Small Business Runway Extension Act

House Bill Proposes Changes to Small Business Sole Source Rules

On January 14, 2019, the House passed four bills pertaining to small business contractors. These bills propose changes to the Small Business Sole Source Rules. The bill that is most relevant is H.R. 190, which removes the word “option” from the sole source thresholds for 8(a), HUBZone, Women-Owned small business (WOSB) and Service-Disabled Veteran Owned (SDVO) small business awards.

What does this mean for government contractors? An agency could award a sole source contract as long as the value of the base year does not exceed $4 million for service and construction contracts and $7 million for supply contracts. Important things to note:

  1. The bill does not alter the important distinction between 8(a) sole source awards and HUBZone, WOSB, and SDVO sole source awards. An agency must award a contract below the threshold amounts to an 8(a) participant on a sole source basis but can only award a sole source contract to a HUBZone, WOSB or SDVO small business concern if the contracting officer does not have an expectation of receiving two or more offers from those types of concerns.
  2. The Bill requires that for WOSB and SDVO sole source awards, the SBA must determine that the intended awardee is eligible prior to award, until such time as SBA has implemented a certification program for WOSB and SDVO concerns. We believe this means that the contracting officer would have to request that SBA conduct a program examination, like a protest determination, on any WOSB or SDVO firm proposed for a sole source award under this authority. This process can take 15 business days or more, which may dampen contracting officer enthusiasm. for using this authority.  In addition, the requirement to execute a justification and approval for HUBZone, SDVO and WOSB sole source awards under FAR 6.302-5 will remain, which also hinders the use of this procurement mechanism.

The SBA is in the process of implementing a WOSB certification program as required by the National Defense Authorization Act of 2015, and there have been discussions and legislative proposals to mandate a government wide certification program for SDVO concerns. The House Bill will now move to the Senate; Live Oak Bank’s Government Contracting experts will continue to update our borrowers and clients on changes and implications.

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