SBA Crackdown on Size/Status Scofflaws

Congress and the Small Business Administration (SBA) are getting ready to crack down on companies who do not play by the rules when it comes to size and status. In 2010, Congress passed the Small Business Jobs Act of 2010 (Jobs Act). Included in this Act were a number of provisions that pertain to small business size and status integrity.

The Jobs Act provides that if a concern willfully seeks and receives an award by misrepresenting its small business size or other socioeconomic status, there is a presumption of loss to the United States equal to the value of the contract, subcontract, cooperative agreement, cooperative research and development agreement or grant. The Jobs Act also provides that certain actions, such as submitting an offer in response to a solicitation set aside for small business concerns, will be deemed a representation of small business size or status. The Act also requires the signature of an authorized official of a concern making a small business size or status representation in connection with certain actions, such as submitting an offer. The amendments further provide that concerns must update their size and status certifications in ORCA (Online Representations and Certifications Application) at lease annually, or the status will be lost until such time as the update is made.

On October 7, 2011, SBA published the following proposed regulations to implement these provisions of the Jobs Act. SBA is proposing to amend its program regulations to

• implement statutory provisions establishing that there is a presumption of loss equal to the value of the contract or other instrument when a concern willfully seeks and receives an award by misrepresentation.
• implement statutory provisions that provide that the submission of an offer or application for an award intended for small business concerns will be deemed a size or status certification or representation.
• implement statutory provisions that provide that an authorized official must sign in connection with a size or status certification or representation for a contract or other instrument.
• implement statutory provisions that provide that concerns that fail to update their size or status in ORCA at least annually shall no longer be identified in the database as a small or some other socioeconomic status, until the representation is updated.
• clarify when size is determined for purposes of entry into the 8(a) Business Development and HUMZone programs.

SBA hopes that these regulations will prevent and deter fraud and misrepresentation in small business government contracting and other programs. In fiscal year 2010, SBA found approximately 200 firms to be ineligible for the contract (or other award type) for which they were awarded. There were undoubtedly many others that were not investigated.