When Is Small Business “Size” Determined?
Many small business government contractors do business with the Federal Government through Federal Supply Schedule contracts or other types of long-term task or delivery order contracts. Federal agencies often will conduct task or delivery order competitions under these types of contracts that are restricted to small business contract holders. The Court of Federal Claims recently issued a decision in Metters Industries, Inc. v. United States, No. 13-116C (Feb. 27, 2013) that examines the date as of which contractors must be “small” to be eligible for task or delivery order awards that are restricted to small businesses.
In Metters Industries, the Army conducted a task order competition among small business holders of Blanket Purchase Agreements that the Army had awarded under the GSA Logistics Worldwide schedule contract. After the Army awarded the task order to Metters Industries, Inc. (“Metters”), the Small Business Administration (“SBA”) determined that Metters did not qualify for award as a small business because Metters did not meet the applicable revenue-based size standard as of the date that the company submitted its offer. Metters appealed the SBA’s determination and also filed a bid protest at the Court of Federal Claims seeking to enjoin the Army from making award to another contractor before the SBA resolved Metters’s appeal.
In deciding whether to grant a preliminary injunction, the Court of Federal Claims examined the SBA’s regulations that establish the date as of which contractors must be “small” to be eligible for task or delivery order awards The general rule set forth in the regulations is that “[a] concern that qualified as a small business at the time it receives a contract is considered a small business throughout the life of the contract.” 13 C.F.R. § 121.404(g). Thus, a contractor’s size as of the date the contractor received the original contract (as opposed to the contractor’s current size on an order-by-order basis) is often what “counts” for purposes of award eligibility.
However, there also are several exceptions to this general rule that are set forth in the SBA’s regulations. The specific exception at issue in Metters Industries provides:
Where the contracting officer explicitly requires concerns to recertify their size status in response to a solicitation for an order, SBA will determine size as of the date the concern submits its self-representation as part of its response to the solicitation for the order.
13 C.F.R. § 121.404(g)(3)(v) (emphasis added). Under this exception, a contracting officer may (but is not required to) request size recertification in connection with individual orders. When the contracting officer does make such a request, the contractor’s size will be determined as of the date the contractor submits the requested certification with its offer. See id. In Metters Industries, Metters contended that the Army did not “explicitly require” recertification in connection with the task order competition and thus Metters’s current size was irrelevant to the issue of its eligibility for the award.
The Court of Federal Claims found that it was difficult to “handicap” the likelihood of success of Metters’s appeal of the SBA’s decision. However, the Court of Federal Claims also found that the Army did not unambiguously request Metters or other offerors to recertify their current size. The Court of Federal Claims further noted that it had “difficulty in following the reasoning” of the SBA’s interpretation of the key solicitation language, which provided that the awardee’s “signature on the task order award serves as confirmation that the socio-economic status provided in the quotation is the same as that identified in the applicable GSA schedule . . . as of the date of your signature on the task order award.” The Court of Federal Claims indicated that the SBA decision did not explain how this language clearly constituted a request that offerors recertify their current size.
The Court of Federal Claims also found that other evidence in the record indicated that the Army did not intend to request recertification of size status. Based in part on these findings, the Court of Federal Claims granted Metters’s request for a preliminary injunction.
Before competing in a task or delivery order competition that is set-aside for small businesses, it is important for contractors to carefully assess their eligibility for award. The Metters Industries decision shows how eligibility may depend on whether the contractor has to be small as of the date of original contract award or the date on which the contractor submits its offer for a task or delivery order award. If the solicitation language is unclear, contractors should consider asking the agency for clarification before preparing or submitting an offer. Making incorrect statements regarding size status in connection with a contract award may incur significant liability, including the potential of suspension, debarment, or civil liability under the False Claims Act. For this reason, contractors should also consider seeking outside counsel for assistance where there is uncertainty.
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Stacy Hadeka and Allison Bender also contributed to this report.19 May 2016