Impact of SBA’s New Rule on Small Government Contractor’s Set-Aside Projects
The recent Small Business Administration’s (SBA) final rule, effective as of January 16, 2025, brings significant changes to small government contractors’ ability to secure set-aside work after a “disqualifying” event such as a merger, acquisition, or sale. This new rule will particularly impact small businesses aiming for set-aside work on multiple award schedule contracts, altering the landscape for M&A activity in 2025.
While the Final Rule alters certain aspects of the recertification process for small businesses involved in M&A activities, it does not change everything. Small businesses are still required to recertify their size and status within 30 days following a qualifying event like a merger or acquisition that results in a change in controlling interest. The requirement for recertification after M&A events remains consistent with previous guidelines, excluding recertification for single-award set-aside contracts. In the case of disqualifying recertifications, although a business may no longer be considered small, it can still fulfill orders and options under its existing set-aside contract, without these orders contributing to the agency’s small business goals.
The key shifts introduced by the Final Rule extend to the effects of disqualifying M&A activity on multiple award schedule contracts, primarily detailed in the updated 13 CFR § 125.12. A crucial update to note is the “180-Day Rule” regarding pending set-aside offers. For single set-aside awards, a small government contractor could still be eligible for a contract even if it no longer qualifies as small at the award time, provided the disqualifying event occurred more than 180 days after the offer submission. However, if the event took place within 180 days of the offer, the small business would be ineligible for the award.
The 180-Day Rule applies exclusively to single set-aside awards, with a distinct impact on set-aside multiple award contracts. If a formerly small contractor submitted an offer before the disqualifying event for such contracts, they would be disqualified from receiving the award, regardless of the timing of their submission. The SBA provided rationale behind this decision, asserting that concerns would not be eligible for future small business set-aside orders or those set aside for specific small business types.
Following a disqualifying event, the Final Rule denotes that previously small businesses will be unable to secure future orders and option periods on set-aside or restricted multiple award contracts. This change marks a departure from previous allowances that still granted small businesses opportunities on restricted multiple award contracts post-disqualifying event recertifications. The revised regulations now explicitly bar contracting officers from awarding such contracts to former small businesses in the aftermath of a disqualifying event.