Last week’s FAR Out focused on Federal Acquisitions Regulations (“FAR”) Subpart 9.1, and the general requirement that contractors and subcontractors be found responsible prior to contract award. This week’s posting will concentrate on the applicability of Subpart 9.1 to small business concerns.
Making the Distinction. FAR Subpart 9.103(b) stipulates that “[n]o purchase or award shall be made unless the contracting officer makes an affirmative determination of responsibility.” However, Subpart 9.103(b) also stipulates that “[i]n the absence of information clearly indicating that the prospective contractor is responsible, the contracting officer shall make a determination of nonresponsibility. If the prospective contractor is a small business concern, the contracting officer shall comply with Subpart 19.6, Certificates of Competency and Determinations of Responsibility.” (Emphasis added). It is immediately clear from reviewing this provision that small business concerns are treated differently from their larger competitors, an interpretation which is proven by a review of Subpart 19.6. FAR Subpart 19.601(c) stipulates that “[a] contracting officer shall, upon determining an apparent successful small business offeror to be nonresponsible, refer that small business to the [Small Business Administration] for a possible [Certificate of Competency], even if the next acceptable offer is also from a small business.” Thus, small business concerns are given two bites of the apple: if contracting officers find that they are nonresponsible, they have a chance at redemption by receiving a Certificate of Competency from the Small Business Administration (“SBA”).
What is a Certificate of Competency? Per FAR Subpart 19.601(a), a Certificate of Competency (“COC”) “is the certificate issued by the Small Business Administration (SBA) stating that the holder is responsible (with respect to all elements of responsibility, including, but not limited to, capability, competency, capacity, credit, integrity, perseverance, tenacity, and limitations on subcontracting) for the purpose of receiving and performing a specific Government contract.” In short, a COC is equivalent to the affirmative determination of responsibility required of larger contractors under FAR Subpart 9.1, except it is made by the SBA, and only after the contracting officer has made a determination of nonresponsibility. Furthermore, per Subpart 19.602-2(a), the SBA will not provide a COC unless the small business concern at issue applies for one.
When is a COC not Required? The contracting officer is not required to refer his/her determination of a small business concern’s nonresponsibility when, per FAR Subpart 19.602-1(a)(2)(i), the contracting officer determines such concern is “unqualified and ineligible because it does not meet the standard in 9.104-1(g), provided, that the determination is approved by the chief contracting office…” As discussed last week, FAR Subpart 9.104-1(g) stipulates that contracting officers must affirmatively determine that contractors are “otherwise qualified and eligible to receive an award under applicable laws and regulations…” Furthermore, under FAR Subpart 19.602-1(a)(2)(ii), the contracting officer is not required to refer his/her determination of a small business concern’s nonresponsibility when such concern “is suspended or debarred under Executive Order 11246 or Subpart 9.4.” The FAR thus sets a standard, whereby it is gives small business concerns a second chance, but only within reason. Where it is found that small business concerns are not in conformance with laws and regulations, or have already been determined not presently responsible by a suspending and debarring official, such concern does not receive a COC lifeline.
What is the Timeline for a COC? Upon determining that a small business concern is nonresponsible, the contracting officer must withhold the contract award “for a period of 15 business days (or longer if agreed to by the SBA and the contracting officer) following receipt by the appropriate SBA Area Office of a referral that includes all required documentation.” FAR Subpart 19.602-2. Thereafter, the SBA Area Office has 15 days to take the steps outlined at FAR Subpart 19.602-2 to either issue or deny a COC. In short, the whole process should take approximately one month.
What is the Scope of the SBA’s COC Review? In determining whether a small business concern is eligible for a COC, the SBA may review all dimensions of such concern’s responsibility. Per FAR Subpart 19.602-2(b)(1), “[t]he COC review process is not limited to the areas of nonresponsibility cited by the contracting officer.” Furthermore, under Subpart 19.602-2(b)(2), “[t]he SBA may, at its discretion, independently evaluate the COC applicant for all elements of responsibility, but may presume responsibility exists as to elements other than those cited as deficient.” Thus, while the SBA may presume that the small business concern is responsible with respect to those factors not cited by the contracting officer, it may review these factors independently as well. Accordingly, after conducting its review, the SBA Area Office may “[c]onsider denying a COC for reasons of nonresponsibility not originally cited by the contracting officer.” FAR Subpart 19.602-2(c).
How Involved is the Contracting Officer in the COC Review? If he/she chooses to be, the contracting officer can be VERY involved. While the contracting officer may simply accept the Area Director’s decision to issue the COC, he/she may also request that the Area Director “suspend the case for one or more of the following purposes:
(i) To permit the SBA to forward a detailed rationale for the decision to the contracting officer for review within a specified period of time.
(ii) To afford the contracting officer the opportunity to meet with the Area Office to review all documentation contained in the case file and to attempt to resolve any issues.
(iii) To submit any information to the SBA Area Office that the contracting officer believes the SBA did not consider (at which time, the SBA Area Office will establish a new suspense date mutually agreeable to the contracting officer and the SBA).
(iv) To permit resolution of an appeal by the contracting agency to SBA Headquarters under 19.602-3. However, there is no contracting officer’s appeal when the Area Office proposes to issue a COC valued at $100,000 or less.” FAR Subpart 19.602-2(d)(2).
Big Contract? Per FAR Subpart 19.602-2(f), SBA Area Offices must “refer recommendations for issuing a COC on contracts greater than $25,000,000 to SBA Headquarters.”
8(a) Procedures. The procedures for 8(a) concerns with respect to responsibility are slightly different. Under FAR Subpart 19.809, “[t]he contracting officer should request a preaward survey of the 8(a) contractor whenever considered useful.” Thereafter, “[i]f the results of the preaward survey or other information available to the contracting officer raise substantial doubt as to the firm’s ability to perform, the contracting officer must refer the matter to SBA for Certificate of Competency consideration under Subpart 19.6.” FAR Subpart 19.809.
So What? There is no doubt about it: determinations of nonresponsibility can be lethal, particularly for small businesses that already face great adversity. However, it is arguably this very disproportionality that led the Government to create COCs. There are two key takeaways here. In the near term, familiarize yourself and your contracts personnel with FAR Subpart 19.6, as the COCs described therein may save your company from an otherwise devastating outcome in the future. In the long-term, use the factors used to determine responsibility in both Subparts 9.1 and 19.6 as a checklist to ensure that your company is achieving the levels of operability, sustainability, and morality expected by the Government. Do that, and you can worry less about determinations of nonresponsibility and COCs, and more about growing your business.
Adam Munitz is a lawyer at Fluet Huber + Hoang, a full service law firm focused on the needs of growing government contractors. Adam specializes in Government Contracts Law and Export Compliance. You can reach him by email here.