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OMB releases guidance related to small business goals

December 14, 2021 By Nancy Cleveland

The Office of Management and Budget (OMB) released guidance on December 2, 2021, implementing Executive Order 13985, “Advancing Racial Equity and Support for Underserved Communities through the Federal Government” (EO).  The EO directs agencies to readily make available federal contracting opportunities to all eligible vendors and to remove barriers preventing underserved individuals and communities from entering into procurement opportunities.

Additionally, President Biden has set a goal to increase the share of contracts awarded to small, disadvantaged businesses (SDBs) to 15% by 2025.  Below are five actions all federal agencies are instructed to take to help increase spending to government contractors in underserved communities.  Small businesses should be attentive to how these actions will result in new opportunities for them in 2022.

Continue reading at:  JD Supra

Filed Under: Contracting News Tagged With: OMB, SDB, small business goals, subcontracting goals

SBA is deleting ‘direct’ ownership requirement from HUBZone program

April 17, 2018 By Nancy Cleveland

HUBZone companies owned by U.S. citizens will no longer be required to demonstrate that the ownership is “direct.”

The SBA’s HUBZone program rules have long required that a HUBZone company owned by U.S. citizens be at least 51% directly owned by those citizens – as opposed to allowing the qualifying citizens to own those interests through legal vehicles like holding companies.  But the SBA has had second thoughts, and effective May 25, 2018, the direct ownership requirement will be eliminated.

In a direct final rule issued on March 26, the SBA writes that “[d]irect ownership is not statutorily mandated” by the portion of the Small Business Act governing the HUBZone program.  The SBA has concluded that “the purposes of the HUBZone program – capital infusion in underutilized geographic areas and employment of individuals living in those areas – may be achieved whether ownership by U.S. citizens is direct or indirect.”

Keep reading this article at: http://smallgovcon.com/hubzone-program/hubzone-program-sba-will-delete-direct-ownership-requirement/

Filed Under: Contracting News Tagged With: citizenship, direct ownership, HUBZone, indirect ownership, ownership and control, SBA, SDB, small business, Small Business Act, small disadvantaged business, unconditional ownership

Federal rule mandates small business updates, imposes monetary penalties

September 24, 2013 By ei2admin

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:

  1. Accurately maintain their size status with the federal government, and
  2. 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.

 

Filed Under: Contracting News Tagged With: 8(a), certification, EDWOSB, federal contracts, federal regulations, fraud, HUBZone, misrepresentation, penalty, SAM, SBA, SDB, SDVOSB, small business, small disadvantaged business, socioeconomic status, veteran owned business, VOSB, woman owned business, wosb

Does your firm qualify as a SDB?

August 26, 2013 By ei2admin

Small businesses, if qualified, can self-represent their status as a small disadvantaged business (SDB).  Doing so could qualify your firm to be considered for federal contracting, including subcontracting, opportunities.

You do not have to submit an application to the Small Business Administration (SBA) for SDB status.

To self-represent as an SDB, you must register your business in the federal government’s vendor database known as the System for Award Management (SAM).  Navigate to end of the SAM database to find the section that deals with small business certifications.   However, first make sure you and your firm understand the SBA eligibility criteria for SDBs.

In order to qualify as an SDB, generally:

  • The firm must be 51% or more owned and controlled by one or more disadvantaged persons.
  • The disadvantaged person or persons must be socially disadvantaged and economically disadvantaged.
  • The firm must be small, according to SBA’s size standards.

While SBA must still certify all firms that participate in the 8(a) Business Development Program, the requirements to be approved are different and more rigorous than SDB status.  If you believe your firm is ready for the 8(a) Business Development program, click here.

For more information on SDB certification, view the October 3, 2008 Federal Register notice  which explains why SDBs do not need to submit an application to the SBA.

In addition to self-representing your business as an SDB, if qualified, your firm might also meet the requirements for one or more of the following programs:

  • SBA’s 8(a) Business Development Program provides managerial, technical, and contractual assistance to small disadvantaged businesses to ready the firm and its owners for success in the private industry.
  • SBA’s HUBZone Program helps small businesses in urban and rural communities gain preferential access to federal procurement opportunities. These preferences go to small businesses that obtain HUBZone certification in part by employing staff who live in a HUBZone. The company must also maintain a “principal office” in one of these specially designated areas.
  • The Women-Owned Small Business Federal Contract Program authorizes contracting officers to set aside certain federal contracts for eligible women-owned small businesses.
  • The Service-Disabled Veteran-Owned Small Business Concern Procurement Program provides procuring agencies with the authority to set acquisitions aside for exclusive competition among service-disabled veteran-owned small business concerns.

Filed Under: Contracting Tips Tagged With: 8(a), certification, EDWOSB, HUBZone, SBA, SDB, SDVOSB, service disabled, small disadvantaged business, woman owned business, wosb

SDB set-aside contract was illegal, violated SBA regulations

October 25, 2010 By ei2admin

The District Court for the Eastern District of Virginia denied a subcontractor’s motion for temporary restraining order and preliminary injunction because the subcontractor sought to enforce an illegal contract that violated SBA 121.103 and SBA 125.6(a). The dispute arose from a loan servicing support contract that was set aside for socially and economically disadvantaged small business concerns. The incumbent contractor no longer qualified as an SDB due to its increased revenues, so it approached an SDB janitorial and maintenance firm about submitting a joint bid. The parties entered into a teaming agreement where the SDB would serve as the prime contractor and the incumbent would act as a subcontractor and provide key services such as information technology support. After contract award, the parties entered into a subcontract agreement. When the prime contractor attempted “to squeeze out” the subcontractor from participating in the prime contract, the subcontractor sought to enjoin the prime from withholding payments allegedly due under the subcontract and require the prime to restore the subcontractor’s access to a joint account.

Ostensible Subcontractor

However, a court cannot enforce an illegal contract, and the loan servicing support contract was an “agreement conceived in fraud.” The parties deliberately procured a government contract that violated applicable federal regulations, including SBA 121.103 and SBA 125.6(a), and they were not eligible for the contract under those regulations. Under SBA 121.103(h)(4), “[a] contractor and its ostensible subcontractor are treated as joint venturers, and therefore affiliates, for size determination purposes.” The Small Business Administration uses a seven-part test to determine whether a small business is unusually reliant on its subcontractors, and here, six of those factors weighed heavily in favor of a finding of undue reliance. The subcontractor had equal management rights; it had the requisite background and expertise to carry out the contract; it was the party that “chased the contract”; the parties collaborated on the bid; the parties contemplated a relationship where the subcontractor would perform a relatively large share of the contract; and the subcontractor was the party that would perform the more complex and costly contract functions. A review of SBA precedent confirmed that the loan servicing support contract violated the “ostensible subcontractor” rule, and as a result, the parties were affiliates and ineligible for award.

50% Rule

Further, the parties did not comply with the “50% Rule” of SBA 125.6(a), which requires the SDB to perform at least 50 percent of the cost of the contract incurred for personnel with its own employees. A letter from a Certified Public Accountant stated the actual costs incurred by the parties did not meet “either the intent or letter” of the 50% Rule, and the parties’ expense reports showed the subcontractor incurred approximately 62 percent of the parties’ labor costs in one fiscal year and approximately 59 percent of the labor costs in another fiscal year. Since the prime was affiliated with the subcontractor under SBA 121.103, it was an other-than-small business concern, and because the prime’s certification that it was a small business concern was false, the parties’ bid was fraudulent at the time it was made. The court also held the parties’ subcontract was unenforceable and the requested relief was barred by the doctrine of unclean hands. (Morris-Griffin Corp. v. C & L Service Corp., DC ED Va, 54 CCF ¶79,415)

— October 18, 2010 – Walters Kluwer Law and Business

Filed Under: Contracting Tips Tagged With: fraud, SBA, SDB, small business, subcontracting

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