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Government Contractors

SBA Adjusts Size Standards

On June 12, 2014, the Small Business Administration (“SBA”) published an interim rule with request for comments in the Federal Register making inflation adjustments to its revenue-based size standards. The new size standards become effective on July 14, 2014. Parties interested in making comments on the interim rule must submit their comments by August 11, 2014.

SBA policy is to review its revenue-based size standards every five years to determine if an adjustment for inflation is warranted. This does not mean that the size standards will be revised every five years based upon specific criteria as the Truth in Negotiations Act threshold is. Instead, SBA makes a value judgment as to whether an inflation adjustment is warranted.

The new size standards have various impacts on contractors. First, under SBA rules for awards of new contracts, a contractor’s size is determined as of the date it submits a proposal in response to a solicitation. Thus, the new size standards will apply to proposals for new awards submitted on or after July 14, 2014, regardless of when the solicitation was issued.

Similarly, if a contracting officer requires certification of a contractor’s size status on or after July 14, 2014, as a condition of issuing an order under an indefinite delivery contract, contractors would use the new size standard in making that certification.

Finally, prime contractors that are required to develop small business subcontracting plans pursuant to Federal Acquisition Regulation (FAR) 52.219-9 would apply the new size standards in developing plans that are to be submitted on or after July 14, 2014.

The interim rule does not change the SBA rules on affiliation. Thus, if concerns are affiliated, the combined revenue of the affiliated concerns will be measured against the adjusted size standard to determine if each is small.

Similarly, the adjusted size standards do not have any impact upon the criteria for determining if the owner(s) of an 8(a) concern is economically disadvantaged. However, the new size standards do apply in determining the size of an 8(a) concern. Thus, like all other small business concerns, 8(a) concerns will be permitted to experience some growth in revenue without fear of jeopardizing their status as an 8(a) or other small business concern.

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