SBA’s Proposed Rule Changes Protest Landscape in Size and Status | PilieroMazza SARL

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On September 9, 2022, the United States Small Business Administration (SBA) issued a proposed rule (the Rule) making substantial changes to the 8(a) business development program (covered here in a previous PilieroMazza alert). Various protest-related changes are scattered throughout the rule for the Women-Owned Small Business (WOSB), Service-Disabled Veteran-Owned Small Business (SDVOSB), and Historically Underutilized Business Zone (HUBZone) programs. The rule expands and limits the basic rules for filing a size or status protest against an apparently successful bidder. To avoid losing contract opportunities to ineligible contractors, contractors should know when they can file size or status challenges. Below are the key potential rule changes and the implications for those looking to file a size or status dispute. The deadline for submitting a public comment is November 8, 2022.

Stand up to bring protests of size and status

Currently, SBA regulations do not provide for whether size or status protests can be filed in sealed tenders against the next lowest bidder after the apparent initial recipient is deemed ineligible due to a protest of size or status. The rule would allow concerns to protest the size or status of the next lowest bidder if filed within five (5) business days of notification of the identity of the next lowest bidder. There is no reason why the next lowest bidder should be protected from possible challenge. Accordingly, the Rule would expand the ability of a disappointed bidder to file a size or status dispute in sealed bids.

The rule would also create consistent rules for determining who can initiate a size or status protest in SBA’s small business programs. From now on, any WOSB or SDVOSB bidder can bring a sizeable protest. Additionally, any HUBZone offeror not eliminated for reasons unrelated to size may file a size dispute. In contrast, for small business set-aside and 8(a) competitive contracts, only a bidder that the contracting officer has not eliminated for a procurement-related reason can initiate a substantive challenge. The rule would adopt this language to all SBA small business programs. Thus, any offeror that the contracting officer has not eliminated from its application for a reason related to procurement could launch a major challenge in each of these programs.

Decisions pending at the Government Accountability Office (GAO)

The rule would also make various changes and clarifications regarding size protests against companies that have tied bid protests pending against their GAO contract awards. In the event an agency takes corrective action in response to such a protest, the proposed rule would require the SBA to automatically dismiss large protests. If an agency re-evaluates the bids, any disappointed bidder may then protest the new (or same) apparently successful bidder within five (5) business days of receiving notification from the winning bidder. The rule avoids situations where the SBA makes a size determination against a company that, as a result of agency corrective action taken in response to a GAO complaint, may no longer be the successful bidder.

In addition, the rule would add that if a bid challenge is pending with the GAO and the SBA receives a large bid challenge relating to the same procurement, the SBA will suspend its proceedings until the GAO renders a decision. Once the GAO’s decision is rendered, the SBA would resume the process and attempt to issue a formal size determination within fifteen (15) business days. The SBA already follows this suspension policy, with the rule simply codifying it.

Small Business Disadvantaged (SDB) Statutory Protests

Since the SDB program was effectively eliminated a number of years ago, companies have not been able to challenge a winner’s SDB status. The SBA’s Office of Inspector General believes that there should be general authority to challenge a company’s SDB status. As such, the rule would authorize the SBA to review the SDB status of any company that has held itself out as an SDB on a prime contract (for purpose or otherwise) or subcontracted to a federal prime contractor. whenever she receives credible information questioning the status of the SDB.

The rule would also allow the contracting officer or the SBA to launch its own protest against the SDB status of a subcontractor or proposed subcontractor. Other interested parties would also be permitted to submit information to the procurement officer or the SBA for the purpose of persuading them to launch a protest. However, in order to be considered timely, such protests should be submitted to SBA prior to the completion of performance by the intended subcontractor.

When the SBA determines that a subcontractor does not qualify as an SDB, the rule would prevent the prime contractor from including that subcontractor’s subcontracts as subcontracts of an SDB in its subcontracting relationships, from the moment the protest was decided. Therefore, contractors wishing to avoid the headache of not being able to count subcontracts to SDBs should pay more attention and investigate the status of their SDB subcontractors.

While the rule does not focus on protests, the above changes alter the landscape of size and status protests, which can provide a quick and efficient way to challenge an award to a bidder who certifies as small in a certain category, but for some reason may no longer be small or compliant with SBA regulations. It is important for contractors to know when and what type of size or status protests can be filed. If your business is affected by these proposed changes and wishes to submit public comment to SBA, be sure to do so before the November 8, 2022 deadline.

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