Government Contracts Small Business Runway Extension Act Didn’t Apply to RFP
Wednesday, September 18, 2019

Small Business Runway Extension Act Didn’t Apply to RFP

By Government Contracts Editorial Staff

Protests of the terms of a request for proposals for One Acquisition Solution for Integrated Services contracts were denied because the government was not required to use new size standards in the Small Business Runway Extension Act of 2018 (PL 115-324). The RFP, issued as a small business set-aside, was an “open season On-Ramp” that allowed additional firms to compete for small business pool OASIS contracts. The pool was assigned North American Industry Classification System code 541330, engineering services, which has a Small Business Administration size standard of $15 million in annual receipts. SBA’s regulations provide that, for purposes of calculating whether a firm meets a size standard defined in terms of annual receipts, the firm’s revenue is averaged over the prior three years (SBA 121.104(c)). The Runway Extension Act, which was enacted prior to the release of the RFP, revised the Small Business Act at 15 USC 632(a)(2)(C)(ii)(II) to impose a five-year measuring period. However, in the Q&A, the government stated it was relying on SBA guidance and “until the SBA issues further direction, agencies will continue to use the previous standard of 3 years when determining size status.” Two weeks later, SBA issued a proposed rule implementing the Runway Extension Act (¶70,425.634). According to the protesters, the legislation took effect when enacted and SBA was required to immediately apply a five-year average.

No Final Regulations. The Comptroller General ruled “[e]ven assuming the Runway Extension Act took effect on the date of its enactment …, we conclude that the act did not automatically amend all existing size standards and SBA regulations. Rather, as the SBA reasonably explains, the Small Business Act requires the promulgation of regulations to give effect to the Runway Extension Act.” SBA interprets §632(a)(2)(A) of the Small Business Act to apply to size standards issued by SBA and §632(a)(2)(C) to size standards issued by other agencies. SBA’s proposed rule explains that the Runway Extension Act addresses the size standards for non-SBA agencies under §632(a)(2)(C), not SBA standards under 15 §632(a)(2)(A). Nevertheless, the rule “propose[d] to change [SBA’s] own size standards to provide for a 5-year averaging period for calculating annual average receipts for all receipts-based size standards” to avoid confusion arising from conflicts in several different types of size standards. The proposed rule states that it “only would affect the application of SBA’s size standard rules after the effective date of a final rule,” and because size status is determined as of the date when a firm certifies its size in a proposal, SBA will apply the three-year calculation period to any firm that self-certified its size prior to the effective date of a final rule. SBA’s interpretation of the Runway Extension Act as requiring rulemaking was entitled to deference, and none of the protesters’ arguments addressed SBA’s interpretation of §632(a)(2) with regard to the requirement to promulgate changes to size standards or the interpretation of those standards. (TechAnax, LLC, et al., 34 CGEN ¶116,511)

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