DOD issued a final rule effective 26 May 15 amending the Defense Federal Acquisition Regulation Supplement (DFARS) to clarify that entering into a contract award may cause a small business to eventually exceed the applicable small business size standard.
DoD wanted to ensure that a small business contractor is aware that entering into a covered contract conveys its acknowledgement that doing so may cause it to eventually exceed the small business size standard of the North American Industry Classification System (NAICS) code identified in the solicitation and contract.
This final ruling adds DFARS 219.309, which requires the inclusion of this provision in solicitations, including FAR part 12 for acquisition of commercial items, when the estimated annual value of the contract is expected to exceed the small business size standard (if the size standard is set by dollars of revenue) or $70 million (if the size standard is set by number of employees) for the NAICS code assigned by the contracting officer.
DFARS 252.219–7000, Advancing Small Business Growth, requires the offeror to acknowledge that by acceptance of the contract resulting from the solicitation, the Offeror may exceed the applicable small business size standard of the NAICS code assigned to the contract and would no longer qualify as a small business concern for that NAICS code. (Small business size standards matched to industry NAICS codes are published by the Small Business Administration and are available at http://www.sba.gov/content/table-small-business-size-standards).
The clause goes on to encourage offerors to develop the capabilities and characteristics that are competitive with other-than-small contractors in this industry.
I guess this one puzzles me a bit. Was it unclear to small businesses that if they are a small business based on an annual income of say $1M and they proposed on and won a $15M contract, they would no longer be small under that NAICS code?
If so, then the small business was not very savvy about how SBA determines small business standards and probably needed to do a little more investigation before entering the federal government contracting marketplace.
By adding this clause, it reminds me of all the warning labels that have been added to products because that ONE person could not figure out not to do something stupid with it. Or the fact that shampoo has to have instructions on the label. To me, this clause is a CYA for the DOD so small businesses can’t complain and say “You awarded me a big contract and now I’m not small anymore!”
So now you all know so don’t be surprised if this happens! LATHER – RINSE – REPEAT!