Enforcing New Recertification Rules: Changes to SBA’s Size Protest Regulations

We continue our discussion of the Small Business Administration’s (SBA) recent final rule on various small business programs. Today, we focus on revisions to the regulations governing size protests and requests for formal size determinations under multiple-award contracts, pursuant to the new 13 C.F.R. § 121.1001(a)(11)–(12).

We previously discussed SBA’s changes to the effect of recertifications under multiple award contracts, with a key change being that, in certain instances, a “disqualifying recertification” will render a contract-holder ineligible for award of future set-aside task and delivery orders or the exercise of new options. To accompany this change, SBA has added procedures for challenging the eligibility of a firm in connection with an allegedly disqualifying recertification.

Although recertifications in connection with a transaction or the fifth year of a long-term contract have been around for years, until now there has been no mechanism to allow one contractor to protest or request for a formal size determination of another multiple-award contract-holder’s size recertification in connection with a transaction. See, e.g., Size Appeal of Odyssey Systems Consulting Group, Ltd., SBA No. SIZ-6135 (2021). Moreover, under the old regulations, a recertification as a large business in connection with a transaction or the fifth year of a long-term set-aside multiple-award contract generally had no effect on a contractor’s eligibility to receive new set-aside task orders under that contract; rather, a recertification as large simply prevented the procuring agency from taking small business credit for future orders and options.

To give teeth to the new disqualifying recertification provisions, SBA has added new protest and size determination request provisions tied to the recertifications required by the new 13 C.F.R. § 125.12. The triggering events for a recertification under Section 125.12 are: (1) a merger, acquisition, or sale of or by a concern or an affiliate of the concern, which results in a change in controlling interest; (2) the fifth year of a long-term contract; and (3) an express request by the contracting officer for recertification in connection with a particular order or agreement. The new rule specifically authorizes other contract-holders to initiate size protests and requests for a formal size determination in connection with each of these three kinds of recertifications:

(11) In connection with a size recertification relating to a contract required by § 125.12 of this chapter, the following entities may file a size protest challenging the recertification:

1. 1. Any contract holder on that multiple award contract;
   2. The contracting officer; or
   3. The SBA program manager relating to the contract at issue (i.e., the Director of Government Contracting, the Associate Administrator for Business Development, or the Director of HUBZone, as appropriate), or the Associate General Counsel for Procurement Law.

(12) In connection with a size recertification relating to a multiple award contract required by § 125.12 of this chapter, any contract holder on that multiple award contract may also request a formal size determination concerning a recertifying concern’s status as a small business.

1. 1. 1. A request for a formal size determination made by another contract holder on a multiple award contract must be sufficiently specific to provide reasonable notice as to the grounds upon which the recertifying concern’s size is questioned. Some basis for the belief or allegation that the recertifying concern does not continue to qualify as small must be given.
      2. SBA will dismiss as not sufficiently specific any request for a formal size determination alleging merely that the recertifying concern is not small or is affiliated with unnamed other concerns.

13 C.F.R. § 121.1001(a)(11)–(12) (emphasis added).

No timeliness deadlines apply to a contractor’s request for a formal size determination of another multiple-award contract-holder under paragraph (a)(12). As written, the regulation allows one firm to trigger a formal size determination of a fellow contract-holder at any time when there was (or should have been) a recertification under Section 125.12, and not only in connection with a new task order award. As long as the request is sufficiently specific, SBA should then undertake the investigation and issue a formal determination. If the determination results in the challenged concern being found to be other than small, that presumably will trigger Section 125.12’s corresponding ineligibility provisions.

With respect to size protests under paragraph (a)(11), the new rule leaves the existing protest deadlines at Section 121.1004 unchanged. For protests of certifications triggered by the fifth year of a long-term contract, a protest by another firm is due by the fifth business day after notice of the protested concern’s size certification. 13 C.F.R. § 121.1004(a)(3)(ii). A protest of a certification made in response to a contracting officer’s express request for a particular order is due by the fifth business day after receipt of notice of the prospective awardee’s identity (or the award itself if there was no pre-award notice). 13 C.F.R. § 121.1004(a)(3)(iii). These deadlines presumably continue to apply to size protests under the new 13 C.F.R. § 121.1001(a)(11).

Neither the old regulations nor the new ones contain any deadlines for protests of the third recertification category under Section 125.12, recertifications required in connection with a merger or acquisition event. Does that mean that these protests are subject to no deadlines (similar to a protest by a contracting officer or SBA itself)? Or did SBA intend one of the deadlines at 13 C.F.R. § 121.1004(a)(3)(ii) or (iii) to apply to size protests of this sort? Although at least one of the comments on the proposed rule raised a concern about undefined deadlines, this area of ambiguity remains.

In any event, it is possible that the availability of non-time-limited size determination requests under paragraph (a)(12) may, as a practical matter, make deadlines less important for size protests under (a)(12). Previously, if you filed a size protest on the sixth business day in connection with the award of a task order where the contracting officer had expressly requested recertification, your protest would have been dismissed as untimely, leaving you with no recourse. Now, however, a company with a sixth-day protest (or any other late protest) could simply request, in the alternative, a formal size determination (which has no deadlines) and achieve apparently the same outcome as if it had filed a timely size protest. Time will tell how this plays out in practice.

It seems likely that SBA will need to amend the regulation to provide more clarity about how deadlines will work and whether there will be any difference in outcomes between a size protest and a request for a formal size determination. And it remains to be seen how SBA’s area offices will be able to handle an uptick in size protests and requests for size determinations without a corresponding increase in staffing and resources.