applicable size standard. In another decision, OHA affirmed a decision that a construction company was not small despite the company's argument that the NAICS code called for a higher size standard than stated in the solicitation. The contracting officer had assigned NAICS code 236220, with a $33.5 million size standard, to the solicitation. The size standard for NAICS code 236220 was increased to $36.5 million after issuance of the solicitation, but the contracting officer did not amend the solicitation to reflect the increased size standard. OHA found that in the absence of a solicitation amendment, the applicable size standard was $33.5 million. This decision provides a valuable lesson for small business contractors: the size standard as stated in the solicitation governs, and if the size standard for the relevant NAICS code changes, contractors may want to clarify the size standard applicable to the solicitation with the contracting officer.