Government Contracts Monitor

Sole Source Awards to WOSBs Are Finally Here, But Certification Questions Remain

January 18, 2016

Year-end 2015 brought two important developments for Women-Owned Small Businesses (WOSBs), that provide new business opportunities, as well as some uncertainty, as we start 2016. First, the FAR Council issued its eagerly-awaited Interim Rule authorizing sole source awards to WOSBs in appropriate circumstances. This new authority, which is effective immediately, levels the playing field between WOSBs and the other socio-economic classifications, and provides government contracting officers an important new tool to increase the number of prime contract awards to WOSBs. Second, the Small Business Administration (SBA) issued an Advance Notice of Proposed Rulemaking (ANPRM), inviting comments, by February 16, 2016, on a wide range of issues related to implementing Congress’s ending WOSB self-certification and developing a new certification regime. Importantly, self-certification remains in place for now. However, changes are coming, likely in 2017, and this is your chance to comment and effect the direction of such change and promote a workable outcome.

Background: As previously discussed here, Section 825 of the National Defense Authorization Act of 2015 (FY15 NDAA) amended the Small Business Act to (1) authorize, for the first time, sole source awards to WOSBs, bringing WOSBs in line with other socio-economic programs, and (2) delete the statutory authority for WOSB status self-certification. Congress also advanced the date for a required SBA report as to WOSB participation in federal contracting.

SBA issued its Final Rule implementing the authorized sole source award authority, effective October 14, 2015 (discussed here). However, FAR implementation was still required before WOSB sole source awards could occur.

SBA deferred addressing self-certification, stating that “[t]his statutory requirement … may require substantial resources … and require a more prolonged rulemaking.” Importantly, SBA stated that “any certification process must be fair, efficient and comprehensive, but should not be burdensome or prevent new WOSBs and EDWOSBs from entering into the Federal marketplace.” SBA stated that “SBA wants to balance the need to protect the Government and other participants from fraud, with the goal of increasing WOSB and EDWOSB participation in the program.”

The FAR Interim Rule: The new FAR Interim Rule finally allows Contracting Officers to make sole source awards to WOSBs. However, consistent with the overall parameters of the WOSB Program, such sole source awards may be made only when:

The proposed contract is for an industry (NAICS code) identified by SBA in which WOSBs are underrepresented or substantially underrepresented; and
Where the Contracting Officer determines, based on market research,
    (I)    there is one responsible WOSB, but no reasonable expectation that two or more qualifying WOSBs will submit offers in the case of an industry in which WOSBs are             substantially underrepresented, or two or more qualifying Economically-Disadvantaged WOSBs (EDWOSBs) where WOSBs are underrepresented
    (ii)    the anticipated award price (including options) will not exceed $6.5M for manufacturing NAICS codes, and $4.0M for all other NAICS codes; and
    (iii)    award can be made at a fair and reasonable price.

Importantly, while mandating that Contracting Officers “consider” a WOSB sole source award before considering a small business set-aside, new FAR 19.1506 does not actually mandate WOSB sole source awards, and the sole-source decision is left to the Contracting Officer’s discretion. However, the FAR Council stated that one of the objectives of the Interim Rule is “to provide an additional needed tool for agencies to meet the statutorily mandated goal of 5 percent of the total value of all prime contract and subcontract awards for WOSBs.” There thus is a strong basis upon which WOSBs can encourage Contracting Officers to avail themselves of this newly-provided tool to enhance their respective agency’s performance with respect to WOSB prime contract award goals, and Contracting Officers should consider and give weight to this policy in making award decisions.

Ending Self-Certification – Next Steps: SBA’s new ANPRM confirms SBA’s previously stated intent to: (1) proceed deliberately, and solicit maximum industry input, before establishing a new WOSB certification regime; and (2) continue permitting self-certification in the interim. As stated by SBA last Spring, “there is no evidence that Congress intended to halt the existing WOSB Program until such time as SBA establishes the infrastructure and issues regulations implementing the statutory certification requirement.”

The FY15 NDAA specifies four different certification alternatives: (1) a Federal Agency; (2) a State government; (3) SBA; or (4) a national certifying entity approved by SBA. SBA is now inviting comments as to the practicality of, and downsides to, each of these four alternatives in light of existing programs and experience, and as to whether each alternative should be pursued.

SBA also is inviting comments as to the length of any grace period that should be permitted for presently self-certified entities to come into compliance with the new system when implemented, and as to what should be done with, or what continuing use made of, the existing WOSB documents repository.

Comments on the ANPRM are due no later than February 16, 2016.

Conclusion: WOSBs working in eligible industries should take advantage of, and educate their Contracting Officers about, the new sole source award authority, and encourage them to award eligible contracts on this new basis. WOSBs also should consider providing comments to SBA in response to the ANPRM, particularly as to any experience (good or bad) with the various specified certification methods, including as to the time and cost of third-party certification.