Congress in the National Defense Authorization Act of 2013 amended the Small Business Act to provide that penalties created under 15 USC 645(a) for misrepresentation of a firm as a small business concern do not apply to individuals or firms that act in good faith reliance upon small business status advisory opinions they receive from Small Business Development Centers (SBDCs) or Procurement Technical Assistance Centers (PTACs). In addition, the Small Business Act was amended to give responsibility for reviewing, accepting or rejecting these small business status advisory opinions to the SBA Office of General Counsel. The Small Business Act was further amended to require that the SBA promulgate regulations to implement this safe harbor provision.

On June 25, 2014 the SBA published its proposed rule in the Federal Register designed to implement the statutory direction.

The new rule will not apply to all small businesses, but only to those that represent themselves as being small for purposes of federal procurement opportunities. The safe harbor provisions of the proposed rule will only affect those firms that incorrectly claim status as small business concerns after obtaining small business status advisory opinions from SBDCs or PTACs.

The rule describes a small business status advisory opinion as a written opinion issued by either the Small Business Development Center or a Procurement Technical Assistance Center which concludes that a firm is entitled to represent itself as a small business concern for purposes of federal government procurement opportunities. The rule further provides that an SBDC or PTAC must submit a copy of each small business status advisory opinion it issues to the Associate General Counsel, Office of Procurement Law, U.S. Small Business Administration, Attn: Small Business Status Advisory Opinion. The small business status advisory opinion must:

  1. Include the name, address, Employer Identification Number or Dun & Bradstreet Number, and one or more principals of the covered concern.
  2. Identify the individual NAICS code(s) and accompanying size standard(s) to which the advisory opinion applies.
  3. A determination that the covered concern does not exceed the size standard(s) dated and signed by a counselor or similarly qualified employee of an SBDC or PTAC.
  4. Include, as an attachment, copies of the evidence provided by the covered concern to the SBDC or PTAC clearly documenting its annual receipts and/or number of employees.
  5. Include, as an attachment, a written statement signed by at least one principal of the concern affirming that all the information provided to the SBDC or PTAC for the purpose of obtaining the small business status advisory opinion is, to the best of his/her knowledge, true, accurate, and complete.

Unless the SBA requests a formal size determination, the SBA will decide within ten business days of receiving a small business status advisory opinion to accept or reject it. The SBC will then provide written notification of that decision to the SBDC or PTAC that issued the small business status advisory opinion as well as to the subject business.

The rule provides that a concern that receives a small business status advisory opinion holding that it does not exceed the applicable size standard may rely upon that determination for purposes of responding to federal procurement opportunities from the date that it is issued unless and until an advisory opinion is rejected by the SBA.

Comments to the proposed rule are due within 60 days from June 25.