SBA Issues Amendments and Clarifications of Regulations

October 18, 2018

The U.S. Small Business Administration (“SBA”) amended its regulations to incorporate a provision of the National Defense Authorization Act of 2018 (“NDAA 2018”) and to update and provide technical corrections to SBA’s current regulations. The rule was issued on March 26, 2018, and became effective on May 25, 2018.

The NDAA 2018 amended the Small Business Act by replacing the fixed dollar amount thresholds with references to the micro-purchase and simplified acquisition thresholds contained in the FAR. The NDAA 2018, signed into law by President Trump on December 17, 2017, now defines the micro-purchase threshold for products as $10,000; a $6,500 increase from 2017 (Section 806). The micro-purchase thresholds for acquisitions involving services and construction services both remain unchanged at $2,500 and $2,000, respectively. NDAA 2018 also significantly increases the simplified acquisition threshold from $150,000 to $250,000. Unfortunately, the Federal Acquisition Regulation (“FAR”) has not been amended to reflect these revised limits.

In addition, the SBA is also updating the sole source dollar amounts in its Service-Disabled Veteran-Owned (“SDVO”) small business and the Historically Underutilized Business Zone (“HUBZone”) small business regulations by now referencing to the FAR coverage on these topics. The dollar threshold for the SDVO small business program (FAR 19.1406) is $6.5 million, including options, for contracts assigned a manufacturing NAICS code, and $4 million, including options, for all other contracts. For the HUBZone program (FAR 19.1306), the dollar threshold is $7 million, including options, for contracts assigned a manufacturing NAICS code, and $4 million, including options, for all other contracts. The thresholds for sole source contracting for these and other programs are contained in the Small Business Act, SBA’s regulations, and the FAR. Dollar thresholds in the FAR are updated every five years for inflation. Therefore by referencing the FAR amounts, the SBA’s regulations will not need to change to conform to the increased FAR thresholds. The last time the FAR was adjusted for inflation was 2015.

This rule also allows indirect ownership by U.S. citizens in the HUBZone program to more accurately align with the underlying statutory authority. The SBA believes that capital infusion in underutilized geographic areas and employment of individuals living in those areas – the main purposes of the HUBZone program – can be achieved whether ownership by U.S. citizens is direct or indirect. As such, this rule deletes the requirement that ownership by U.S. citizens in the HUBZone program must be direct and instead specifies that a HUBZone small business concern must only be at least 51 percent owned and controlled by U.S. citizens.

Finally, the SBA is making several technical changes to address mistakes and typos made in previous rules. For example, this final rule will update some cross-references that were not updated when a previous rulemaking changed numbering. Other changes made are for missing words, errors, grammar, syntax, and clarity. These changes are merely intended to clarify, not change, existing regulations. This rule does not constitute a significant regulatory action, as determined by the Office of Management Budget, nor is this rule a major rule under Congressional Review.

For help navigating this rule or any other rule or regulation, please contact one of our experienced GovCon professionals.