A few years ago, we wrote about how through the 2015 NDAA, Congress directed SBA to end self-certification for WOSBs and EDWOSBs and implement a certification process. On May 14, 2019, SBA issued the proposed rule which, if finalized, would implement a certification requirement for WOSBs and EDWOSBs. In this proposed rule, SBA has also proposed revising the economic disadvantage criteria for 8(a) companies, particularly for initial eligibility purposes, and to make these consistent between the 8(a) and EDWOSB programs.
WOSB/EDWOSB Certification: 5 Ws
Regarding WOSB/EDWOSB certification, companies may currently self-certify through certify.sba.gov as a WOSB or EDWOSB by uploading various documents. Through the proposed rule, SBA is proposing to provide certification, to accept certification from certain identified government entities, and to allow certification by SBA-approved, third-party certifiers. Below is a brief overview of the proposed SBA certification process and requirements.
Who? Any company seeking to receive set-aside or sole source contracts as part of the WOSB program (includes both WOSB and EDWOSB set-asides and sole source). The proposed rule explains that WOSBs that are not certified cannot compete for WOSB/EDOWSB set-aside or receive sole source contracts. However, WOSBs may continue to self-certify and receive contract awards outside of the WOSB program (i.e., small business set-aside) and agencies may still take credit for their WOSB status (without having to verify any documentation).
What? SBA maintains a list of required documents for WOSB/EDWOSB certification that can be found here: https://certify.sba.gov/prepare. SBA may also request additional information over and beyond what is initially required. The proposed rule cautions that if the company does not provide requested information within the allotted time, SBA may presume that the disclosure of the missing information would adversely affect the eligibility or demonstrate a lack of eligibility. Applicants would also be required to notify SBA of any changed circumstances after submission of an application and once certified.
Where? Companies will continue to utilize certify.sba.gov (or any successor system), as they have been doing for the past year or so. Companies should also continue to be registered in SAM (which is required in order to obtain an account through certify.sba.gov).
When? Once implemented, a concern may apply for WOSB/EDWOSB certification and submit the information whenever it can represent that it meets the eligibility requirements. SBA will then, within 15 days after receipt of the application, advise each applicant whether the application is complete or if additional information or clarification is required. Similar to the 8(a) program, SBA has included a 90-day goal for issuing a determination, starting from the date that it receives a complete package. If SBA denies the application, an applicant may seek reconsideration within 30 days and SBA will issue a written decision within 60 days from receipt of the request for reconsideration. Unlike 8(a), SBA is not proposing to adopt an appeal process. A certified-WOSB/EDWOSB must recertify within 30 calendars days of the third anniversary date of the initial certification.
SBA has already taken into consideration the difficulty it will face in processing all of the potential applications once the rules are finalized. One solution SBA is proposing is that a company could continue to submit an offer as a WOSB/EDOWSB if it has submitted an application to SBA and has not received a negative determination regarding that application at the time it submits the offer. Then, at the time of award, SBA would prioritize the firm’s WOSB/EDWOSB application. SBA specifically requests comments on this solution or possible other solutions.
Why? As noted above, Congress directed SBA to end self-certification for WOSBs and EDWOSBs.
In addition to certification by SBA, SBA is proposing to include circumstances where a company may become a certified-WOSB/EDWOSB through an approved third party. While companies currently have this option, this is not dispositive. Through the proposed rule, SBA will accept third-party certifications and the approved certifier must ensure that all documents that it used to determine that a company is approved for certification is uploaded to certify.sba.gov. Third-party certifies may continue to charge a fee (whereas SBA’s application process will be at no cost).
The rule also proposes that SBA will accept certifications by SBA (for the 8(a) and HUBZone programs), the VA (VOSB/SDVOSB) and the DOT (DBE) that a firm is owned and controlled by women for purposes of WOSB/EDWOSB certification. Importantly, SBA will accept certifications as HUBZone, VOSB, SDVOSB, or DBE for WOSB purposes only. If you are seeking to qualify as EDWOSB, you must apply to SBA. However, SBA will accept 8(a) certification for certification as an EDWOSB.
8(a) Economic Disadvantage Criteria
On the 8(a) side, currently, the regulations include different economic disadvantage criteria for initial eligibility to the 8(a) program and continued eligibility. Through the proposed rule, SBA is proposing to keep the economic advantage criteria the same throughout, and not distinguish between initial and continued eligibility. SBA is proposing to apply the current, continued eligibility requirements to both initial and continued eligibility; meaning, in order to be considered economically disadvantaged for admittance to the 8(a) program (and to maintain eligibility once admitted) the qualifying disadvantaged owner must have a net worth of less than $750,000 (currently $250,000), his or her adjusted gross income (averaged over the three preceding years) may not exceed $350,000 (currently $250,000), and the fair market value of his or her assets cannot exceed $6 million (currently $4 million). These proposed economic disadvantage criteria would align with the current economic disadvantage criteria to be certified as an EDWOSB.
Notably, however, SBA has considered applying a $375,000 net worth standard to both the 8(a) and EDWOSB programs. SBA concluded that the $375,000 net worth standard may not be appropriate. SBA is specifically requesting comments on whether the $375,000 or $750,000 net worth standard should be used for both the 8(a) and EDWOSB programs.
SBA is requesting comments on the proposed rule, which are due by July 15, 2019. Please contact Meghan Leemon of PilieroMazza’s Government Contracts Group at firstname.lastname@example.org if you have any questions or concerns regarding the proposed rule.