SBA Announces Proposed Changes to Small Business Procurement Rules

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Burgandy Basulto is a Content Writer at NAWRB. She has a bachelor’s degree in both English and Philosophy, and a master’s degree in Philosophy. When she’s not reading or writing, she loves running, kickboxing, watching films, trying new restaurants she finds via Yelp, and experiencing other cultures during her travels.

The U.S. Small Business Administration (SBA) released proposed changes to the small business procurement rules, including several provisions to the National Defense Authorization Acts (NDAA) of 2016 and 2017, and the Recovery Improvements for Small Entities After Disaster Act of 2015 (RISE Act). The new proposed rule is expected to have a substantial impact on small business contracting.

The new rule addresses a variety of issues affecting small businesses, including subcontracting plans; the non-manufacturer rule (NMR); Information Technology Value Added Reseller (ITVAR) procurements; limitations on subcontracting (LOS), recertification, size determinations and the ostensible subcontractor rule.

Key Provisions

  • If a contractor or subcontractor fails to comply in good faith with subcontracting plan requirements, such as failing to provide reports or cooperate in surveys, it will be considered a material breach of contract.
  • The SBA will implement provisions of the RISE Act to create contracting preferences for small business concerns (SBC) in designated disaster areas, and will also provide double credit awards to address these concerns.
  • The NMR Size Standard will be amended so that a firm may qualify as an SBC to provide manufactured products or supply items as a manufacturer as long as it does not have over 500 employees.
  • Contracting officers will be given the authority to set orders aside for a socioeconomic small business program (e.g., HUBZone or WOSB) under a multiple award contract.
  • Language will clarify that recertification is required on full-and-open contracts when they are awarded to SBCs.
  • When a contract is assigned a NAICS code with an employee-based size standard, an independent contractor may be considered an employee of the firm, but not when the NAICS code is given with a receipts-based size standard.
  • The SBA will evaluate contractor relationships under the ostensible subcontractor rule, and if the subcontractor is seen as an ostensible subcontractor, the relationship will be viewed as a joint venture.
  • The kit assembler exception will be removed from the NMR. Instead, if the majority of items in a kit are made by a small business, no waiver of the NMR is required. If not, the waiver of the NMR must be attained.

Read the official release of the proposed rules here.

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