Small Business Size Regulations; Size for Purposes of Government-Wide Acquisition Contracts, Multiple Award Schedule Contracts and Other Long-Term Contracts; 8(a) Business Development/Small Disadvantaged Business; Business Status Determinations, 66434-66444 [E6-19253]

Agencies

• SMALL BUSINESS ADMINISTRATION

[Federal Register Volume 71, Number 220 (Wednesday, November 15, 2006)]
[Rules and Regulations]
[Pages 66434-66444]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-19253]


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SMALL BUSINESS ADMINISTRATION

13 CFR Parts 121 and 124

RIN 3245-AF06


Small Business Size Regulations; Size for Purposes of Government-
Wide Acquisition Contracts, Multiple Award Schedule Contracts and Other 
Long-Term Contracts; 8(a) Business Development/Small Disadvantaged 
Business; Business Status Determinations

AGENCY: U.S. Small Business Administration.

ACTION: Final rule.

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SUMMARY: The U.S. Small Business Administration (SBA or Agency) is 
amending its regulations to address the time at which size is 
determined for the purposes of long-term federal contracts including 
Government-Wide Acquisition Contracts (GWACs), the General Services 
Administration (GSA) Multiple Award Schedule (MAS) contracts and multi-
agency contracts (MACs). SBA is also amending its 8(a) Business 
Development regulations to address when a business concern may receive 
orders as an 8(a) program participant under GSA's MAS Program and other 
multiple award contracts. This final action is necessary to ensure that 
small business size status is accurately represented and reported over 
the life of these long-term Federal contracts.

DATES: Effective Date: This rule is effective June 30, 2007, and 
applies to solicitations and contracts issued after the effective date, 
as well as contracts and solicitations in existence at the time of the 
effective date.

FOR FURTHER INFORMATION CONTACT: Dean Koppel, Assistant Administrator, 
Office of Policy and Research, Office of Government Contracting, (202) 
205-7322 or at dean.koppel@sba.gov.

SUPPLEMENTARY INFORMATION: On April 25, 2003, SBA published in the 
Federal Register, 68 FR 20350, a proposed rule to address the time at 
which size is determined for purposes of GSA's MAS Program, including 
the Federal Supply Schedule (FSS), and MAS contracts awarded by other 
agencies under the authority granted by GSA, and other long-term 
contracts, including GWACs and multi-agency contracts. The contract 
types mentioned above will hereinafter be referred to as ``long-term 
contracts'' in this rule. With options, these contracts are longer than 
5 years in duration--typically lasting 10 to 20 years. SBA also 
proposed to amend its 8(a) BD regulations to make those regulations 
consistent with the proposed rule. SBA established the Effective Date 
of this final rule after consideration of the public comments and after 
consultation with the General Services Administration (GSA), the 
Department of Defense (DoD) and the Office of Federal Procurement 
Policy (OFPP). SBA has been assured that this date reflects the amount 
of time required to: (1) Modify the Government's contract award 
database, the Federal Procurement Data System-NG (FPDS-NG), to capture 
changes in small business size status ``going forward'' from the date 
of re-certification; (2) permit agencies to revise their ``back 
office'' contract reporting systems that feed into FPDS-NG; and (3) 
implement the final rule in the Federal Acquisition Regulation (FAR). 
In addition, the final rule clarifies that re-certification does not 
affect the terms and conditions of the underlying contract.

Summary of Comments

    SBA sought public comment on its proposed rule to amend Sec.  
121.404 by adding paragraph (c) to provide that, for purposes of 
multiple-award contracts, a concern must re-certify its size on an 
annual basis. The intent of the proposed rule was to require re-
certification on long-term contracts. With options, these contracts are 
greater than 5 years in duration, typically 10 to 20 years. SBA has 
decided to limit applicability of the final rule to only long-term 
contracts. For long-term contracts, concerns will now be required to 
re-certify their small business size status prior to the sixth year of 
performance, and every time an option is exercised thereafter.
    On April 25, 2003, SBA proposed to require re-certification on 
long-term contracts on an annual basis, but requested comments on 
requiring re-certification on an order-by-order basis or at least once 
every five years. 68 FR 20350. SBA received more than 600 comments both 
supporting and criticizing all three proposals. Status as a small 
business in the context of government contracting is primarily relevant 
for two distinct reasons: (1) Eligibility for set-aside contracts and 
(2) tracking whether Federal agencies meet their annual small business 
prime contracting goals. SBA's regulations generally provide that size 
is determined ``as of the date the concern submits a written self-
certification that it is small to the procuring activity as part of its 
initial offer * * * which includes price.'' 13 CFR 121.404(a). A firm 
that certifies itself as small as part of its offer for a contract is 
generally considered small for the life of the contract, even if it 
grows to be other than small during the life of the contract. 13 CFR 
121.404(g). The Small Business Act requires procuring agencies to set 
annual small business prime contracting goals and annually report the 
``number and dollar value of contracts awarded'' to small business 
concerns. 15 U.S.C. 644(h)(2)(D).
    Over the past decade, Federal agencies have increasingly relied 
upon multiple award task or delivery order contracts to procure goods 
or services. Under these procurement vehicles, the quantity of goods or 
services to be purchased is not set at the time of contract award. 
Instead, goods or services are acquired by placing a task or delivery 
order with a contractor, often as a result of a competition among 
multiple contract holders. Task and delivery order contracts have been 
called ``hunting licenses'' or ``club memberships'' because the real 
competition, the actual purchase of goods or services, occurs at the 
order level. Federal agencies have also increasingly utilized task or 
delivery order contracts of other agencies to acquire goods or 
services, typically for an administrative fee. Many of these multiple-
award contracts have potential durations that far exceed the typical 
five-year government contract. Agencies are increasingly using these 
vehicles to get credit towards their small business goals.
    SBA has never had a specific rule in place to deal with these long-
term contracts. Application of SBA's existing rule to these vehicles 
leads to unsatisfactory results, with contractors retaining their size 
status for decades, well after they have outgrown the size standard or 
merged with or been acquired by a large business concern. Thus, under 
existing rules an order awarded to a concern that has outgrown

[[Page 66435]]

its small business status is counted as a prime contract award to a 
small business. Moreover, these ``large businesses'' can compete for 
and win orders that are reserved for small business concerns.
    Although SBA proposed requiring re-certification on an annual 
basis, it also specifically requested comments on requiring re-
certification on an order-by-order basis, and every five years. After 
consideration of the comments and consulting with Federal agencies that 
would be affected by the annual re-certification requirement and OFPP, 
SBA has decided that re-certification will be required prior to the 
beginning of the sixth contract year, and then prior to each option 
thereafter. Moreover, SBA will give procuring agencies the discretion 
to request size certifications in connection with competitions for 
particular orders. When SBA proposed to require re-certification on an 
annual basis, it did not discuss the fact that such a rule would be 
contrary to the general rule, which allows a concern to retain its size 
status for the life of the contract, which is typically five years 
under traditional contracts with base terms of one-year with four one-
year options. Second, SBA had not fully consulted with the procuring 
agencies that would be required to implement the proposed annual re-
certification. After consideration of the comments and consulting with 
the various procuring agencies, including GSA and DoD, SBA has been 
told that the agencies do not have the resources to request, receive 
and process the expected influx of size certifications every year. In 
addition, many small businesses submitted comments suggesting that an 
annual re-certification requirement would not give them sufficient time 
to recoup proposal costs or to conduct long-range strategic planning.
    SBA also proposed to amend 13 CFR 121.404 to require that 
contracting officers assign a North American Industry Classification 
System (NAICS) code to each order under a long-term contract vehicle. A 
concern's size is a function of the work to be performed. A concern may 
qualify as a small business for one type of work, but be considered a 
large business for a different type of work. In some cases, a contract 
will only have one NAICS code and size standard, so a requirement to 
assign a NAICS code and size standard to each order will not impose any 
difficulty on the contracting officer. However, in cases where a 
contract contains multiple NAICS codes and size standards, the 
assignment of a NAICS code and size standard is required in order to 
determine whether a concern is small for purposes of the work acquired 
under the order. Otherwise, orders awarded to firms that have never 
certified they are small for a particular type of work will be coded as 
an award to a small business.
    SBA proposed a size protest process for multiple-award contracts 
which required contracting officers to publish lists of recent size 
representations in the Federal Register, and provided that a size 
protest must be filed within 10 days of publication. Many procuring 
agencies objected to this additional increase in their workload, 
arguing that contracting personnel do not have the time or resources to 
comply with this requirement. Consequently, SBA will adopt its five day 
rule for size protests in connection with long-term contract awards, 
options, or orders. Thus, a size protest must be filed within 5 
business days of receipt of notice of the identity of a proposed 
awardee or award of a contract or order, or within 5 business days of 
receipt of notice of the size certification made by a concern in 
connection with the exercise of an option. In the case of a negotiated 
acquisition, procuring agencies are sometimes required by law to 
provide unsuccessful offerors with written, pre-award notice of the 
identity of the apparent successful offeror(s). In other situations, 
such as where an order is being awarded or an option is being 
exercised, written notice is not required by law. Consequently, the 
protest ``clock'' with respect to long-term contracts, orders or 
options will not begin to run until notice is received, whether it is 
in writing, orally, or via electronic posting.
    Size is a component of every small business program, i.e., in order 
to be eligible for an 8(a), Historically Underutilized Business Zone 
(HUBZone), Small Disadvantaged Business (SDB) or Service-Disabled 
Veteran-Owned Small Business Concern (SDVOSBC) contract or benefit, a 
concern must be small for the size standard applicable to the 
particular contract. SBA's re-certification rule will apply to all 
small business programs, including the 8(a) BD program, on long-term 
contracts set aside for 8(a) concerns, concerns will have to re-certify 
their size prior to the beginning of the sixth year and prior to each 
option thereafter. In accordance with long-standing SBA policy, 
procuring agencies generally cannot take 8(a) credit on contracts that 
were not specifically set aside for exclusive competition among 
eligible 8(a) concerns. A Memorandum of Understanding (MOU) between SBA 
and GSA which allowed agencies to take 8(a) credit for orders awarded 
under full and openly competed MAS contracts expired in 2003. At this 
time procuring agencies should no longer be taking 8(a) credit for 
orders awarded under full and open MAS contracts. Thus, SBA's 8(a) BD 
program regulations will be amended to specifically delete language 
regarding size in the context of the MAS program, since SBA's size re-
certification rule will apply uniformly across all small business 
programs.

Discussion of Comments on the Proposed Rule

    The comment period for the proposed rule closed on June 24, 2003. 
SBA received 636 comments. Forty-six commenters requested a 90-day 
extension to the comment period. The request was considered. However no 
extension to the comment period was granted. Following is a synopsis of 
the approximately 83 substantive comments.

Re-Certification

    SBA proposed to require re-certification on an annual basis, but 
also requested public comments on requiring re-certification every five 
years, as well as on an order-by-order basis. Several commenters urged 
SBA to explicitly limit applicability of the rule to long-term 
contracts. As stated earlier, it was not the intent of this rulemaking 
to affect contracts of less than five years in total duration. Most of 
the complaints and concerns that prompted this rulemaking have arisen 
in the context of long-term contracts. This rule applies to long-term 
(durations, including options, of more than five years) contracts, 
e.g., GWACs, MAS and FSS contracts and to all contracting actions where 
an acquisition, merger or novation has taken place.
    Several commenters also recommended that the proposed changes be 
limited to multi-agency contracts, e.g., GWACs, MAS and FSS contracts. 
SBA is aware of procuring agencies creating their own long-term 
multiple award contracts with characteristics similar to contracts 
awarded under the MAS program, e.g., open-ended solicitations with 
rolling admissions. While the majority of complaints and concerns that 
prompted this rule have arisen in the context of multi-agency 
contracts, applying the re-certification requirement to all long-term 
contracts will help avoid confusion among small business contractors as 
to their size status for various long-term contracts. Moreover, a 
different rule might create a disincentive for both agencies and 
contractors to enter into

[[Page 66436]]

multi-agency contracts, which is not the intent of this rule.
    GSA, the Department of Energy, DoD, and the Department of State 
submitted comments arguing that an annual re-certification requirement 
would place an excessive burden on contracting agencies and personnel. 
GSA pointed out that there are approximately 12,000 MAS contracts, and 
no system exists to track the anniversary dates of these awards. GSA 
argued that the optimal and logical time to address re-certification 
for long-term contracts is prior to exercising an option, a requirement 
that GSA had already instituted for its contracts under GSA Acquisition 
Letter MV-03-01, ``Federal Acquisition Regulation Class Deviation--Size 
of Business Re-representation.'' The Departments of State and Energy 
cited GSA's approach as their preferred method for addressing the 
issue. OFPP also expressed its strong preference for requiring re-
certification at the time an option is exercised, but at least every 
five years.
    Many commenters pointed out that the SBA's Regulatory Flexibility 
Act Analysis indicated that approximately 6 to 12 concerns with 
multiple award contracts would grow from small to large on an annual 
basis. These commenters essentially argued that imposing an annual re-
certification requirement on perhaps tens of thousands of concerns, to 
correct such a small number of improper awards, was contrary to the 
intent of the Regulatory Flexibility Act. Although we believe that the 
number of concerns that grow from small to large in a given year may be 
substantially higher, supra, we believe that our final approach is the 
least costly and burdensome way to address the issue of size in 
connection with long-term contracts.
    Several commenters urged SBA to require re-certification when a 
small business concern is acquired by a large business, and OFPP 
expressed its support for such a requirement. SBA's rules currently 
require re-certification when a contract is novated or a change-of-name 
agreement is executed (13 CFR 121.404(i)). Thus, under the existing 
rule, a concern that simply wants to change its name must re-certify 
its size, but a firm that is acquired and operated as a subsidiary of a 
large business need not re-certify its size. SBA intended to require 
re-certification when a small business is acquired by a large business, 
but not if a firm simply grows beyond the size standard during 
performance and wants to change its name. Thus, this rule will require 
re-certification when a small business concern becomes other than small 
due to acquisition or merger, such as when the contractor is acquired 
and operated as a subsidiary of a large business or is merged with a 
large business. This particular rule will apply to all contracts, not 
just long-term contracts.
    Approximately 553 of the 636 comments we received in support of the 
annual re-certification requirement were duplicative, and did not 
discuss the impact of the rule on procuring agencies or small 
businesses, or the general rule which provides that a concern that is 
small at the time of its offer is considered small for the life of the 
contract. On the other hand, numerous commenters, including 
contractors, trade groups, Federal agencies and Congressional 
responders, essentially argued that small businesses submitted their 
proposals and established their business plans in reliance on the 
continuation of their size status throughout the life of the contract. 
They contend that these contract holders need a reasonable amount of 
time to recoup their proposal costs and to plan their transition from 
small to other than small status. Many commenters argued that one year 
is not a reasonable amount of time.
    Several commenters argued that the annual re-certification 
requirement would make procuring agencies reluctant to set aside 
larger, multi-year requirements because they would be unwilling to risk 
that small business awardees will grow beyond the size standard and be 
ineligible to service the contract within one year of award. Several 
commenters argued that the annual re-certification requirement would 
deter small businesses from pursuing long-term contracting 
opportunities because firms would be unlikely to expend time and 
resources creating a proposal for a long-term contract if there is a 
possibility that they would lose the contract after only one-year. We 
first note that contractors which had grown to be other than small 
would not be ``ineligible'' to receive further orders. They could 
continue to receive orders, but the procuring agency could not count 
those orders towards the fulfillment of its small business goals. If a 
procuring agency exercised an option with a concern that had grown to 
be other than small, subsequent orders would not count towards the 
procuring agencies small business prime contracting goals. On the other 
hand, if a procuring agency declines to exercise the option of a 
concern that had grown to be other than small, it would lead to a 
dwindling pool of competition, which is contrary to the intent and 
purpose of the statutory and regulatory multiple award contracting 
provisions. SBA does not want to provide agencies and contractors with 
a disincentive to enter into long-term contracts.
    After considering all of the comments, SBA has determined that 
requiring re-certification prior to the beginning of the sixth contract 
year, and then prior to the exercise of each option thereafter, is the 
least burdensome and fairest approach of the three we proposed. This 
approach is consistent with the existing, long-standing general rule 
with respect to traditional contracts (a base term of one-year with 
four one-year options), where SBA considers a concern to be small 
throughout the life of the contract. Moreover, our approach will not 
penalize agencies and contractors that award, or are awarded, long-term 
contracts with base terms of one-year with several one-year options. It 
would be unfair to require re-certification after one year on 
performance simply because the total duration of the contract exceeds 
five years, when the same concern would be considered small for the 
life of a contract with a total duration of five years or less.
    Many commenters requested that SBA address some of the 
ramifications of the re-certification requirement. Many commenters were 
concerned about whether options would be exercised on contracts that 
were set aside for small business concerns if the concern had grown to 
be large. The final rule does not prohibit a contracting officer from 
exercising an option, even where a concern has outgrown the applicable 
size standard on a small business set-aside contract, but it also does 
not require a contracting officer to do so. If the contracting officer 
chooses to exercise the option, the procuring agency would have to 
amend FPDS-NG so that orders awarded during the option period would not 
be counted towards the agency's small business prime contracting goals. 
Although we recognize that a procuring agency may decline to exercise 
an option with a firm that cannot re-certify that it is small because 
the agency will not receive small business credit for the continued 
performance of that firm, that is a decision that is best left to the 
discretion of the contracting officer, after taking into account the 
agency's small business contracting goals, the firm's past performance, 
the existing competitive mix, and other factors that go into that 
decision. To the extent some concerns will not be considered for orders 
under full and open contracts because they are no longer small, other 
small business concerns will benefit by being considered for, and 
receiving, those orders.

[[Page 66437]]

    Several commenters asked for clarification on how re-certification 
would interact with the performance requirements applicable to set-
aside contracts. See 13 CFR 121.406 (manufacturing requirements) and 
125.6 (limitations on subcontracting). The Small Business Act provides 
that a concern ``may not be awarded a contract under subsection (a) as 
a small business concern'' unless the concern agrees to comply with 
specified performance requirements. 15 U.S.C. 644(o). The statute 
focuses on ``award'' of a contract. A contractor that is awarded a 
contract as a result of a small business set-aside must comply with the 
applicable performance requirements throughout the life of the 
contract, even if the concern grows to be large. Thus, on a long-term, 
small business set-aside contract where a concern cannot certify that 
it is small and the procuring agency exercises the option, the concern 
will still have to comply with the performance requirements that are 
applicable to all contract holders. In contrast, the performance 
requirements mentioned above do not apply to full and open contracts. 
Consequently, under current law a concern awarded an order under a full 
and open contract need not perform any specific portion of the work, 
even where competition for the order is limited to small business 
concerns. SBA did not propose to impose a performance requirement on an 
order-by-order basis, and thus has not imposed such a requirement as 
part of this final rule. SBA may consider such a requirement in the 
future as part of a separate rule-making.
    Similarly, the statutory basis for the non-manufacturer rule (13 
CFR 121.406) provides that a small business that complies with 
``subparagraph (B) shall not be denied the opportunity to submit and 
have considered its offer for any procurement contract for the supply 
of a product'' under a small business or 8(a) set-aside. 15 U.S.C. 
637(a)(17). The statute focuses on the time of offer and contract 
award. A concern that grows to be large during performance of a set-
aside contract must still comply with the requirements of the non-
manufacturer rule throughout the life of the contract. Consequently, 
where a concern cannot re-certify itself as small under a long-term, 
small business set-aside contract, the concern still must comply with 
the requirements of the non-manufacturer rule throughout the life of 
the contract.
    Several commenters asked SBA to clarify the effect of re-
certification on other small business programs, i.e., SDB, SDVOSBC, 
HUBZone, and 8(a) BD. Commenters requested clarification on whether 
firms would have to also re-certify their SDB, HUBZone, 8(a) BD, 
SDVOSBC, or other status. Those issues are beyond the scope of this 
rulemaking action. The proposed rule addressed size for the purposes of 
specific contracts, including small business, HUBZone, 8(a), and 
SDVOSBC set-aside contracts, but only addresses size certifications. In 
general, firms receive small business program certifications based on 
their size for their primary industry, but certified HUBZone/SDVOSBC/
SDB/8(a)BD firms must still meet the size standard applicable to a 
given procurement in order to be eligible for award. Thus, a size re-
certification with respect to a particular contract will not affect a 
firm's status under any small business certification program. Those 
certification programs have rules that address when certified concerns 
must provide that SBA program office with information that could affect 
program eligibility. See 13 CFR 124.112, 124.1016(b), 126.501. However, 
if a concern is no longer small, orders awarded to that concern cannot 
be counted towards an agency's goals for any of the small business 
subgroups, e.g., 8(a), SDB, HUBZone, SDVOSBC.
    Several commenters asked for clarification on how re-certification 
would affect subcontracting plan requirements. The Small Business Act 
provides that the subcontracting plan requirements ``shall not apply to 
offerors or bidders who are small business concerns.'' 15 U.S.C. 
637(d)(7). Thus, the concern's size status at time of offer or bid 
determines whether the subcontracting plan requirements are applicable 
to a particular contractor. Even where the subcontracting plan 
requirements are imposed as the result of a contract modification, it 
is the concern's size status at time of contract award that determines 
whether a subcontracting plan is required. Consequently, a concern's 
change in size status as a result of a re-certification requirement 
will have no effect on the subcontracting plan requirements that were 
imposed, or not imposed, at the time of contract award.
    Several commenters also requested clarification concerning how re-
certification would affect cost accounting standard requirements. The 
Cost Accounting Standards Board is responsible for implementing cost 
accounting standards. 41 U.S.C. 422. The Cost Accounting Board has 
exempted contracts and subcontracts with small business concerns from 
cost accounting standard requirements. FAR Sec.  30.000; 48 CFR 
9903.201-1(b)(3). The Cost Accounting Standards Board will have to 
determine what effect, if any, re-certification will have on the 
applicability of the cost accounting standard requirements. In our 
view, the re-certification requirement should have no effect on the 
terms and conditions of a contract.
    In sum, a change in size status for reporting purposes will not 
affect in any way the terms and conditions of the initial contract. If 
the performance of work requirements (Sec.  125.6) or non-manufacturer 
rule (Sec.  121.406) apply to a contract because a firm was deemed to 
qualify as small at the time of contract award, they will continue to 
apply if the firm becomes other than small at some point during 
contract performance. Similarly, if a firm was exempt from having a 
subcontracting plan at the time of award because it qualified as a 
small business, it will not be required to have a subcontracting plan 
if it becomes other than small at some time during contract 
performance.
    Several commenters asked whether subcontractors would be required 
to re-certify their size for purposes of subcontracting plans. That 
issue is also beyond the scope of the proposed rule, and this rule does 
not impose any re-certification requirement at the subcontractor level. 
SBA may consider such a requirement in the future as part of a separate 
rule-making.
    Several commenters were concerned about the affect of re-
certification on ``teaming.'' If a team in the form of a joint venture 
is awarded a contract, the joint venture as combined must meet the 
applicable size standard. The same rules would apply to a joint venture 
as would apply to a stand-alone entity. Thus, the joint venture, as 
combined, would have to be small at the time of re-certification in 
order to retain its small business size status. Likewise, under SBA's 
8(a) BD mentor-protege program, an 8(a)protege can form a joint venture 
with its large business mentor and qualify as a small business for a 
particular contract, as long as the protege qualifies as small for the 
particular procurement. If the protege is no longer small at the time 
of re-certification, then the joint venture cannot certify itself as 
small under either a set-aside or a full and open contract. Similarly, 
if a joint venture qualifies as small based on other exclusions from 
affiliation (13 CFR 121.103 (h)(3)), the joint venture would not be 
considered small if at the time of re-certification the joint venture 
does not meet the applicable requirements for the exclusion (e.g., a 
joint venture between three firms that individually met the applicable 
size standard and

[[Page 66438]]

qualified the joint venture as small under Sec.  121.103(h)(3)).
    Several commenters requested that SBA clarify how the rules will 
affect Blanket Purchase Agreements (BPA) or orders with options, and 
multi-year orders. A BPA is not a contract. When a BPA is utilized, 
goods and services are not actually purchased until an order is issued. 
Consequently, a concern's size at the time a BPA is awarded is 
irrelevant, and the regulations have been amended to make this clear. 
The issue of size for purposes of options on orders and multi-year 
orders is beyond the scope of this rule. We would like to see whether 
this rule solves the issues that prompted this rulemaking before we 
consider whether this issue needs to be addressed.
    Several commenters requested that SBA clarify whether the rule 
would apply to existing contracts, and some recommended that contracts 
already awarded be ``grandfathered'' in under existing rules. We 
disagree. The problems this rule addresses primarily arose when GSA 
modified all of its existing MAS contracts to give them base terms of 
five years with three five-year options, for a total duration of twenty 
years. We are not aware of anything that would prevent GSA from 
modifying all of its MAS contracts in the future to add additional 
five-year option periods. Moreover, many GSA MAS solicitations are 
open-ended, and admission to the MAS is done on a rolling basis. Thus, 
if this rule applied only to solicitations issued after the effective 
date, it would not apply to existing GSA MAS contracts or other long-
term contracts currently being performed. Thus, this rule must apply to 
existing contracts, but, for the reasons stated above, will not cause 
any firm to lose a long-term contract as a result of growing to be 
other than small.
    Several commenters asserted that current regulations adequately 
protect small business interests and prevent awards from being issued 
to large companies masquerading as small businesses. We strongly 
disagree with the assertion that existing rules adequately prevent 
orders awarded to large business concerns from being counted as awards 
to small business concerns for goaling purposes. There are numerous 
reports, studies, and articles documenting cases where order awards to 
large businesses are counted as awards to small businesses (e.g., SBA 
Advocacy, ``Analysis of Type of Business Coding for the Top 1,000 
Contractors Receiving Small Business Awards in FY 2002'', December 
2004; GAO, ``Contract Management: Reporting of Small Business Contract 
Awards Does Not Reflect Current Business Size'' (Report GAO-
03-704T, May 7, 2003, https://www.gao.gov).
    Several commenters asserted that problems in the current system can 
be solved through better training. We disagree. Many of these practices 
were legal under the current system. Several commenters argued that 
criminal prosecution for false size certifications would solve the 
apparent problems. Again, we disagree. The Small Business Act contains 
criminal penalties for false size certifications (15 U.S.C. 645), but 
many of the actions in question did not involve criminal conduct. 
Instead, a number involved human error, and others involved taking 
advantage of legal loopholes under the existing regulatory system, 
which was created before the advent of long-term multiple award task 
and delivery order contracts.
    Some Congressional responders recommended allowing firms to retain 
their size status if they are within a certain percentage of the 
relevant size standard, arguing that this approach will allow a concern 
to grow and benefit from the multi-year contracts they have been 
successful in winning. The issue of changing or altering size standards 
is beyond the scope of this rule. SBA has requested and received 
comments concerning size standards, and may address this issue as part 
of a separate rule-making.
    Several commenters requested clarification on what would happen if 
a concern that was large at the time of its initial offer for a 
contract became small during the course of a contract. The vast 
majority of cases that SBA is aware of involved companies that outgrew 
their size, not the reverse. Nevertheless, we believe on a long-term 
contract a concern should be able to change its size status from other 
than small to small on an unrestricted procurement for statistical 
purposes. The final rule amends the regulations to allow an other than 
small firm to certify its small business size status in connection with 
the exercise of an option.
    Several commenters argued that if periodic re-certification is 
adopted, SBA should specifically limit the authority of a contracting 
officer to obtain a size certification for a particular order under a 
multi-award contract. We disagree. First, a significant number of 
commenters supported requiring size certifications on an order-by-order 
basis. Agencies are increasingly conducting complex multi-year, multi-
million dollar procurements as competitions for orders under the MAS 
program, where offerors submit ``quotes'' that exceed, in terms of 
volume and complexity, proposals. Allowing procuring agencies to 
request size certifications in connection with particular orders is 
consistent with the purposes of the Small Business Act (procurements 
meant for small businesses should be awarded to small businesses) and 
has been upheld by the GAO and the Court of Federal Claims. See LB&B 
Associates, Inc. v. U.S., 68 Fed. Cl. 765 (Fed. Cl. 2005); CMS 
Information Services, Inc., B-290541, Aug 7, 2002, 2002 CPD ] 132. The 
final rule gives contracting officers the discretion to request size 
certifications for individual orders, but does not require them to do 
so. One commenter asserted that under the 8(a) BD or the HUBZone 
Program, eligibility must be met at the time of award of a task or 
delivery order contract and for each order. We disagree. SBA's 8(a) BD 
and HUBZone program regulations do not require concerns to meet HUBZone 
or 8(a) eligibility requirements on an order-by-order basis.
    One commenter recommended that SBA use the term ``representation'' 
instead of ``certification'' when referring to matters concerning size 
status for contracts. SBA's regulations provide that size will be 
determined as of the date a concern submits a written self-
certification of size, but the self-certification occurs when an 
offeror represents that it is small as part of its offer or by 
submitting an offer. FAR Clauses 52.219-1, 52.204-8. Thus, those terms 
have been used interchangeably in the context of determining status as 
a small business concern, and are used in that manner throughout this 
rule.
    One commenter recommended that SBA consider requiring firms to re-
certify their size status prior to contract award. We disagree. First, 
the majority of the problems that prompted this rule did not involve 
firms that grew large prior to award. Instead, many of the problems 
revolved around firms that were small at contract award but 
substantially exceeded the applicable size standard when orders were 
awarded several years later. Second, the general rule provides finality 
to concerns and procuring agencies and appears to be working well.
    Several commenters argued for a three-year re-certification rule, 
since a firm's size under an annual revenue size standard is calculated 
by averaging annual revenue for the three most recently completed 
fiscal years. While this approach has some merit, we believe five years 
is more appropriate, because it is consistent with how long a firm 
retains its size status under traditional five-year contracts.
    Many comments concerning re-certification were beyond the scope of 
the rule. These comments included

[[Page 66439]]

suggestions that procuring agencies should be prohibited from awarding 
small businesses contracts with values that will far exceed the 
applicable size standard, and requests that the re-certification rule 
apply to the Small Business Innovative Research (SBIR) and financial 
assistance programs.

NAICS Code

    Several commenters asserted that a business could be small for a 
particular order but not for its underlying contract. If a concern has 
not submitted a written self-certification that it is small along with 
its offer (including price) for the underlying contract, then the only 
way such a concern could be considered small for the order is if the 
ordering agency requests size certifications in connection with a 
solicitation for the order. Otherwise, the concern is large and the 
order will not count as an award to a small business.
    GSA questioned the need for NAICS codes for all orders and 
solicitations for orders, arguing that ordering agencies are interested 
in acquiring total solutions which may be provided under different MAS 
contracts, with different NAICS codes and size standards. However, for 
MAS orders, the FAR currently provides that ``For purposes of reporting 
an order placed with a small business schedule contractor, an ordering 
agency may only take credit if the awardee meets a size standard that 
corresponds to the work performed.'' FAR Sec.  8.405-5(a). The only way 
to determine whether an awardee meets a size standard that corresponds 
to the work to be performed is by assigning a specific size standard to 
the order. As a result of the comments received, we have decided that a 
NAICS code and corresponding size standard will be required for each 
and every order. For contracts where there is only one NAICS code and 
size standard, the order will contain the same NAICS code and size 
standard. For contracts with multiple NAICS codes and size standards, 
the order will contain the NAICS and size standard from the underlying 
contract that best corresponds to the work to be performed, and only 
concerns that have certified that they are small for that same or lower 
size standard will be deemed to be small for that particular order.
    One commenter stated that the proposed regulations should provide 
guidance as to how to determine the appropriate NAICS code, and should 
indicate if a small business can or should aggregate the size standards 
of multiple NAICS codes when determining whether it qualifies for a 
procurement. SBA's regulations already adequately address how NAICS 
codes are assigned to procurements. 13 CFR 121.402. SBA's regulations 
do not allow size standards to be aggregated. One commenter requested 
clarification on how size standards based on number of employees are 
distinguished from size standards based on average annual receipts, 
which is also already adequately addressed in SBA's regulations. 13 CFR 
121.104, 121.106, 121.201.
    Finally, we have decided that for purposes of a size re-
certification in connection with an option period, the appropriate size 
standard to use is the size standard in effect at the time the size re-
certification is requested, and not the size standard that was in 
effect when the contract was originally solicited. The final rule will 
enable the Government to get more accurate small business government 
contracting statistics and allow concerns to take advantage of 
increases in size standards that occur due to inflation adjustments or 
other periodic reviews.

Size Protests

    Several comments were received concerning the size protest process, 
and SBA has modified the final rule in response to these comments. Many 
government agencies objected to the proposed public notice requirement, 
which would have required contracting agencies to post on a website or 
publish in the Federal Register a list of concerns that had submitted 
size re-certifications. We have essentially adopted the existing five 
business day rule for size protests in connection with long-term 
contract awards, options, and orders. Because written notice is not 
required in many instances, e.g., in connection with an order 
competition or when an option is exercised, unsuccessful offerors will 
be required to file protests within five days of receipt of notice, 
whether the notice is received in writing, orally or via electronic 
posting.
    The effect of a negative protest decision will depend on the type 
of contract and the certification that is being protested. Under 
existing rules, if a firm is found to be other than small with respect 
to a full and open contract, the procuring agency will change the 
concern's status from ``small'' to ``other than small,'' but the 
concern does not lose its contract. If a size protest is filed with 
respect to an initial size certification for a small business set-aside 
contract and the firm is found to be other than small, the contract 
should not be awarded, or if it was awarded, the contract would have to 
be terminated, since eligibility for award was based on the initial 
size certification. For size protests concerning representations made 
for options under a contract, if a firm is found to be other than 
small, a contracting officer will have to alter the firm's status in 
FPDS-NG. Whether the procuring agency exercises the option, or 
continues to place orders under the contract, is at the discretion of 
the contracting officer. SBA's regulations do not prohibit a 
contracting officer from exercising an option in such a case. With 
respect to size protests in connection with a size certification for a 
particular order, if a concern is found to be other than small the 
concern is not eligible for award of the order.
    One commenter stated that SBA does not have jurisdiction to permit 
size protests with respect to orders under multiple award contracts, 
citing 41 U.S.C. 253j(d). We disagree. The statutory provision cited 
above applies to protests concerning the procurement process. The 
statute does not specifically reference size status protests, and there 
is no evidence in the legislative history to support the proposition 
that Congress intended to bar size status protests with respect to 
particular orders. GAO and the Federal Courts have upheld a procuring 
agency's authority to request size certifications with respect to 
particular orders. See LB&B Associates, Inc. v. U.S., 68 Fed. Cl. 765 
(Fed. Cl. 2005); CMS Information Services, Inc., B-290541, Aug 7, 2002, 
2002 CPD ] 132.
    Several commenters requested that SBA clarify whether there are any 
consequences if a party files a size protest and the protest is found 
to be without merit. Penalizing parties for filing protests would have 
a devastating impact on the integrity of the procurement system, which 
is based on self-policing by the procurement community. Moreover, 
unsubstantiated, non-specific protests are routinely dismissed without 
requiring any action by the protested concern.
    Several commenters questioned whether SBA has any process in place 
to verify business size other than the protest procedures. SBA does 
review questionable size representations that are made by firms in the 
Government's Central Contractor Registration (CCR) system which 
contains small business data in the Dynamic Small Business Search 
(DSBS) engine. CCR is also linked to the Government's On-line 
Representations and Certifications Application (ORCA) which contains 
small business size status data relating to offers submitted for 
Federal contracting opportunities. However, size status for procurement 
purposes is a function of the work to be performed. A

[[Page 66440]]

concern can be small for one type of work and large for another type of 
work. The size protest process is the only feasible and practicable way 
to resolve issues in reference to a concern's size with respect to a 
specific contract or order.
    One commenter recommended that SBA conduct on-site visits. We 
disagree. The size protest process as it exists now has worked well for 
decades. The problems and complaints that prompted this rule did not 
involve any failure within the size protest process.

8(a) BD Program

    Several commenters argued that the proposed rule would harm 
concerns that are transitioning out of the 8(a) BD program. However, 
SBA's rule does not prohibit procuring agencies from exercising options 
on 8(a) contracts where 8(a) concerns have grown to be large. Moreover, 
concerns begin transitioning out of the 8(a) BD program in their fifth 
year of program participation, and are supposed to be able to compete 
in the open marketplace when their term of participation in the program 
ends, not several years after they leave the program. The size rules 
should apply uniformly across small business programs.
    Several commenters asked whether the final rule supercedes the 8(a) 
BD MOU between SBA and GSA concerning the MAS program. The MOU between 
SBA and GSA with respect to the MAS program expired in 2003. 
Traditionally, procuring agencies have only been allowed to take credit 
towards their 8(a) contracting goals for sole source contract awards 
and contracts awarded pursuant to competition limited exclusively to 
8(a) concerns. Orders issued under full and openly competed MAS 
contracts, where an 8(a) firm competes with non-8(a) small firms and 
large firms, does not satisfy the 8(a) statutory requirement that 
competition for an 8(a) award must be limited to eligible 8(a) firms. 
Thus, procuring agencies can no longer take 8(a) credit for orders 
awarded to 8(a) firms under full and open MAS contracts.
    One commenter argued that a firm that is no longer in the 8(a) BD 
program should no longer receive orders as an 8(a) small business. The 
Small Business Act provides that a concern that is an eligible 8(a) 
concern at the time specified in the solicitation for the receipt of 
initial offers may be awarded a competitive 8(a) contract, even if the 
concern exits the program prior to award. 15 U.S.C. Sec.  637(a)(1)(B). 
Consequently, task or delivery orders issued under such a contract 
would be counted as orders to an 8(a) concern. On a long-term 8(a) 
contract, if a firm is no longer small at the time an option is 
exercised, a procuring agency can exercise the option, but orders 
issued during that option period will not count as 8(a) awards.

Compliance With Executive Orders 13132, 12988, and 12866, the 
Regulatory Flexibility Act (5 U.S.C. 601-612), and the Paperwork 
Reduction Act (44 U.S.C. Ch. 35)

Executive Order 12866

    The Office of Management and Budget (OMB) has determined that this 
final rule constitutes a significant regulatory action under Executive 
Order 12866.

Paperwork Reduction Act

    For purposes of the Paperwork Reduction Act, 44 U.S.C. Ch. 35, SBA 
determined that the rule imposes a new reporting requirement. Small 
business concerns are required by this rule to re-certify their size 
status prior to the end of the fifth year, and at the time each option 
is exercised thereafter. Specifically small businesses are required to 
recertify their size status for the NAICS code and size standard 
contained in the applicable contract. SBA has submitted this 
information collection to OMB for review.
    Three comments raised concerns regarding additional paperwork 
associated with a re-certification on long-term contracts and the 
possible costs. In particular, these commenters identified a new 
requirement to provide additional reporting of their small business 
status as time consuming and costly. In addition, they expressed 
concern that they may have to provide information in response to 
protests of their small business status.
    SBA does not agree that this rule will impose any significant 
burden on small businesses. Businesses must prepare and keep 
information on their size in the course of business with the Federal 
Government as both prime contractors and as subcontractors to other 
prime Federal contractors. Businesses rely on that information to self-
certify that they are a small business but do not need to provide the 
information for the Government's review unless a size protest 
challenging that self-certification is filed with the contracting 
officer. Since the publication of the proposed rule, the Federal 
Government has implemented ORCA to collect data in reference to offers 
placed against specific solicitations. Small business size status for 
the NAICS code contained in the specific solicitation is one data 
element collected. Small businesses are required to verify and update 
that data in ORCA on an annual basis. The information used to re-
certify small business status is the same as that already being 
provided on a regular basis and is no different from the information 
used for self-certifications currently provided in ORCA by businesses 
during the solicitation period.

Executive Order 12988

    This final rule meets applicable standards set forth in section 
3(a) and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to 
minimize litigation, eliminate ambiguity and reduce burden to the 
extent practicable.

Executive Order 13132

    This final rule will not have substantial direct effect on the 
States, or on the distribution of power and responsibilities among the 
various levels of government. Therefore, for purposes of Executive 
Order 13132, SBA has determined that this final rule has no federalism 
implications warranting the preparation of a federalism assessment.

Regulatory Flexibility Act

    SBA has determined that this rule could have a significant economic 
impact on a substantial number of small entities within the meaning of 
the Regulatory Flexibility Act (RFA), 5 U.S.C. 601-612. Therefore, SBA 
has prepared a Final Regulatory Flexibility Act (FRFA) analysis 
addressing the proposed regulation.
    The RFA provides that when preparing a FRFA, an agency shall 
address all of the following: a statement of the need for, and 
objectives of, the rule; a summary of the significant issues raised by 
the public in response to the initial regulatory flexibility analysis 
(IFRA); a description of the estimate of the number of small entities 
to which the rule will apply; a description of the projected reporting, 
recordkeeping and other compliance requirements; and a description of 
the steps taken to minimize the significant economic impact on small 
entities. This FRFA considers these points and the potential impact of 
the proposed regulation concerning multiple award or schedule contracts 
on small entities.

(a) Need for, and Objectives of, the Rule

    Under the Small Business Act, SBA is authorized to specify detailed 
definitions and size standards by which an entity may be determined to 
be a small business concern. 15 U.S.C. 632(a)(2). SBA's definitions and 
size standards relating to SBCs are set forth in 13 CFR part 121. 
Pursuant to SBA's

[[Page 66441]]

current regulations (13 CFR 121.404(g)), a concern's size status for a 
particular contract is determined as of the date that it submits its 
initial offer, including price, for the contract. This includes GWACs, 
FSS and MAS contracts. If a concern is small as of that date, it is 
generally considered small for the life of the contract and for all 
orders issued pursuant to that contract. With options, these long-term 
contracts have durations of 10-20 years or longer. Under current 
policy, a concern that certified itself as small to receive a long-term 
contract, could still be considered small for subsequent orders issued 
pursuant to the contract even if the business concern is no longer 
small. Agencies are then able to count, for small business goaling 
purposes, an order as an award to a small business even though the 
concern may have grown to be other than small or may have merged with 
or been acquired by a large business. Unfortunately, this means that 
Federal agencies that meet their SBC goals by counting awards to former 
SBCs do so at the expense of SBCs that currently meet SBA's small 
business criteria, because those agencies may not seek other 
procurement opportunities with the present universe of SBCs, believing 
that they have met their SBC goal through orders to concerns that are 
no longer small. As a result of the increasing use of these long-term 
contracts, SBA believes it is necessary to amend its regulations and 
address these size eligibility issues for orders issued pursuant to 
long-term contracts.

(b) Summary of Significant Issues Raised by the Public in Response to 
the Initial RFA

    SBA received 17 comments on the IRFA. These comments focused on 
several issues that are discussed below.
    One issue concerned the impact and significance of the proposed 
rule considering the small number of small businesses affected. 
According to two commenters, SBA indicated that it expected that an 
annual re-certification would result in only 6-12 businesses each year 
reporting a change in size status. If all 12 companies are assumed to 
receive average annual orders in line with the average value of orders 
received by individual small businesses ($1.5 million), then the total 
impact of this ``erroneous'' classification equates to only .13% of 
total FSS dollars. Even if the average value of dollars obligated 
annually ($50 million) by the four companies that grew to be large is 
considered to be representative of the problem, then the impact 
increases to only .98% of total FSS dollars. In their view, it is not 
practicable or reasonable to institute an annual re-certification 
requirement for all small businesses to correct a problem that appears 
to involve only a very few companies.
    One commenter also stated that the SBA calculation that led to its 
conclusion is based on data that is in some cases 6 to 10 years old, 
and includes figures for all small businesses in the U.S., not just 
those that actually participate in the Federal Government contracting 
that would be covered by this proposed rule. The commenter stated that 
from this generic data, SBA concludes: (i) only 6 to 12 businesses a 
year will be affected by the proposed rule; and (ii) that the actual 
number will be greater than this estimate, although this figure is also 
unknown to the Agency. According to the commenter, this unknown impact 
on the small business economy warrants that additional time be given to 
properly analyze how many small businesses will be affected. The 
commenter recommends that a formal survey of the estimated 6,000 
contract holders should be taken in order to get a realistic estimate 
of the number of concerns affected, and the number of jobs that will be 
lost by this proposed rule.
    SBA has re-estimated the potential impact of the re-certification 
policy based on current data from the DSBS database contained in the 
CCR and FPDS. The next section of this FRFA discusses the new analysis, 
which estimates a larger number of small businesses, initially 2,300 
concerns and approximately 250 annually thereafter, will be affected by 
this rule. While the actual impact is difficult to ascertain, SBA 
believes the updated analysis in this rule more realistically describes 
the potential impact on small businesses. SBA also believes that the 
accuracy of reporting Federal small business awards in determining the 
achievement of Federal agencies in meeting their small business goals 
and the subsequent implications on potential contracting opportunities 
for small businesses unquestionably supports the need to address the 
issue of small business certification on long-term contracts.
    Two commenters expressed concern about the extent of SBA's 
consideration of minimizing burdens on small businesses. One commenter 
stated that SBA had performed an analysis in accordance with the RFA, 
but there remains a question as to whether the law was, in fact, 
followed. The commenter believed that the SBA violated the spirit of 
the RFA which attempts to minimize costly and burdensome regulation on 
small businesses, while rejecting other, less burdensome, choices. 
Another commenter stated that this change will require every small 
business owner to fill out additional paperwork each year on each 
contract they hold. This information will then have to be collected, 
analyzed, verified and then stored in a new information system for use. 
This information would likely be subject to an increased number of FOIA 
requests from competitors, requiring further paperwork and Government 
resources.
    In the proposed rule, SBA did consider the paperwork burden on 
small businesses of an additional requirement to re-certify small 
business status. Because businesses must maintain up-to-date 
information on their size, the burden to re-certify on a more frequent 
basis should be minimal. Furthermore, since the publication of the 
proposed rule, the Federal Government has implemented ORCA, which 
requires small businesses placing offers on Federal contracts to 
electronically certify their small business size status for the 
specific NAICS code contained in the solicitation. In addition, the 
small business must review and update the data, at the minimum, on an 
annual basis. Thus, although SBA has adopted a five year re-
certification requirement for long-term contracts, small businesses are 
not being asked to provide information that is not otherwise being 
provided on at least an annual basis.
    Several commenters raised issues concerning the implications of an 
annual re-certification on small businesses opportunities. According to 
one commenter, the proposed rule is overly broad and would make it 
financially infeasible for small businesses to bid on multiple award 
contracts or the agencies to issue them. If SBA's proposal were 
enacted, argue these commenters, small businesses could invest in the 
upfront establishment of its office and personnel only to become 
ineligible after a year because it exceeded the size standard. They 
contend that it would be impossible to recoup the costs expended 
upfront to get the work. Overall, these commenters took the position 
that the proposed rule ignored the reality of pursuing business, 
pointing out that there is an upfront investment that can only be 
recouped over time.
    More specifically, one commenter stated that annual re-
certification would have a negative impact on their progress payment 
reimbursement rate, from 90 percent to 75 percent. One commenter stated 
that small businesses, particularly in the services industry, which are 
trying to maintain a prescribed size standard to insure continued 
performance on existing contracts, will

[[Page 66442]]

be unable to develop a long-term marketing strategy under the proposal. 
This commenter also noted that they will also be confronted with 
significant employee issues, as their ability to hire and retain 
qualified employees will be diminished given the limited growth 
opportunities for employees.
    One commenter stated that the proposed regulation discourages 
businesses from taking on new projects or hiring additional workers in 
order to avoid losing eligibility under the annual re-certification 
process. In the view of this commenter, a small concern must therefore 
choose whether to turn down work from other sources so it will be small 
when called upon to fulfill a task order, or to risk being unable to 
re-certify the next year.
    One commenter stated that most small businesses require several 
years to adequately adjust in the marketplace to compete with large 
businesses, adding that crossing a dollar threshold does not make a 
company well positioned to realistically compete with multi-billion 
dollar a year full and open competitors.
    Another commenter stated that the proposed rule will have two 
results: (1) A company considering acquiring an emerging small business 
will lower the price tag of the business, and (2) sources of capital 
(banks and venture capitalist), because of the increased risk on their 
investment, will increase the cost of capital. A five-year Federal 
contract has a predictable rate of return as opposed to a Federal 
contract that could lose its preferential status as a result of its 
success. According to the commenter, this proposed rule increases 
``risk'' and this ``risk'' will have to be considered by owners and 
investors in making investment decisions. In the end, stated the 
commenter, emerging small businesses will be unable to develop a long-
term marketing and growth strategy.
    Still another commenter stated that the proposed annual re-
certification requirement will impose substantial uncertainty and new 
costs on small business. In particular, argues the commenter, the 
requirement threatens to penalize those small business companies that 
successfully compete and obtain long-term contracts. Such companies may 
achieve a short-term temporary increase in receipts and growth in 
business, but this would be quickly followed by loss of small business 
status and disqualification from those types of contracts. This, in 
turn, would lead to loss of MAS contracts, resulting in lost receipts, 
employee layoffs and other cutbacks. While the company might as a 
result regain small business status, states the commenter, this would 
not be until after a delay of at least a few years, when MAS contracts 
would not be included in the years used to calculate annual receipts.
    As explained above, SBA took into consideration these and other 
comments to the proposed rule and has revised the final rule to require 
re-certification prior to the sixth year and prior to each option 
thereafter. SBA believes that the longer time period allowed on these 
contracts before re-certification alleviates many of the valid concerns 
raised by these comments.
    Five commenters stated that size protests are an expensive and 
disruptive process. The commenters suggested small businesses will be 
forced to expend limited financial capital defending themselves against 
a protest, many of which are likely to be frivolous, which they 
consider an especially onerous change. The proposed requirement would 
cause small business to regard long-term contracts as an unreliable 
source of temporary business only, which would put a company at great 
risk or cause uncontrollable and unplanned business disruption. One 
commenter stated that for those companies already awarded GSA MAS 
contracts, the proposed change would drastically affect contract terms 
since companies would be required to put extra time into reporting 
their small business size status. This extra reporting requirement to 
GSA and SBA does have pricing implications. One commenter stated that 
protests will bring contracting to a halt and the Administration's 
budget for construction will not be obligated and projects will not be 
finished on time.
    Issues related to size protests were discussed in the supplemental 
information section and modifications to the proposed rule have been 
adopted. Size protests on long-term, multi-agency contracts are needed 
to preserve the integrity of the procurement system and small business 
reporting. SBA's size prot