Small businesses need to pay closer attention than ever to their “small business size status.”
New rules from the Small Business Administration (SBA), recently published in the Federal Register, require that small businesses:
- Accurately maintain their size status with the federal government, and
- Face substantial financial penalties, if willful misrepresentation of size or socioeconomic status is proven.
What actions are expected to be taken by small businesses?
First and foremost, it’s imperative that every small business update its profile in the System for Award Management (SAM) at least once a year. A small business failing to perform annual updating will no longer be identified in the SAM database as a small business. Lack of updating also will cause a firm’s other socioeconomic designations (such as SDB, 8(a), HUBZone, WOSB, EDWOSB, VOSB and SDVOSB) to be dropped from SAM. Losing these designations in SAM potentially means losing eligibility for federal contracts set-aside for various small business classifications. Firms not identified as small businesses also will not likely be considered as potential subcontractors by prime contractors who are required to meet small business subcontracting goals.
The possible penalty for a business misrepresenting itself as a small business has never been as severe as now. If the SBA finds that a business “willfully misrepresented” itself as a small business in order to win a federal contract, the agency can cancel the contract and impose a penalty equal to the total dollar value of the contract. Previously, when a contractor misrepresented its size or small business status, the contractor had to forfeit its contract and pay back profits associated with the contract.
The bottom line is this. Businesses should make sure they update SAM at least annually. In addition, businesses should expect to see a new certification form in bid and proposal solicitations, requiring each small business to certify its status as a small business along with any other socioeconomic classification the firm may hold. The form must be signed by an authorized official. If a federal solicitation does not contain a certification section, offerors (bidders and proponents) are expected to prepare a signed certification of their own to be included in their offer.
