SBA Issues Final Rule Implementing Certification for Women-Owned Small Businesses

The U.S. Small Business Administration (SBA) on May 11, 2020, published its long-awaited Final Rule implementing important changes for Women-Owned Small Business Concerns (WOSBs) and Economically Disadvantaged Women-Owned Small Business Concerns (EDWOSBs) participating in the Procurement Program for Women-Owned Small Business Concerns (Program). Among other things, the Final Rule requires a certification for businesses competing for set-aside or sole source contracts under the Program, and to those seeking to be awarded multiple award contracts for pools reserved for WOSBs and EDWOSBs. It also changes EDWOSB requirements to be consistent with the 8(a) Business Development (BD) Program.

The rule becomes effective on July 15, 2020; however, it's important to note that many of the specific changes do not go into effect until Oct. 15, 2020. Some of the important points are summarized here in more detail.

The Certification Requirement Has Been in the Works Since 2015

As many of our readers know, the Small Business Act authorizes contracting officers to restrict competition to eligible WOSBs and EDWOSBs for certain federal procurements. See 15 U.S.C. § 637(m). The Final Rule's roots actually date to the 2015 National Defense Authorization Act (2015 NDAA), which amended the Small Business Act to: a) give contracting officers the authority to award WOSB and WOSB sole source awards, and b) require concerns be certified as WOSB or EDWOSB by a federal agency, state government, SBA or a national certifying entity approved by SBA in order to receive set-aside or sole source awards. While SBA implemented the sole source authority on Oct. 14, 2015, the WOSB and EDWOSB certification requirement has been in the works since then.

Summary of the WOSB and EDWOSB Certification Requirement

In response to the 2015 NDAA, SBA proposed eliminating references to self-certification requirements in 13 C.F.R. 127 for WOSB and EDWOSB set-aside and sole source contracts under the Program. Once this rule is effective on July 15, 2020, WOSBs and EDWOSBs that are not certified will be ineligible for contracts under the Program. Other WOSB concerns that do not participate in the Program will be able to continue to self-certify their status, receive contract awards outside the Program, and count toward an agency's goal for awards to WOSBs.

Under the Final Rule, three options exist for small businesses seeking certification as WOSBs or EDWOSBs:

1. applying via SBA's free online application
2. submitting evidence of certification from another approved government entity, or
3. submitting evidence of certification from an approved third-party certifier

SBA is the final authority for each of the three certification processes.

Under the Final Rule, all WOSBs and EDWOSBs, whether certified directly by SBA or otherwise, will be required to attest to SBA annually that they remain eligible for the Program and undergo a full program examination every three years.

The Final Rule also provides that if a concern cannot recertify as a WOSB or EDWOSB by the end of the fifth year of a long-term contract, the procuring agency can no longer count awards made pursuant to that contract as WOSB/EDWOSB awards.

Finally, SBA has decided to "indefinitely" delay the addition of 13 C.F.R. 127.33, which details how SBA will ensure that approved third-party certifiers are meeting the requirements. While SBA did not detail its reasons for the delay, SBA may intend to make further changes to the current proposed section.

8(a) Eligibility Economic Disadvantage

The Final Rule also makes economic disadvantage criteria consistent between the EDWOSB Program and 8(a) BD Program. Previously, a concern applying for EDWOSB and 8(a) BD status simultaneously could be found economically disadvantaged for EDWOSB purposes but not for the 8(a) BD Program. Both programs now have a consistent $750,000 net worth standard, a $350,000 gross income standard and a fair market value threshold of $6 million.

Additionally, the Final Rule excludes retirement accounts from calculations of an economically disadvantaged individual's net worth, regardless of age.

Key Takeaways

In short, given the nature of SBA's changes to the Procurement Program for Women-Owned Small Business Concerns, contractors should be aware that:

• WOSBs and EDWOSBs can no longer self-certify their status and must receive a third-party certification through one of three processes. One of these options — the SBA certification process — is free.
• WOSBs and EDWOSBs are now required to attest to SBA annually that they remain eligible for the programs and undergo a full program examination every three years.
• If a contractor cannot recertify as a WOSB or EDWOSB by the end of the fifth year of a long-term contract, the agency can no longer count awards made pursuant to that contract as WOSB/EDWOSB awards.
• Both the EDWOSB and 8(a) BD Program now have consistent standards of $750,000 net worth, a $350,000 gross income and a fair market value threshold of $6 million.

SBA's long-awaited Final Rule brings notable and important changes to the Program, which will impact WOSB, EDWOSB and 8(a) BD Program applicants. Holland & Knight's Government Contracts Group is ready to assist you in navigating these changes and to answer any questions specific to your business.