Business Update: Legislation Affecting YOUR Access to Federal Contracts

Informed business owners not only are aware of the legislation that affects their business, but also take proactive steps to incorporate the changes into business-building strategies. The areas affected by recent legislation and rulings include:

 

  • Small Business Parity
  • Increased Dollar Thresholds
  • Sole Source Dollar Award Thresholds
  • Women’s Procurement Program
  • Prime Contractor Requirements for Subcontracting Plans
  • Bundling Limits
  • Size Standards Review

 

Small Business Parity

Equal footing was restored to all small business types in federal contracting programs. The types of small business affected are: those businesses who are “Small” as determined by the SBA Size Standards, 8(a) Certified, Women-Owned, Service Disabled Veteran-Owned and HUBZone. This means that the contracting officer now has the ability to choose the small business type for set-aside opportunities as opposed to being required to focus on just only one type, such as HUBZone.

Owners of small businesses pursuing government contracts will take advantage of this situation by answering every Sources Sought Notice or Request for Information (RFI) where their products or services are required. The federal government uses Sources Sought Notices and RFIs as market research to determine if enough qualified small businesses can perform the work, and if so, will then have reason to set-aside the contract for small business, or a particular type of small business. For instance, if two businesses who are 8(a) certified respond, the contracting officer may then issue the opportunity as an 8(a) set-aside. If one business responds who is 8(a) and another who is woman-owned, the set-aside may be for “small business”.

It is critical that small businesses respond to these notices in order to give the contracting officer a legitimate reason to use the set-aside program and not use a full and open competition process where all businesses, large and small, would compete for the contract.

Increased Dollar Thresholds

In the past, contracts between $3,000 and $100,000 were to be set-aside exclusively for small business, with a few exceptions. This threshold was increased from $100,000 to $150,000. Generally, this means that all contracts valued between $3,000 and $150,000 should be set-aside for small businesses.

The exceptions to this new limit would be sales made on GSA Schedules or task orders on other contract vehicles such as Government-wide Acquisition Contracts (GWACs) or Indefinite Delivery Indefinite Quantity (IDIQ) contracts. Those sales are available to any size company, large or small.

Savvy small business contractors will take time to contact all current contracting officers for whom they have worked and educate them about the increase in the threshold and ask for any upcoming opportunities that may fall within the new thresholds.

Sole Source Dollar Award Thresholds

Contracting officers have had the opportunity to make sole-source contract awards (where no competitive bidding is required) to 8(a) and HUBZone firms up to 3.5 million dollars for any non-manufacturing work and 5.5 million dollars for manufacturing. Those limits have now increased to $4 million and $6.5 million dollars respectively.

The Service Disabled Veteran Owned Small Businesses (SDVOSBs) threshold for sole source awards has now increased from $3 million to $3.5 million for non-manufacturing and $5.5 to $6 million for manufacturing contracts.

Educated business owners will contact their local Small Business Administration (SBA) representative and learn how to request and participate in the sole-source contracting process. There is a very specific process to follow to win sole source contracts and your SBA representative is a very important person who will guide you through the process.

Women’s Procurement Program

The SBA announced the publication of a final rule, called the 8(m) Program, to implement the federal procurement program for women-owned small businesses (WOSB) that has been over ten years in the making. This is an economic-disadvantaged-based program in which eighty-three industries have been identified where WOSBs are underrepresented among federal contractors. Thirty-eight of which the SBA has deemed WOSBs to be “substantially underrepresented.” The 8(m) program seeks to open up more opportunities for WOSBs working in these 83 industries.

To be eligible, the company has to be considered “small” under the primary NAICS code, and not less than 51% unconditionally and directly owned and controlled by one or more women who are U.S. Citizens. Further, the rule specifies that, with certain exceptions, the woman who holds the highest officer position may not engage in outside employment and must manage the company on a full-time basis during the normal working hours just like other companies in the same or similar line of business.

To determine whether a woman is economically disadvantaged for purposes of the 8(m) Program, the SBA will check her income, personal net worth, and the fair market value of her total assets. A woman will be found economically disadvantaged if her adjusted gross yearly income, averaged over the three years preceding the certification, is less than $350,000, her personal net worth is less than $750,000, and the fair market value of all of her assets is less than $3 million. In the 38 industries where women are deemed to be “substantially underrepresented,” the rule waives the economic disadvantage requirement.

Woman-owned businesses may either self-certify or certify through third parties approved by SBA. Regardless of the certification method, every woman-owned business must ensure that all requirements for the following three databases are met:

Central Contractor Registration (CCR)
“WOSB Program Repository,” to be established by the SBA
Online Representations and Certifications Application (ORCA)

This program is scheduled to go into effect in February 2011and the SBA estimates that federal agencies will be able to start setting aside contracts for WOSBs in the first quarter of 2011.

Right now, WOSBs are planning their strategies to build strong relationships with target agencies and prime contractors so that they will be well-positioned for accelerated success after February, 2011.

Prime Contractor Requirements for Subcontracting Plans

Prime contractors have been required to write specific subcontracting plans for all non-construction contracts over $550,000 and $1 million for construction contracts. Now, the limits are increased to $650,000 and $1.5 million for construction. Prime contractors will also be required to use the subcontractors listed in their subcontracting plan, unless they went out of business within 1 year.

Prompt payment to subcontractors will also be enforced in that subcontractors must be paid within 90 days. Contracting officers will be required to include this and related issues in the published prime contractor’s evaluation.

Bundling Limits

In the past ten years, the practice of contract bundling, or consolidation, has grown dramatically. This is the practice of combining many related or even non-related services or products under one, generally very large, contract. Because the contracts grew to extraordinary sizes, often exceeding 100 million dollars, most small businesses were effective cut out of competition.

Recent legislation now states that no Federal agency acquisition plan can include consolidation of contract requirements (bundling of contracts) worth more than just $2 million unless consolidation is necessary and justified. There is now an across-the-board policy on bundling: Agencies will be required to solicit bids from small business joint ventures and teams on solicitations above the bundling threshold.

This means that there will be many more contracts of smaller sizes up for competitive or even sole-source bids. While this is very good for small business, it will make the contracting officers’ lives difficult and demanding.

The businesses who will be most successful in this market will have all of the necessary certifications, contract vehicles and full preparation with regards to the needs of the market, not to mention strong relationships built with the decision-makers.