Tag Archives: Small Business Administration

Recent Clarifications to SBA’s Definition of Receipts

Over the summer, SBA published a final rule and size policy statement elucidating what is included in “receipts” for purposes of a size calculation. While SBA made clear that “all income” is to be included in receipts, it also clarified an important receipts exclusion for small businesses.

Specifically, SBA amended 13 C.F.R. § 121.104 to clarify that receipts “include all income,” and the only exclusions from income are the ones specifically listed in paragraph (a) of that regulation. Small Business Government Contracting and National Defense Authorization Act of 2013 Amendments, 81 Fed. Reg. 34,243, 34,253 (May 31, 2016). This clarification was motivated by apparent confusion among contractors: “It was always SBA’s intent to include all income, except for the listed exclusions; however, SBA has found that some business concerns misinterpreted the current definition of receipts to exclude passive income.” The amended regulation states: “Receipts means all revenue in whatever form received or accrued from whatever source, including from the sales of products or services, interest, dividends, rents, royalties, fees, or commissions, reduced by returns and allowances.” 13 C.F.R. § 121.104(a) (emphasis added).

The four discrete exclusions from receipts that the regulation provides are:

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SBA Releases Long Anticipated Final Rule Establishing Government-wide Mentor-Protégé Program for All Small Business Concerns

On July 25, 2016, SBA published the eagerly anticipated Final Rule establishing a government-wide mentor-protégé program for all small business concerns. While there are a few departures from the details outlined in the Proposed Rule released nearly a year and half ago, the Final Rule generally adheres to the plan outlined in the Proposed Rule, which was modeled on the existing 8(a) mentor-protégé program. The Final Rule also contains changes in other areas of SBA’s regulations, such as the rules applying to the 8(a) and HUBZone programs.

The Final Rule becomes effective on August 24, 2016. In order to help you understand how the final rule changes the existing regulations, we have prepared a chart of the major regulatory changes announced in the new rule. Click here if you would like to download this entire report with the chart.

Chart PM

While the Final Rule does not specify the date on which SBA will start accepting applications for the new small business mentor-protégé program, SBA officials have signaled that it will begin accepting applications on October 1, 2016.

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Update on SBA’s New ITVAR Size Rule

By Jon Williams, PilieroMazza

On February 15, 2016, my colleague, Cy Alba, wrote an article for our blog, The PM Legal Minute, “SBA Closes the Door on Resellers of Major Commercial Software,” directed at IT value-added resellers (ITVARs) and discussed the major ramifications of the new rule. The rule requires ITVARs to comply with the nonmanufacturer rule when reselling IT products to the federal government under NAICS code 541519, footnote 18, which has a size standard of 150 employees. This was a 180-degree turnaround from SBA’s prior position on ITVARs, which were not previously required to comply with the nonmanufacturer rule. The upshot of the new rule is that ITVARs performing small business set-aside prime contracts will now have to supply products made by small businesses, or obtain a waiver from SBA to supply products made by large businesses. SBA’s new ITVAR size rule went into effect on February 26. Over the last few weeks, we have been studying the rule closely and have talked with many ITVARs and others in the industry about the implications and implementation of the new rule. There are still many unanswered questions, but the following thoughts and policy issues have crystalized so far:

  • The rule should only apply prospectively, meaning it would cover procurements issued after February 26, 2016 under the ITVAR NAICS code, but would not apply retroactively to ITVAR procurements issued before February 26.
  • The nonmanufacturer rule has a 500-employee size standard. By requiring ITVARs to comply with the nonmanufacturer rule under NAICS code 541519, there is confusion about whether the 150-employee size standard found in NAICS code 541519, footnote 18 is trumped by the nonmanufacturer rule’s 500-employee size standard.  We do not believe this was SBA’s intent. Therefore, SBA should clarify that, to qualify as a small business using the nonmanufacturer rule under NAICS code 541519, a firm must have less than 150 employees.
  • In a pending SBA rulemaking related to the limitations on subcontracting, SBA indicated its intent to confirm that the nonmanufacturer rule does not apply to small business set-aside procurements between $3,000 and $150,000. SBA should finalize this intention, and should go a step further to make clear that this exception to the nonmanufacturer rule includes multiple-award contract orders between $3,000 and $150,000.
  • In the same pending SBA rulemaking, SBA signaled the understanding that it needs to facilitate class waivers for name brand IT products, such as software. As part of this rulemaking, the current class waiver rules should be revamped to make it easier and faster to obtain class waivers for name brand items. That way, when an agency desires only name brand items, or when only name brand items will do, it would not be necessary for the agency to go through the individual waiver process.
  • SBA needs to clarify that class waivers tied to a particular manufacturing NAICS code will be applicable whenever that item is supplied under a procurement using NAICS code 541519. Because NAICS code 541519 is a services code, it is unlikely that a class waiver could be issued for this code. That is why it is necessary for existing class waivers under manufacturing codes to apply when the waived products are supplied under NAICS code 541519.

There was a recent GAO protest ruling that heightens our concern over how these policy issues will be resolved.  The GAO ruling, Manus Medical LLC, B-412331 (Jan. 21, 2016), found that an agency was not required to set aside a procurement for small businesses because, while there may have been at least two small business distributors of the products sought, there were not at least two small business manufacturers. GAO also found that the agency was not required to pursue an individual waiver for the contract because the decision to seek a waiver is discretionary.

Based on Manus Medical, and the new ITVAR size rule, we are concerned that there will be less small business set asides for ITVARs.  One way to mitigate this concern would be to implement more class waivers for IT products, the existence of which an agency presumably would have to consider in determining whether to set aside a procurement for IT products.

Because this is such an important issue for the ITVAR community, we plan to continue monitoring this rule closely and will push the key policy issues with SBA and others. We held a webinar on April 12, 2016, to help resellers understand the impact of SBA’s new ITVAR size rule and we gained feedback to submit to SBA. We invite you to send us your thoughts, concerns, and suggestions about this new rule to Cy Alba at ialba@pilieromazza.com and me, Jon Williams, at jwilliams@pilieromaza.com. You can watch the webinar in its entirety on our YouTube Channel at www.youtube.com/pilieromazza.

About the Author: Jon Williams is a partner with PilieroMazza and a member of the Government Contracts Group. He also works with the Business & Corporate and Labor & Employment Groups. He may be reached at jwilliams@pilieromazza.com.

FY2015 Procurement Scorecard: Another “A” for the Government

April 28, 2016, the Small Business Administration (SBA) released its annual small business procurement “report card,” identifying how the federal government as whole and major federal agencies measured up in terms of meeting their small business prime and subcontracting goals for the 2015 fiscal year. The federal government got an “A,” as did 18 of the 24 major Federal agencies. And, three agencies (i.e., the Department of Justice, the General Services Administration, and SBA) even got an “A+.”

2015 marks the third consecutive year that the federal government received an “A” rating for promoting small business procurement efforts. The “A” rating means the government is generally doing a good job of meeting its goals to get federal contracts into the hands of small businesses. The 2015 goal for small business prime contracts was 23 percent, which the government exceeded by awarding 25.75 percent of federal prime contracts to small businesses, or $90.7 billion. The 25.75 percent achievement sets the record as the highest ever percentage of federal prime contracts to small businesses.  

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SBA Reports Record-High Contracting for Women-Owned Firms

From Government Executive

For the first time in 20 years of trying, federal agencies met their mandatory goal of steering small business contracts to women-owned firms, the Small Business Administration announced on Wednesday.

“What we were able to achieve was because of that big lift across the country,” Administrator Maria Contreras-Sweet told a gathering of contractors and agency officials at the National Press Club. “Women entrepreneurs can be the linchpin for a broader middle class, for upward mobility and social mobility.”

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