SBA Update Proposed Regulations: Analysis and Application National 8(a) Association 2015 Summer...

SBA Update

Proposed Regulations: Analysis and Application

National 8(a) Association2015 Summer Conference

June 16, 2015

© Birch Horton Bittner & Cherot 2015 | BirchHorton.com

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Presented by:

Jon M. DeVore

Birch Horton Bittner & CherotWashington, D.C.

[email protected]

John Klein

Small Business Administration

Washington, [email protected]

Christine V. Williams

Davis Wright TremaineAnchorage, AK

[email protected]

DisclaimerThis 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 RegulationsWill 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: “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) Mentor-

Protégé 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

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8(a) Contracts Authorized “Regardless of Place of Performance”

• 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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Definition of Common Administrative Services Affiliation Exemption Expanded for Tribally/ANC-Owned Businesses• 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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Definition of Common Administrative Services Affiliation Exemption Expanded for Tribally/ANC-Owned Businesses (cont.)• 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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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. C

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Examples of Activities Qualifying for Common Administrative Services Affiliation Exemption

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

POSSIBLY SAFE 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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11 © Birch Horton Bittner & Cherot 2015 | BirchHorton.com

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SBA May Now Unilaterally Change 8(a) Firms’ Primary NAICS Codes• 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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Burden of Establishing Social Disadvantage is on the Applicant• 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.

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

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Substantial Unfair Competitive Advantage Uses a National Scale

• 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.”

But compares firm’s industry share relative to overall small business participation in industry nationwide

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Further Changes to 8(a) Program• Individuals May Not

Manage More Than Two Tribally-Owned or ANC-Owned 8(a) Program Participants at Once This language already appears

in the Small Business Act, but is not currently in SBA regulations.

Applies to tribal- and ANC-owned participants as per 13 CFR 124.109(a).

Codifies current SBA practice that in determining who manages actual day-to-day operations of a concern, SBA looks beyond corporate formalities and titles and examines the totality of the circumstances.

• Benefits Reporting Requirement Timing Changed for Entity-Owned Firms Changed from Participant’s

Annual Review Submission to Annual Financial Statement Submission

Purpose: make clear benefits reporting is not tied to continued eligibility and to help report community benefits

SBA circulated a discussion draft at Tribal Consultation

• Administrative Record in 8(a) Appeals Codifies language from recent

OHA cases – so long as SBA’s path of reasoning may

reasonably be discerned, OHA “will uphold a decision of less than ideal clarity.”

• Relaxation in “Good Character” Definition 8(a) applicant now ineligible if a

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. C

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Changes to the 8(a) Mentor-Protégé 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 Mentor-Protégé Programs. Ch

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SBA Creates One New Mentor-Protégé Program for All Small Businesses• 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: 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 mentor-protégé programs. C

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Certification of Compliance & Basis for Suspension or Debarment• 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:” 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 Joint Venture RegulationsChanges affecting small business joint ventures generally & changes to 8(a)-specific joint venture program regulations


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Changes Affecting Small Business Joint Ventures Generally• 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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Amended Definition of Joint Venture for All SBA Programs• Current regulations: allow JVs that are separate legal entities to be

1. unpopulated2. populated with administrative personnel only, or 3. 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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Joint Ventures Between Small Business Protégés and Their SBA-Approved Mentors

• 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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Inspection of Records – SBA Access to ALL Records of Joint Venture Partners• 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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Ability to Report Information re: JV Compliance with Performance of Work Requirements

• 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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Other Changes/Clarifications to Joint Ventures

• JV Certifications and Performance of Work Reports All JV partners performing SDVO, HUBZone, WOSB/EDWOSB, or small business set-aside contracts must certify prior to performance that they will comply with JV regulations and the JV agreement, and how they are meeting 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.

• JV Past Performance Evaluation Must Consider Work Done Individually by Each JV Partner, as well as any work done by the joint venture itself previously.

• Tracking JV Awards: SBA seeks comments on how to track JV awards, such as – requiring JV names to include “small business

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

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Changes to 8(a)-Specific Joint Venture Program Regulations• 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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No Change to 8(a) Joint Venture Size Standards• 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.

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Streamlined Performance of Work Requirements for 8(a) JVs• 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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Prior Approval by SBA Permitted for 8(a) JV Agreements• 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. Ch

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Size of 8(a) Joint Venture is Protestable

• 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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Contract Execution Can be in Name of 8(a) JV or 8(a) Participant

• 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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Certification of Compliance & Basis for Suspension or Debarment for 8(a) JVs• New process for the 8(a) participant and its JV partners to certify compliance with:

1. JV agreement requirements; 2. the specific JV Agreement; 3. relevant performance of work requirements; 4. that the joint venture (and any addenda) has prior SBA approval; and 5. 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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SBA May Inspect Records of ALL 8(a) Joint Venture Partners• 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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HUBZone Contracts May be Performed by JVs with Non-HUBZone SBCs• 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 HUBZone JV Size Standards

• 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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Procedural Clarification: SBA May File Requests for Reconsideration of OHA Decisions

• 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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Questions?

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Jon M. DeVoreBirch Horton Bittner & Cherot


John KleinSmall Business Administration


Christine V. Williams

Davis Wright TremaineAnchorage, AK

[email protected]


SBA Update Proposed Regulations: Analysis and Application National 8(a) Association 2015 Summer...

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Transcript of SBA Update Proposed Regulations: Analysis and Application National 8(a) Association 2015 Summer...