United States: SBA OHA Affirms Long-Standing Interpretation Of Recertification Regulations

In a recent decision, the U.S. Small Business Administration's ("SBA") Office of Hearing and Appeals ("OHA") affirmed the widely-understood interpretation of the SBA regulations that a Service-Disabled Veteran-Owned Small Business Concern ("SDVO SBC") retains its SDVO SBC status for the life of multiple award task order contracts even when acquired by a non-veteran-owned company. The result of this interpretation is that, unless recertification is requested by the contracting officer or there is an off-ramp provision in the multiple award task order contract, an acquired firm remains eligible for set-aside task orders. However, the procuring agency may not credit an award toward its SDVO SBC goals unless the contractor re-certifies as an SDVO SBC following the acquisition. Although this interpretation has been widely held in the industry and among contracting personnel at federal agencies, it came into question recently in Analytic Strategies, Inc., SBA No. VET-268, 2018 (January 29, 2018). In that case, the SBA's Director of Government Contracting determined that Analytic Strategies, Inc. ("Analytic Strategies") was ineligible for an SDVO SBC set-aside task order on a multiple award contract simply because Analytic Strategies had been acquired. In reviewing what was a matter of first impression from a litigation-perspective, OHA reversed the SBA's Director of Government Contracting's determination and affirmed the widely-held view of the applicable regulations.

The facts of the case are relatively straightforward. The General Services Administration ("GSA") had awarded Analytic Strategies a Government-wide Multiple Award, Indefinite Delivery, Indefinite Quantity contract under the One Acquisition Solution for Integrated Services ("OASIS") Small Business ("SB"), Pool 1. At the time of its initial offer, Analytic Strategies qualified as an SDVO SBC and identified itself as such. A couple of years after contract award, Analytic Strategies was acquired by PlanetRisk, Inc., a non-veteran owned company. In accordance with the SBA's re-certification rule, Analytic Strategies informed the GSA of its acquisition by a non-veteran-owned firm and the GSA told Analytic Strategies that it remained eligible for set-aside task orders under the OASIS SB Pool 1 contract. Analytic Strategies then submitted an offer in response to a Department of Homeland Security ("DHS") Request for Quotations from holders of OASIS SB Pool 1 contracts. The task order was set aside for SDVO SBC contractors. DHS's contracting officer did not request recertification and awarded the task order to Analytic Strategies.

One of the unsuccessful offerors filed a bid protest at the Government Accountability Office ("GAO") asserting that Analytic Strategies had misrepresented its SDVO SBC status to DHS. While the GAO dismissed this claim because the GAO does not have jurisdiction over allegations that an offeror is not an SDVO SBC, OBXTek, Inc., B-415258, Dec. 12, 2017, 2017 CPD ¶ __ at 5-6, the GAO protest brought the procurement to the attention of the SBA's Director of Government Contracting. The SBA's Director of Government Contracting initiated his own status protest and determined that Analytic Strategies was not eligible for the set-aside task order. His decision relied on the recertification rule at 13 C.F.R. § 125.18(e), which requires a firm to re-certify its SDVO SVC status after an acquisition.

Analytic Strategies appealed the decision of the SBA's Director of Government Contracting to OHA. In its decision, OHA observed that the plain text of the regulation draws a distinction between an offeror's eligibility to compete for a set-aside task order and the procuring agency's ability to take SDVO SBC credit for that award. OHA also noted that 13 C.F.R. 121.404(g), related to size re-certifications, has a parallel structure to § 125.18(e) and prior OHA size decisions strongly suggested that the distinction between eligibility and credit was meaningful. See e.g., Size Appeal of Tescom, SBA No. SIZ-5641 (2015) (finding that a concern that initially qualifies as a small business concern, and later recertifies as other than small, retains its eligibility for awards, but the procuring agency may no longer count those awards toward its small business goals). With respect to eligibility, OHA held that the plain text of the recertification regulation provides that "a concern that initially qualifies as an SDVO SBC may retain its status for the life of a contract" and that the "only exception to this general rule occurs if the contracting officer requests recertification in connection with a specific order." By contrast, re-certifications under § 125.18(e) create only "a prohibition on counting the award of options or orders toward the procuring agency's socioeconomic goals...."

OHA therefore concluded that DHS properly awarded the task order to Analytic Strategies, even though it no longer qualified as an SDVO SBC, because Analytic Strategies had qualified as an SDVO SBC at the time of its initial offer for GSA's OASIS SB Pool 1 contract and the DHS's contracting officer did not require recertification for the task order. However, the SBA interpreted the regulation to prohibit DHS from counting the award to Analytic Strategies toward its SDVO SBC goals because Analytic Strategies did not recertify as an SDVO SBC after being acquired by PlanetRisk.

Key Takeaways:

SDVO SBC contractors that are acquired by non-SDVO SBC concerns retain their SDVO SBC eligibility for task orders under a pre-existing multiple award contract absent a request for re certification by the procuring agency's contracting officer or a specific provision in the multiple award contract providing for such contractors to be off-ramped. In such situations, however, the regulation prohibits the procuring agency from counting this award toward its SDVO SBC goals. While the holding in Analytic Strategies, Inc., SBA No. VET-268, 2018 (January 29, 2018) does not expressly reach size re-certifications under 13 C.F.R. § 121.404(g), there is strong language in the opinion indicating that OHA would rule the same way if that case were presented to it.

*Victoria Dalcourt is a Law Clerk in our Washington, D.C. office and not admitted to the bar.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP. All rights reserved

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