National 8(a) Association
2015 Summer Conference
June 16, 2015
SBA Update
Proposed Regulations:
Analysis and Application
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Presented by:
Jon M. DeVore
John Klein
Christine V. Williams
Birch Horton Bittner & Cherot
Washington, D.C.
jdevore@dc.bhb.com
Small Business Administration
Washington, D.C.
john.klein@sba.gov
Davis Wright Tremaine
Anchorage, AK
christinewilliams@dwt.com
Disclaimer
This presentation was made without the direct involvement of the Small Business Administration. Any views
or analysis provided are not necessarily shared by John Klein or the SBA
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SBA Proposes Major
Overall of Small Business
Regulations
Will Establish Government-Wide Mentor-Protégé Program for All
Small Business Concerns; Make Changes to 8(a) Program
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SBA Proposes Significant New
Regulations
•
Proposed Rule to implement 8(a) Program changes & Mentor-Protégé Program expansion
published February 5, 2015; comments were due May 6, 2015 (after a 30-day extension).
•
SBA’s second major proposed rulemaking in the last six months.
•
Impactful changes/clarifications include:
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“Rule of Two” Will Apply Regardless of the Place of Performance
Size: Affiliation Exemption for Common Administrative Services Expanded
SBA May Now Unilaterally Change an 8(a) Firm’s Primary NAICS Code
Burden of Establishing Social Disadvantage is on the Applicant
Substantial Unfair Competitive Advantage Uses a National Scale, But Compares Firm’s Industry Share
Relative To Overall Small Business Participation In Industry Nationwide
Creation of a Mentor-Protégé Program for All Small Businesses and Related Changes to 8(a) MentorProtégé Program
Changes to Joint Venture Regulations for 8(a)s and for All Small Businesses
Changes to Size Standards and HUBZone Regulations
SBA May File Requests for Reconsideration of OHA Decisions
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“Rule of Two” Will Apply “Regardless of
the Place of Performance”
•
Contracts performed overseas will now be subject to the “Rule of Two” mandate.
•
Quiet change: No explanation or mention in the Rule Summary
 SBA does not even reference the existing citation, only the newly assigned regulation citation, making it
difficult to decipher what SBA is proposing.
•
Complications:
 Major change which could lead to potential backlash from other agencies, cause practical challenges in setting
aside overseas contracts for small businesses, and create general confusion.
 Language is contrary to the FAR 19.000(b)’s language that the FAR’s small business program regulations do not
apply overseas.
•
Changes Respond to GAO’s 2013 Latvian decision
 GAO denied a protest claiming an overseas contract should have required “Rule of Two” set aside, asserting that
SBA regulations were silent on the program’s application overseas.
 SBA soon proactively changed their regulations to say small business programs could be utilized “regardless of
the place of performance” to 13 CFR 125.2.
 Continued uncertainty spurred SBA to expand this language throughout the small business contracting
regulations, including here.
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Changes to the 8(a) Program
Significant changes and clarifications
6
•
SBA also added regardless of the place of performance language to its program-specific
regulations for:




•
8(a) Program
SDVO SBC
HUBZone
Woman-Owned Small Businesses
However, unlike the Rule of Two mandate, language here is permissive.
 Clarifies SBA’s interpretation that agencies may utilize these programs regardless of the place of
performance, essentially allowing small business contracting programs to be used overseas.
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Changes to the 8(a)
8(a) Contracts Authorized “Regardless
of Place of Performance”
•
Currently, business concerns owned by tribes or ANCs are not considered to be affiliated (for size
purposes) with other concerns owned or controlled by these entities due to common ownership or
management.
 Current 13 CFR 121.103(b)(2)(ii): Business concerns owned and controlled by Indian Tribes, ANCs, NHOs,
CDCs, or wholly-owned entities of Indian Tribes, ANCs, NHOs, or CDCs are not considered to be affiliated
with other concerns owned by these entities because of their common ownership or common
management. In addition, affiliation will not be found based upon the performance of common
administrative services, such as bookkeeping and payroll, so long as adequate payment is
provided for those services. Affiliation may be found for other reasons.
•
Proposed change codifies current SBA internal guidance memos defining “common administrative
services.”
 No substantive changes to current SBA practices.
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Changes to the 8(a)
Definition of Common Administrative
Services Affiliation Exemption
Expanded for Tribally/ANC-Owned
Businesses
•
Common administrative services falling under the exemption include:
 “bookkeeping, payroll, recruiting, other human resource support, cleaning services, and other duties which
are otherwise unrelated to contract performance or management and can be reasonably pooled or otherwise
performed by a holding company or parent entity without interfering with the control of the subject firm.”
•
NOTE: The proposed changes above affect the general affiliation exemption of 13 CFR Part 121,
not the broader 8(a)-specific affiliation exemption at 13 CFR 124.109(c)(2)(iii), which continues to
read:
 “In determining the size of a small business concern owned by a socially and economically disadvantaged
Indian tribe (or a wholly owned business entity of such tribe) for either 8(a) BD program entry or contract
award, the firm’s size shall be determined independently without regard to its affiliation with the tribe, any
entity of the tribal government, or any other business enterprise owned by the tribe, unless the Administrator
determines that one or more such tribally-owned business concerns have obtained, or are likely to obtain, a
substantial unfair competitive advantage within an industry category.”
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Changes to the 8(a)
Definition of Common Administrative
Services Affiliation Exemption
Expanded for Tribally/ANC-Owned
Businesses (cont.)
•
Gray Areas: Contract Administrative Services and Business Development
•
“CONTRACT administration services”: May or may not fall under the affiliation exemption.
Permissible services are “administrative in nature” such as:
 “record retention not related to a specific contract (e.g., employee time and attendance records), maintenance
of databases for awarded contracts, monitoring for regulatory compliance, template development, and
assisting with invoice preparation as needed.”
•
Business development at the parent company level to identify procurement opportunities for
specific subsidiaries MAY be permissible.
 subsidiary must be involved in the business development for the opportunity and preparing the offer,
control the technical and contract-specific portions of preparing the offer, and control employee
assignments and contract performance logistics once the contract is awarded.
•
Not common administrative services: “actual and direct day-to-day oversight and control” of
contract performance – such as negotiating directly with the government, project scheduling, and
hiring and firing of employees.
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Changes to the 8(a)
Definition of Common Administrative
Services Affiliation Exemption
Expanded for Tribally/ANC-Owned
Businesses (cont.)
SAFE



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

POSSIBLY SAFE
Bookkeeping
Payroll
Recruiting
Human resource support
Cleaning services
Duties unrelated to contract
performance/ management
that do not interfere with the
control of the subject firm
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
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



Services that are “administrative in
nature”
Record retention not related to
specific contract
Database maintenance for
awarded contracts
Regulatory compliance monitoring
Template development
Assisting with invoice preparation
Identifying procurement
opportunities IF subsidiary is involved
in business development and
prepares the offer, controls the
technical and contract-specific
portions of offer preparation,
controls employee assignments,
and controls contract performance
logistics.
NOT PERMISSIBLE




“Actual and direct day-to-day
oversight and control” of contract
performance
Negotiating directly with
government
Project scheduling
Hiring and firing of employees
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Changes to the 8(a)
Examples of Activities Qualifying for
Common Administrative Services Affiliation
Exemption
•
Proposed change codifies current SBA practice of changing a firm’s NAICS code when SBA
determines that a firm’s primary industry has evolved.
 MAJOR change to the current regulations, which allow only the Participant itself to change its primary NAICS
code.
 Prompted by fear the current system allows a firm to select a primary NAICS code different from any other
Participant owned by that same entity and then perform majority of its work in the same primary NAICS code
as the other participant.
 Currently, no requirement for Participant to actually perform work in the NAICS code under which its program entry was
certified.
•
Proposal: Provide SBA with discretionary authority to “change the primary industry classification
contained in a Participant’s business plan where the greatest portion of the Participant’s total
revenues during a three-year period have evolved from one NAICS code to another.”
 Process:
 SBA will review primary NAICS codes as part of the firm’s annual review process.
 When SBA determines that such change is appropriate, SBA notifies Participant of intent to make a change.
 Participant may challenge by demonstrating why it believes its chosen primary NAICS continues to be appropriate
 ie new contracts received since end of the last fiscal year, if the firm made good faith efforts to obtain contracts in its
primary NAICS code, etc.
 No additional appeals process!
•
SBA also requested comments on whether a change in primary industry should be automatic
based on Federal Procurement Data System information, which would be an even more
dramatic change from the status quo.
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Changes to the 8(a)
SBA May Now Unilaterally Change 8(a)
Firms’ Primary NAICS Codes
•
Clarification: Individuals claiming social disadvantage (who are not
members of a designated group) must present evidence they have suffered
social disadvantage that has negatively impacted their entry into or
advancement in the business world.
 Evidence now required: Alters SBA-OHA decisions allowing establishment of
social disadvantage despite a record lacking sufficient evidence supporting a
discriminatory basis for the alleged misconduct.
 Each instance of alleged discriminatory conduct must be accompanied by a description of its
negative impact on the individual’s entry into or advancement in the business (alters
current OHA interpretation)
 Burden is on applicant, who must establish with evidence all aspects of
eligibility.
•
Alternative explanations: “SBA may disregard a claim of social
disadvantage where a legitimate alternative ground for an adverse
employment action or other perceived adverse action exists and the
individual has not presented evidence that would render his/her claim any
more likely than the alternative ground.”
•
SBA now has right to seek corroborating evidence. Previously, SBA
was limited in its ability to question the veracity and relative impact of an
applicant’s accounts of discriminatory treatment without evidence to the
contrary.
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Claims Must
Generally Include:
1. When and where
the discrimination
occurred
2. Who committed the
discrimination
3. How the
discrimination took
place
4. How such acts
adversely affected
the individual
Changes to the 8(a)
Burden of Establishing Social
Disadvantage is on the Applicant
But compares firm’s industry share relative to overall small business participation in industry nationwide
•
Clarifies when entity-owned business concerns are not subject to 13 CFR Part 124’s broad
affiliation exemption:
 “Entity-owned concerns may be found affiliated only if they have obtained, or are likely to obtain, a
substantial unfair competitive advantage within a particular industry category on a national scale.”
 Requires SBA to consider a firm’s percentage share of the national market and other relevant factors to determine
whether a firm is dominant in a specific six-digit NAICS code with a particular size standard.
 Importantly, SBA will compare the firm’s industry share “as compared to overall small business participation
in that industry.”
•
“SBA does not contemplate a finding of affiliation where a tribally-owned concern appears to
have obtained an unfair competitive advantage in a local market, but remains competitive,
but not dominant, on a national basis.”
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Changes to the 8(a)
Substantial Unfair Competitive
Advantage Uses a National Scale
•
Individuals May Not
Manage More Than Two
Tribally-Owned or ANCOwned 8(a) Program
Participants at Once
“will uphold a decision of less
than ideal clarity.”
•
Benefits Reporting
• Relaxation in “Good
Requirement Timing
Changed for Entity-Owned Character” Definition
 8(a) applicant now ineligible if a
Firms
 This language already appears
 Changed from Participant’s
in the Small Business Act, but
Annual Review Submission to
is not currently in SBA
Annual Financial Statement
regulations.
Submission
 Applies to tribal- and ANC Purpose: make clear benefits
owned participants as per 13
reporting is not tied to
CFR 124.109(a).
continued eligibility and to help
 Codifies current SBA practice
report community benefits
that in determining who
 SBA circulated a discussion
manages actual day-to-day
draft at Tribal Consultation
operations of a concern, SBA
looks beyond corporate
formalities and titles and
• Administrative Record in
examines the totality of the
8(a) Appeals
circumstances.
 Codifies language from recent
OHA cases – so long as SBA’s
path of reasoning may
reasonably be discerned, OHA
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holder of at least 20% of its
stock lacks business integrity or
is currently incarcerated or on
parole or probation pursuant to
a pre-trial diversion or following
conviction for a felony or any
crime involving business
integrity.
 Increase from the previous 10%
ownership requirement,
resulting in a slightly more
relaxed reporting & eligibility
requirement for applicants.
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Changes to the 8(a)
Further Changes to 8(a) Program
•
Although SBA is creating a new Mentor-Protégé Program for all small businesses (more
below), the 8(a) Program’s Mentor-Protégé Program will continue to operate as a separate
program.
•
Proposed rule makes various changes to the existing 8(a) Mentor-Protégé Program to make
all of the mentor-protégé programs more equitable and easier to consistently regulate,
including:
 Expanded Definition for Firms that Can Be Protégés
 Clarification for Continuing Mentor-Protégé Relationship when Control of Mentor Changes
 Ability to Transfer an 8(a) Mentor-Protégé Relationship & JV to General Mentor-Protégé Program
Following 8(a) Graduation
 SBA May Terminate a Mentor-Protégé Agreement
• Much
more on Changes to the 8(a) Mentor-Protégé
Program in the Track III breakout session on MentorProtégé Programs.
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Changes to 8(a) Mentor-
Changes to the 8(a) Mentor-Protégé
Program
•
SBA statutorily required to create a mentor-protégé program that is available to all small
businesses.
•
Significant change that will greatly expand the participation of mentor-protégés’ joint venture
teams in small business contracting.
•
Rather than creating four new programs, SBA proposes to implement one mentor-protégé
program for the following SBCs:
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•
Service-Disabled Veteran-Owned Small Business Concerns (SDVO SBCs)
HUBZone SBCs
Women-Owned Small Business (WOSB) concerns
all other small businesses
These are in addition to the current mentor-protégé program for 8(a) participants
Five separate mentor-protégé programs?
 SBA believes that is it easier for small businesses and the acquisition community to utilize and
understand one program, but requested comments on whether it should finalize five separate mentorprotégé programs.
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Changes to 8(a) Mentor-
SBA Creates One New MentorProtégé Program for All Small
Businesses
•
SBA proposes to require a written certification of compliance from a small business JV partner prior to
performance of any contract set aside/reserved for small businesses; Forces small businesses and their
mentors to certify compliance with some of the relevant rules.
 This is especially important when combined with SBA’s proposed paragraph 125.8(i), which allows imposition of
suspension or debarment for certain violations regarding a mentor-protégé JV authorized under 125.9. The following
grounds will be considered “willful violation[s] of a regulatory provision or requirement applicable to a public agreement
or transaction:”
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


failure to enter a JV Agreement that complies with 125.8(b),
failure to perform a contract in accordance with the JV Agreement,
failure to perform a contract in accordance with performance of work requirements,
failure to submit the Certification of Compliance,
failure to comply with Inspection of Records provisions in proposed 125.8(g).
•
Seems to allow SBA to impose (or threaten to impose) suspension and/or debarment for a protégé’s failure to follow
the prescribed rules and approved JV Agreement terms; it also seems to threaten suspension and debarment
of non-small business JV partners for their non-compliance as well.
•
Be advised that there are some subtle distinctions between the Certification of Compliance requirements for 8(a)
protégés and other small business protégés.
•
Termination: proposed rule also notes that “SBA may terminate the mentor-protégé agreement at any time if it
determines that the protégé is not benefiting from the relationship or that the parties are not complying with any
term or condition of the mentor protégé agreement.”
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Changes to 8(a) Mentor-
Certification of Compliance & Basis for
Suspension or Debarment
Changes to Joint
Venture Regulations
Changes affecting small business joint ventures generally & changes
to 8(a)-specific joint venture program regulations
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•
Amended Definition of Joint Venture for All SBA Programs
•
Joint Ventures Between Small Business Protégés and Their SBA-Approved Mentors
•
Inspection of Records – SBA Access to ALL Records of Joint Venture Partners
•
Ability to Report Information Regarding JV Compliance with Performance of Work
Requirements
•
Other Changes/Clarifications to Joint Ventures
 JV Past Performance Evaluation Must Consider Work Done Individually by Each JV Partner
 JV Certifications and Performance of Work Reports
 Tracking JV Awards
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Changes to Joint Ventures
Changes Affecting Small Business Joint
Ventures Generally
•
Current regulations: allow JVs that are separate legal entities to be
1.
2.
3.
unpopulated
populated with administrative personnel only, or
populated with their own separate employees that are intended to perform contracts awarded to the
JV.
•
New regulations: If a JV exists as a separate legal entity, it may no longer be populated
with individuals intended to perform work awarded to the JV, but it may continue to
have its own separate employees to perform administrative functions.
•
JV Agreements Must Be In Writing: New regulations clarify that, although a JV may be an
informal arrangement and not a formal separate legal entity, all JV agreements must be in
writing setting forth responsibilities of all JV partners.
 Helps identify the benefits experienced by protégé firms, decipher whether the protégé performed at least
40% of the JV work, and determine whether the protégé controls the JV.
•
Note: The American Bar Association has recommended that SBA require that joint ventures in
the program be formed as separate legal entities to “clearly define their obligations to each other
in the entity’s operating agreement or bylaws.”
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Changes to Joint Ventures
Amended Definition of Joint
Venture for All SBA Programs
•
SBA is adding a new provision to specify requirements for JVs between small
business protégé firms and their mentors.
•
As with the proposed changes to the 8(a) Program, SBA proposes to allow a general
small business protégé to joint venture with its SBA-approved mentor and qualify
as a small as long as the protégé qualifies as small under the corresponding
NAICS code assigned to the procurement.
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Changes to Joint Ventures
Joint Ventures Between Small Business
Protégés and Their SBA-Approved
Mentors
•
SBA proposes the following language, resulting in the following requirement for all joint venture
partners (not just the small business upon whom eligibility is based):
 Inspection of records. The joint venture partners must allow SBA’s authorized representatives, including
representatives authorized by the SBA Inspector General, during normal business hours, access to its files to
inspect and copy all records and documents.
•
SBA’s authority to inspect is NOT LIMITED to only the records relating to the joint
venture!
 Joint venture partners must allow SBA authorized representatives (including SBA IG) to access files and
inspect and copy all records and documents.
 Similar provisions are added to program specific regulations.
•
Added Teeth: Risks of non-compliance include suspension or debarment for mentor-protégé joint
venture partners.
 Failure to comply with the Inspection of Records rule in proposed (new) 125.8(g) could result in suspension or
debarment.
 The preamble states that the suspension and debarment provision applies to mentor-protégé joint
ventures, but the Inspection of Records provision applies to all small business joint ventures.
 It is unclear whether non-mentor-protégé joint ventures under the small business joint venture program
would be at risk of suspension or debarment for failure to comply.
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Changes to Joint Ventures
Inspection of Records – SBA Access to
ALL Records of Joint Venture Partners
•
SBA added a new provision that expressly allows anyone to provide information regarding
(presumably questioning compliance with) a joint venture’s performance of work.
 “Any person with information concerning a joint venture’s compliance with the performance of work
requirements may report that information to SBA and/or the SBA Office of Inspector General.”
•
SBA seems to be adding more avenues for incentivizing and enforcing compliance with
performance of work requirements, which are viewed to have been inconsistently monitored in
practice up to this point.
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Changes to Joint Ventures
Ability to Report Information re: JV
Compliance with Performance of Work
Requirements
•
JV Certifications and Performance of
• JV Past Performance Evaluation Must
Work Reports
Consider Work Done Individually by
All JV partners performing SDVO, HUBZone, Each JV Partner, as well as any work done
WOSB/EDWOSB, or small business set-aside
by the joint venture itself previously.
contracts must certify prior to performance
that they will comply with JV regulations and • Tracking JV Awards: SBA seeks comments
on how to track JV awards, such as –
the JV agreement, and how they are meeting
 requiring JV names to include “small business
applicable performance of work requirements.
 The JV must certify compliance annually, and
once the contract is completed, submit a report
certifying compliance and explaining how the
performance of work requirements were met for
the contract.
 The government may consider the failure to
comply with JV regulations or to submit required
certifications and reports as grounds for
suspension or debarment.
25
joint venture” or “mentor-protégé small business
joint venture;”
 requiring contracting officers to identify awards as
going to small business or mentor-protégé JVs;
 requiring SBCs to amend their System for Award
Management entries to specify that they have
formed a JV; requiring each JV to get a separate
DUNS number; or
 a combination of these actions.
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Changes to Joint Ventures
Other Changes/Clarifications to
Joint Ventures
•
No Change to 8(a) JV Size Standards (even though other JV size standards
were changed to be more relaxed)
•
Streamlined Performance of Work Requirements for 8(a) JVs
•
Prior Approval by SBA Permitted for 8(a) JV Agreements
•
Size of 8(a) JV is Protestable
•
Contract Execution Can be in Name of 8(a) JV or 8(a) Participant
•
Certification of Compliance & Basis for Suspension or Debarment
•
SBA May Inspect Records of ALL JV Partners
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Changes to Joint Ventures
Changes to 8(a)-Specific Joint Venture
Program Regulations
•
While joint ventures involving participants in other SBA programs such as HUBZone and
WOSB will qualify as small as long as JV partners are small in the aggregate, SBA is NOT
proposing to remove similar restrictions affecting 8(a) JV size requirements,
including:
 the requirement that a JV’s 8(a) participant must be less than one half the size standard, and
 the procurement needs to exceed half the size standard (revenue-based standard) or $10 million
(employee based standard).
•
These more rigorous requirements are unchanged for 8(a) JVs and SDVOSB JVs, but will not
apply to HUBZone and WOSB JV arrangements.
•
JVs in an approved 8(a) mentor-protégé relationship will still be considered small if the
protégé qualifies as small, but (explained more fully below) SBA approval of a JV is not a
formal size determination.
27
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Changes to Joint Ventures
No Change to 8(a) Joint Venture
Size Standards
•
SBA proposes to streamline current JV performance of work requirements regarding the
differences between populated and unpopulated JVs.
•
For any 8(a) contract, the JV must perform the applicable percentage of work requirements
in 13 CFR 125.6 (generally applicable to small business contracts).
 The 8(a) must perform at least 40% of the JV’s work (which must be more than administrative or
ministerial functions).
 The amount of work done by the JV partners will be aggregated, and the work done by the 8(a)
partner(s) must be at least 40% of the total done by all partners.
 All work done by the non-8(a) partner and any of its affiliates at any subcontracting tier will be
counted towards non-8(a) work.
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Changes to Joint Ventures
Streamlined Performance of Work
Requirements for 8(a) JVs
•
SBA proposes to allow 8(a) participants to submit a JV agreement for approval at any time and without connection to
a specific 8(a) procurement.
 Currently, joint venture agreements must be contract-specific, forcing submission of the JV agreement to be after publication of the
solicitation in question.
•
If a JV is approved without a specific 8(a) contract – including JVAs regarding a blanket purchase agreement (BPA), basic
agreement (BA), or basic ordering agreement (BOA)):
 the 8(a) firm must submit an addendum to the JV agreement, setting forth the performance requirements to SBA for approval for each of the
three 8(a) contracts authorized to be awarded to the JV;
 SBA must approve such addendum for each order prior to award; and
 Each order issued under the BPA, BA, or BOA agreement counts as a separate contract award against the JV’s maximum number of contract
awards.
•
May take some uncertainty out of the JV proposal process and allow SBA to approve addendums quicker than reviewing
entire JV agreements.
•
If the first JV Agreement is contract-specific and receives SBA pre-approval, the JV must submit only an addendum
setting forth the performance requirements that must be approved prior to award of a second and third 8(a) contract to the
JV.
•
If the original JV Agreement is approved and the JV wants to perform a non-8(a) contract, the JV does NOT need to
submit an addendum regarding contract performance for the non-8(a) contract(s) to be performed as the second or third
contract performed by the 8(a) JV.
 Such addendums would only be required for 8(a) contracts; however, SBA seems to be reiterating that even non-8(a) contracts count against
the maximum three contracts authorized for each 8(a) joint venture.
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Changes to Joint Ventures
Prior Approval by SBA Permitted for
8(a) JV Agreements
•
SBA clarifies that unsuccessful offerors on a competitive 8(a) set-aside contract may protest the
size of an apparently successful SBA-approved 8(a) joint venture offeror.
•
Alters the rule expressed in Size Appeal of Goel Services, Inc. and Grunley/Goel Joint Venture
D LLC that the size of an SBA-approved 8(a) JV could not be protested because SBA had, in
effect, determined the joint venture to qualify as small when it approved the joint venture.
•
SBA makes clear that “Approval of a joint venture by its Office of Business Development should
not immunize the awardee of an 8(a) competitive contract from a size protest.”
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Changes to Joint Ventures
Size of 8(a) Joint Venture is Protestable
•
SBA proposes to allow agencies to execute 8(a) JV contracts in the name of either the JV
entity or the 8(a) participant, whereas in the past, the award had to be in the name of the
JV entity.
•
The rule also requires that agencies specify whether the award is to an 8(a) joint venture
or an 8(a) mentor-protégé joint venture.
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Changes to Joint Ventures
Contract Execution Can be in Name of
8(a) JV or 8(a) Participant
•
New process for the 8(a) participant and its JV partners to certify compliance with:
1.
2.
3.
4.
5.
•
JV agreement requirements;
the specific JV Agreement;
relevant performance of work requirements;
that the joint venture (and any addenda) has prior SBA approval; and
there are no unapproved agreement modifications.
Especially important in combination with SBA’s proposed paragraph 124.513(l), which allows imposition of suspension or
debarment for:





failure to enter a JV Agreement that complies with 124.513(c);
failure to perform a contract in accordance with the JV Agreement;
failure to perform a contract in accordance with performance or work requirements;
failure to submit the Certification of Compliance, or
failure to comply with Inspection of Records provisions (newly re-numbered 124.513(i)).
•
Seems to allow SBA to impose (or threaten to impose) suspension and/or debarment for an 8(a) participant’s failure to
follow the prescribed rules and approved JV Agreement terms; also seems to threaten suspension and debarment of
non-8(a) JV partners for their failures as well.
•
Certification of Compliance is also imposed for small business joint venture mentor-protégé arrangements under proposed
new regulation 125.8(d), likely putting those concerns and partners under the same threat of enforcement as 8(a)
concerns and partners here.
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Changes to Joint Ventures
Certification of Compliance & Basis for
Suspension or Debarment for 8(a) JVs
•
Current Rule: SBA may inspect the records of the joint venture at any time.
•
Proposed Rule:
 “The joint venture partners must allow SBA’s authorized representatives, including representatives
authorized by the SBA Inspector General, during normal business hours, access to its files to inspect
and copy all records and documents.”
•
This change would expose all records of each joint venture party to inspection, and failure to
comply with inspection would be considered a basis for suspension or debarment.
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Changes to Joint Ventures
SBA May Inspect Records of ALL 8(a)
Joint Venture Partners
•
SBA proposes to lift significant restrictions against HUBZone JVs and allow:
 JV contracts between a HUBZone protégé and its mentor, and
 JVs between HUBZone SBCs and one or more non-HUBZone SBCs.
 Current regulations only permit HUBZone SBCs to enter into JVs with other HUBZone SBCs.
 Change makes HUBZone regulations more consistent with other small business programs.
•
SBA would also lift the restriction that HUBZones may not joint venture with their mentor unless
the mentor is a qualified HUBZone SBC.
 But HUBZone SBC will not be able to joint venture with any mentor that has not been approved by SBA unless
the mentor is also a qualified HUBZone SBC.
•
Like the other programs, the HUBZone SBC must be the project manager, control performance of
the HUBZone JV contract, and perform at least 40% of the JV work.
•
SBA requested comments on:
 whether allowing JVs between HUBZone firms and non-HUBZone firms (other than the HUBZone firm’s
mentor) makes sense in light of the purposes of the HUBZone program, and
 whether the purposes of the HUBZone program would be appropriately served by allowing non-HUBZone firms
to act as mentors and joint venture with protégé HUBZone firms.
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Changes to Joint Ventures
HUBZone Contracts May be Performed
by JVs with Non-HUBZone SBCs
•
Currently, HUBZone JVs are subject to the restrictions that the procurement must exceed
half the size standard corresponding to the NAICS code for revenue-based size standards or
must exceed $10 million for employee-based size standards.
•
These limitations are being removed. Instead:
 A joint venture of at least one qualified HUBZone SBC and one or more other business concerns may
submit an offer as a small business for a HUBZone contract so long as the firms in the aggregate
are small under the size standard corresponding to the NAICS code assigned to the contract, unless the
contract qualifies under the exception in § 121.103(h)(3) of this chapter.
•
Change will bring HUBZones in line with the size standard for WOSB JVs, but it does not
apply to 8(a) JVs or SDVOSB JVs.
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Changes to Joint Ventures
Changes to HUBZone JV Size
Standards
•
SBA proposes to add a provision that recognizes SBA as a party that may file a request for
reconsideration in any OHA proceeding
•
Alters the rule expressed in Size Appeal of Goel Services, Inc. and Grunley/Goel JVD LLC that
SBA could not request reconsideration where SBA did not appear as a party in the original
appeal. In addition, the proposed rule allows “any party in interest” to file a request for
reconsideration.
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Changes to Joint Ventures
Procedural Clarification: SBA May File
Requests for Reconsideration of OHA
Decisions
Questions
?
Birch Horton Bittner & Cherot
Washington, D.C.
jdevore@dc.bhb.com
John Klein
Small Business Administration
Washington, D.C.
john.klein@sba.gov
Christine V. Williams
Davis Wright Tremaine
Anchorage, AK
christinewilliams@dwt.com
© Birch Horton Bittner & Cherot 2015 | BirchHorton.com
¿Preguntas?
Jon M. DeVore