Government Contracts Monitor

Get Ready Women -- WOSB Sole-Source Awards Get Closer

June 8, 2015

As previously discussed here, the National Defense Authorization Act for Fiscal Year 2015 (the Act), made two important changes for Women-Owned Small Businesses (WOSBs). First, the Act authorized certain sole source awards to WOSBs, and second, the Act deleted the prior authorization for WOSBs to self-certify their status and eligibility for award. The Small Business Administration (SBA) has now issued a Proposed Rule to implement the new sole source award authority, and to amend SBA’s definitions of "underrepresentation" and "substantial underrepresentation."

New Sole Source Award Authority: The heart of the Proposed Rule is the establishment of two new Subsections which essentially track the statutory sole source award authorization in the Act. Specifically, these new Subsections authorize sole source awards in industries identified by SBA in which WOSBs are underrepresented or substantially underrepresented where, based on market research, the contracting officer determines (1) that there is one responsible WOSB, but does not have a reasonable expectation that two or more qualifying WOSBs 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, will submit offers, (2) the anticipated award price (including options) will not exceed $6.5M for manufacturing NAICS codes, and $4.0M for all other NAICS codes, and (3) award can be made at a fair and reasonable price. SBA states in the NPRM that "[]the objectives of this proposed rule are to put the WOSB Program on a level playing field with other SBA government contracting programs with sole source authority and to provide an additional, needed tool for agencies to meet the statutorily mandated 5% prime contracting goal for WOSBs."

WOSB Status Protests: The Proposed Rule would amend 13 C.F.R. § 127.600, dealing with WOSB/EDWOSB status protests, to provide (1) that only SBA or the contracting officer may protest the proposed awardee’s WOSB or EDWOSB status in a sole source procurement, and (2) that any interested party may protest such status in any other WOSB or EDWOSB procurement. These procedures track those applicable to service-disabled veteran-owned small businesses (SDVOSBs) and HUBZone small businesses.

New Definitions of "Underrepresentation" and "Substantial Underrepresentation": Perhaps the most intriguing aspect of the Proposed Rule is SBA’s proposed adoption of new definitions of "underrepresentation" and "substantial underrepresentation." As you may know, these terms presently are defined in terms of a "disparity ratio" between awards to WOSBs vs. the percentage of WOSBs in the particular NAICS Code. "Underrepresentation" presently is defined as being where the disparity ratio is between 0.5 and 0.8, while "substantial underrepresentation" means a disparity ratio less than 0.5. The new definitions contain no reference to this disparity ratio, and instead propose a much more generic standard, stating that these terms will be "determined by a study using a reliable and relevant methodology." According to SBA, this change would allow SBA to conduct the required study within the new accelerated timeframe imposed by Congress "by providing SBA with the flexibility to conduct the most reliable and relevant study of WOSB participation in federal contracting." SBA further states, without any explanation, that "the new definitions of these terms would align more closely than the current definitions with the statutory intent of the 2013 NDAA and the 2015 NDAA." SBA does not further explain its intent. However, if adopted, it will be interesting to see whether this change results in a new, and possibly more liberal, determination as to the industries in which WOSBs are underrepresented, thus increasing the utility and value of WOSB status.

Deferred Implementation of the Deauthorization of Self-Certification: The Proposed Rule acknowledges that Congress eliminated the authorization for WOSBs to self-certify. However, SBA states that "[t]his statutory requirement … may require substantial resources … and require a more prolonged rulemaking before SBA can establish such a program." SBA further states, however, that "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." SBA therefore decided to implement the new sole source authority as quickly as possible, and defer implementing the new certification requirements through a separate future rulemaking.

Impact; Recommended Actions: SBA is inviting comments on the Proposed Rule on or before June 30, 2015. Given the beneficial aspects of the Proposed Rule and new sole source authority, we urge all WOSBs to strongly support prompt implementation of the Proposed Rule as issued.

It is our understanding that SBA hopes to implement a final rule prior to year-end, and hopefully by the end of the FY fourth quarter. However, SBA acknowledges that the FAR also will have to be amended to include the new statutory sole source authority, so as to eliminate conflict between the existing FAR provisions and the proposed new SBA rules. At this point, the FAR Council has not established a FAR Case addressing this subject. We therefore urge that any submitted comments urge SBA to coordinate with and urge the FAR Council to issue its proposed implementation in the form of an Interim Rule, so as to expedite actual implementation of the new sole source authority. There is recent precedent for this approach provided by the FAR Council’s Interim Rule two years ago eliminating the former statutory cap on WOSB awards. Moreover, such would be consistent with Congress’ purposes in authorizing sole source awards, SBA’s primacy in this area, and the fact that SBA’s proposed rule so closely tracks the Congressional language.

WOSBs also should start informing their contracting officers as to this pending development, so that they are ready to take advantage of this new authority and flexibility once the final regulatory steps are completed later this year or early in 2016.