Small Businesses operating in the federal marketplace often find themselves competing against Large Businesses who hold long term Multiple Award Contracts (MACs) that they obtained while they were a small business (SB). These large businesses may be able to compete as a SB in SB Set-Asides, even though they no longer qualify as a SB for the applicable NAICS code per SBA size determination regulation. For example, the Navy SeaPort-e MAC is awarded for five years with two option periods of five years (for a total of 15 years). Navy policy allows a (originally small) SeaPort-e MAC holder to keep its SB status for competition, even if it has grown to Large Business status, until its SeaPort option period is activated on the five-year anniversary. Thus a large business can compete in SB set-asides based on its original SeaPort-e MAC award if it has not yet had its option period activated or been asked to recertify by the contracting officer.
This not only results in instances where SBs must compete with large businesses in SB Set-Aside solicitations, but in instances where agencies award to large business and count those awards as credit toward their SB contracting goals.
In the Federal Register, Vol. 78, No. 191, Pg. 61119, the SBA expressed its concern that this type of situation may affect competition and SB set-asides by stating:
“SBA was concerned that if an agency issues a long-term order just prior to a business recertifying its status as other-than-small on a multiple award contract, then the long-term order will be counted as an award to a small business for an indefinite amount of time. However, SBA was unsure how often this situation occurs…”
Based on our experience in the local federal market, this situation occurs every time a five-year anniversary of a SeaPort-e award cycle occurs. The SeaPort-e ‘rolling admissions’ has resulted in SeaPort-e MAC awards in every year since 2004, with five year anniversary option periods occurring every year starting in 2009. In our local market there are at least three large businesses that have bid on SB Set-Aside solicitations, as SBs, between January 2014 – April 5th, 2014; April 5th being the 5-year anniversary date when they were formally recognized as a large business in the SeaPort-e system. If any of these large businesses are awarded task orders for these solicitations then the SB Set-Aside will have been wasted, and the SB community will be deprived of a SB Set-Aside award given to a large business. We suspect that this occurs at every agency site using similar MAC systems, and that it has happened every year since 2009 in the SeaPort-e system.
In response to questions we posed earlier this year, we were informed by the Navy SeaPort-e Contracting Officer and the local Navy SB Advocate that when a company competes as a SB because of their status when their SeaPort-e contract was originally awarded, regardless of the current size of the business, then any resulting task order is counted toward the agency SB goals for the life of the task order.
Award of a MAC Task Order to a large business instead of a SB in a SB Set-Aside solicitation is inconsistent with the integrity of the procurement system and the Small Business Act 15 U.S.C. §§ 631-657a. A large business should not be eligible for award under the terms of solicitations which set aside award to small business. Such award is contrary to the intent of 13 CFR 121.404 and FAR 52.219-28, and deprives SBs of opportunity to compete on a level playing field against other SBs.
We suggest that the procurement rules and regulations need to be revised to clarify the existing language and strengthen the requirement for agency contracting officers to award MAC task orders that are set aside for SBs to small businesses. The practice of counting contract awards as credit toward SB goals, after a SB becomes a large business (or other-than-small) for the applicable NAICS code should be terminated. We suspect that there are many $Millions currently counted as SB awards that are actually awarded to SB’s that have grown to large business size since their last recertification under the applicable MAC.
We further propose that agency contracting officers should require size recertification in the System for Award Management (SAM) database by all bidders on SB Set-Aside solicitations, and that agency contracting officers be required to immediately reflect the actual business size in their reports into federal databases such as FPDS for SBs that have recertified their size status in SAM as other-than-small for the applicable NAICS. We also propose that SB’s who recertify as ‘other-than-small’ in SAM, at any time, be required to immediately notify their respective contracting officer(s) that their size status has changed. Further, agency contracting officers should not be permitted to override the FPDS database size determination for specific contracts as this practice skews overall agency SB contracting goal attainment data.