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8(a) BD Program Update: SBA Issues Rule Extending 8(a) BD Program Participation

January 15, 2021

Earlier this week, on January 13, 2021, the U.S. Small Business Administration (SBA) issued an interim final rule that allows companies in the 8(a) Business Development (8(a) BD) program to extend their participation in the program for up to one additional year.  The extension is intended to help small businesses that were participants in the 8(a) BD program as of March 30, 2020 (the date of the nationwide coronavirus emergency disaster declaration) and that may have been adversely affected by the COVID-19 pandemic in their ability to participate and receive the full benefits of the program.

Under the interim final rule, revised section 124.2 of the SBA regulations provides that for small businesses participating in the 8(a) BD program as of March 13, 2020, and through January 13, 2021, the SBA will extend the program term by one year unless the business declines the extension.  If any business that was a participant in the 8(a) BD program as of March 13, 2020, graduated or left the program before January 13, 2021, it must notify the SBA of its intent to be readmitted for a period of one year from the date it completed its program term.  This notification must be received by the SBA no later than March 15, 2021.  In addition, any small business that wishes to be readmitted must certify that it continues to meet program eligibility requirements.

The interim final rule also revises section 124.2 of the SBA regulations to clarify that any period of extension will be added to the business’ transitional stage of participation in the 8(a) BD program.

Lastly, the interim final rule revises section 124.509 of the SBA regulations to clarify how an extension of participation will impact the 8(a) business’ requirement to attain targeted dollar levels of non-8(a) revenue in its extended program term.  Specifically, the target non-8(a) business activity that applies in the final year of the transitional stage of 8(a) BD program participation (year nine) – currently 50% non-8(a) revenue – will apply to any extended program term that is tacked on because of the participation extension.

The interim final rule became effective January 13, 2021, and comments are due by March 15, 2021.

To read or obtain a copy of the interim final rule go here.

To read other articles from The GovCon Bulletin™ go here.

DFARS Update: Comment Period Reopened For New SBIR Data Rights Rules

January 12, 2021

Last month, the Department of Defense (DoD) announced (see announcement here) that the comment period was reopened for its August 31 advanced proposed rulemaking under the Defense Federal Acquisition Regulation Supplement (DFARS).  The reopened comment period, extended until January 31, 2021, is intended to provide experts, the public, and the private sector with an opportunity to address anticipated changes to rules under DFARS concerning the rights of the federal government and contractors in data generated under SBIR and STTR awards.  DoD's announcement also scheduled a virtual public meeting to be held on January 14. 

As the public comment period draws to a close on January 31, we take this opportunity to take a quick look at the DFARS changes anticipated by DoD.

On August 31, 2020, DoD issued its advanced notice of proposed rulemaking under which DFARS will be amended in order to implement certain changes made by the Small Business Administration (SBA) to policy directives covering the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) Programs.  The anticipated changes are reflected in an initial draft of the DFARS revisions that DoD made available with its advanced proposed rulemaking.  A copy of the initial draft can be obtained here.

As we have noted previously in webinars and other resources on the SBIR and STTR programs, the rules that govern the two programs are largely set forth, not in federal regulations, but in policy directives published by the Small Business Administration (SBA).  One of the areas in which SBIR/STTR rules are not only reflected in policy directives but also codified in federal regulations concerns the rights of contractors and the federal government in SBIR/STTR data (i.e., data generated under SBIR and STTR projects).

In May 2019, DoD published a combined revised policy directive that covers both programs and that made significant changes, including changes to the SBIR/STTR data rights rules.  As we discussed in our webinar on the May 2019 Policy Directive Amendments (here), those changes included replacing the extendable SBIR/STTR data protection period (which under FAR is limited to four years and under DFARS is limited to 5 years) with a uniform non-extendable 20-year protection period.

Another change made by the revised policy directive concerns the rights in SBIR/STTR data that the federal government acquires once the SBIR/STTR protection period expires.  Under the revised policy directive, the government obtains “government purpose” rights, a departure from the “unlimited rights” the federal government acquires at the end of the SBIR/STTR protection period under the current DFARS regulation.

DoD’s proposed advanced rulemaking, thus, anticipates conforming the DFARS SBIR/STTR regulations to these and other changes made in the May 2019 Policy Directive.  In addition to incorporating the 20-year SBIR/STTR data protection period and the post-protection period “government purpose” data rights, the advanced rulemaking anticipates amending DFARS in order to adopt new rules under the revised May 2019 Policy Directive that apply when contractors omit restrictive markings on the SBIR/STTR data that they transmit to the federal government.

Existing DFARS regulations, as well as the old SBIR & STTR policy directives, are silent on the issue of what happens if a contractor fails to include a required restrictive marking on SBIR/STTR data that is transmitted to the federal government.  Under the May 2019 Policy Directive, however, contractors are given six months to request to have an omitted SBIR/STTR legend placed on the SBIR/STTR data.  DoD’s advanced rulemaking and the accompanying initial draft of the DFARS revisions anticipate amending DFARS to include the six-month window for contractors to request placement of omitted markings.  The draft of the DFARS revisions sets forth detailed procedures for contractors to follow when making the request.  If contractors do not place restrictive markings on their SBIR/STTR data or do not request placement of omitted markings, the anticipated revised DFARS rules incorporate the May 2019 Policy Directive’s instruction that unmarked data transmitted to the federal government will be subject to the federal government’s “unlimited rights.”

Lastly, DoD's notice of advanced rulemaking anticipates amendments to DFARS in order to refer to, and incorporate, new rules under the May 2019 Policy Directive for the handling of prototypes by federal agencies.  These new rules are intended to prevent reverse-engineering and potentially harmful disclosures of innovative technology. 

To read or obtain a copy of the advanced proposed rulemaking go here.

To read other articles from The GovCon Bulletin™ go here.

FAR Update: Proposed Commercial Acquisition Rule Sets Out Newly Defined “Commercial Products” And “Commercial Services” Terms

December 10, 2020

On October 15, 2020, the Department of Defense (DoD), the General Services Administration (GSA), and the National Aeronautics and Space Administration (NASA) published a Proposed Rule that replaces the term “Commercial Item” in the Federal Acquisition Regulation (FAR) with two newly defined terms - “Commercial Product” and “Commercial Service.”  As the public comment period draws to a close on December 14, we take this opportunity to take a quick look at the FAR changes implemented by the Proposed Rule.

FAR Part 12 sets out the procedures that control federal government procurements for commercial products and services.  These procedures are supposed to more closely resemble acquisition practices in the general commercial marketplace.  So solicitations and contracts for commercial acquisitions typically contain fewer FAR clauses and mandatory flow-down clauses.  Moreover, subpart 12.6 sets out optional streamlined and abbreviated procedures that contracting officers can apply in order to simplify even further the solicitation and evaluation process.

Under existing FAR provisions, the rules for commercial acquisitions use the term “commercial item” when describing those things that are covered by Part 12.  As defined currently in FAR 2.101, “commercial items” are either “items” used by the general public or non-government entities for non-governmental purposes or “services” in support of such items or that are offered in the commercial marketplace.  Thus, the term encompasses both items and services.

The Proposed Rule, however, eliminates the term “commercial item” from FAR and replaces it with two new terms – “commercial product” and “commercial service.”  The Proposed Rule defines the new terms by splitting the current definition of “commercial item” so that the provisions relating to “items” now fall under the definition for the term “commercial product” (except that the term “item” is replaced with the term “product”) while the provisions relating to “services” now fall under the definition for the term “commercial service.”  The Proposed Rule also amends Part 12 by generally substituting the term "commercial item" with the term "commercial product and commercial service."  Consequently, since collectively the two newly defined terms largely mirror the term “commercial item,” for now at least, the scope of what is covered under Part 12 has not changed.

According to the preamble for the Proposed Rule, splitting the term “commercial item” into the two defined terms better reflects the significant role that commercial services play in government procurements and is supposed to provide more clarity to government acquisition personnel with the goal of encouraging greater engagement in the commercial marketplace.  It seems reasonable to anticipate that splitting the definition into two terms will inevitably result in future regulation amendments that (1) further refine what constitutes a “commercial product” and what constitutes a “commercial service,” and (2) set out diverging acquisition procedures under Part 12 that are more narrowly tailored to each kind of item.  Contractors that offer commercial goods or services to the federal government should remain on alert for any future developments.

To read or obtain a copy of the Proposed Rule go here.

To read other articles from The GovCon Bulletin™ go here.

A Closer Look At The SBA’s Final Rule On WOSB Certifications

May 26, 2020

Earlier this month the U.S. Small Business Administration (SBA) published its long-awaited final rule covering the certification requirements for Women-Owned Small Business Concerns (WOSBs) and Economically Disadvantaged Women-Owned Small Business Concerns (EDWOSBs).  In that rule, the SBA also took the opportunity to make changes to align the dollar threshold for economic disadvantage under the 8(a) Business Development Program with the dollar threshold for economic disadvantage that applies to EDWOSBs.

WOSB Certifications

As we wrote about here, in September 2015, the SBA issued a final rule that implemented the 2015 NDAA changes to the Small Business Act granting contracting officers the authority to make sole source awards to WOSBs and EDWOSBs.  Although the 2015 NDAA changes also created a requirement that businesses be certified as a WOSB or EDWOSB by either a federal agency, a State government, the SBA, or a national third party certifier (TPC) approved by the SBA, the SBA did not implement this requirement in its 2015 final rule, believing that such implementation would delay implementation of WOSB sole source authority.

Nearly five years later, the SBA has now implemented the WOSB certification requirement into its WOSB regulations.  Under the final rule, any business wishing to compete for a sole-source or set-aside award under the Women-Owned Small Business Federal Contracting Program (WOSB Program), which is regulated by the SBA, must comply with this certification requirement.  Businesses that do not participate in the WOSB Program may continue to self-certify their WOSB status, may receive contracts outside the WOSB Program, and may be counted toward an agency’s goal for awards to WOSBs.

As for obtaining WOSB or EDWOSB certification by the SBA, small businesses can apply directly to the SBA under a free electronic application process.  According to the SBA, moving to a purely electronic application process - under which the certification application, correspondence, and all notifications are processed electronically - will reduce transaction costs and expedite certifications.

A business that is already certified by the U.S. Department of Veteran Affairs (VA) as a Service-Disabled Veteran Owned Business or a Veteran-Owned Business can be certified by the SBA as a WOSB or EDWOSB simply by submitting evidence that it is a women-owned and controlled small business or an economically disadvantaged women-owned and controlled small business.

Lastly, a small business can apply for WOSB or EDWOSB certification by a TPC and then submit evidence of its TPC certification with its WOSB or EDWOSB application to the SBA.  TPCs are permitted to charge a reasonable fee for their certifications but must alert applicants that the SBA offers certification for free.  Although the final rule anticipates that there may be some differences among the certification processes applied by TPCs and the SBA, the underlying eligibility requirements for WOSB or EDWOSB certifications should be the same.

Indeed, TPCs are required to enter into agreements with the SBA that specify requirements they must meet, and the SBA may terminate its agreement with a TPC if the TPC's eligibility requirements are not the same as those applied by the SBA or if a TPC certifies businesses that the SBA later determines are ineligible for certification.  To ensure that TPCs are meeting requirements, the final rule requires TPCs to submit monthly reports to the SBA and authorizes the SBA to conduct periodic reviews as well as a review every three years.

As for processing WOSB and EDWOSB applications, after the SBA has received a WOSB or EDWOSB certification application, it will advise applicants within 15 days whether the application is complete.  Once an application is complete, the SBA will make a determination within 90 days.  A business that has been declined for certification by the SBA or by a TPC may try again and seek certification within 90 days if it believes it has overcome the reasons for the decline.  After a WOSB or EDWOSB application is approved, a business must annually represent to the SBA that it continues to meet all WOSB/EDWOSB eligibility criteria.

Economic Disadvantage

The economic disadvantage net worth threshold for EDWOSBs is $750,000, which is the same economic disadvantage net worth threshold for continuing eligibility under the SBA’s 8(a) BD program, but higher than the $250,000 net worth threshold for initial eligibility under the 8(a) BD program.  To avoid confusion and inconsistency between the WOSB and the 8(a) BD programs, the SBA changed the 8(a) BD thresholds so that they are now all $750,000. 

Portions of the final SBA rule become effective on July 15, 2020, with the remaining portions becoming effective on October 15, 2020.  To read or obtain a copy of the final rule go here.

To read other articles from The GovCon Bulletin™ go here.