Critical Changes for Small Businesses

Good afternoon, everyone. Welcome to GovSpan's educational webinar series. My name is Artisha Meehan, and I'm the head of federal public sector at GovSpan. For those of you who don't know us, GovSpan is a leading trusted source of data analytics and insight for organizations buying and selling into the public sector. On the federal side, our federal solution, which many of you might know, is AI and is focused really on providing accurate federal information to the world of government contracts, by integrating our various nineteen data sets. Today's webinar is on, critical changes for small businesses with Maria Panicelli. And the, agenda for today, of course, is, you know, just going through the introductions. I wanna take a couple of seconds to just give us all a quick look at what the federal government did in terms of contracts that were awarded as small business in f y twenty three, and then we would absolutely get into Maria's, presentation, which I know is gonna be, covering a lot of changes and facts and you know? So I'm really, really looking forward to that. So just to give you a quick overlook in terms of federal contracts, you know, last year, more than seven hundred and seventy five billion dollars was awarded as, you know, overall as federal contracts to more than a hundred and nine thousand companies. About twenty three percent was really awarded as small business or where the contracting office only set size determination that a business is a small business for that award. And that really translates into a hundred and approximately a hundred and seventy two billion dollars. And that was just awarded to seventy nine thousand companies. So as you can see, you know, that eighty twenty rule definitely applies. Sorry. Yes. And then quickly, just to tell you in terms of agencies, and I know this won't be a surprise to anyone, but our top agencies typically are DOD agencies that are working with these small businesses. But it's always nice to see department of veterans affairs, health and human services, homeland, agriculture, and GSA also making that top, top ten, list. So I just thought it'll be interesting to do a quick overview of that, before we sort of get into, the presentation and I introduce, Maria. So our presenter today is Maria Panicelli. She is, a partner at, today, a partner at MacArthur and English LLP's government contracts group and a good friend of the company. For those of you who don't know Maria, she is she's presented for us many times, and I specifically enjoy her presentations because she always, always, always covers a wealth of information. Her clients include primes and subs that work with a variety of agencies across a breadth of industries all over the nation and abroad. Sorry about that. I don't know what that was. And, she helps a lot of these clients through each and every stage of the procurement process. Maria totally understands the challenges that are involved in government contracting and in the small business procurement and is very proficient in interpreting and applying the FARS, including the DFARS, the VAR, the GSARs, etcetera, as well as all the various small business regulations and furtherance of her AI' goals. She is also very she provides effective assistance to, comp clients that are seeking assistance with the various small business programs, whether it's not just to obtain, but also to maintain that eligibility. I know Maria's clients enjoy working with her as she provides, I think, practical and shrewd advice and is always an advocate for them, whether it comes to bid protest litigations, claims prosecutions, and the false claims act defense. With all of this, Maria is also very active in a number of industry related professional associations, is a frequent lecturer, thought leader, and author on government contracting and small business procurement topics. I am so looking forward to today's session and understanding all the various critical changes that are affecting our small businesses today. The presentation will and the and the recording will be shared. You will get an email after after within twenty four hours of this presentation with a link to the website, which will have the link to the recording as also the presentation. And, also, if you have any questions, could you all please use the q and a button that is there so that we will answer these questions. And with that, Maria, I'm gonna give it to you. Well, thank you very much for that lovely introduction, and, thanks to everyone out there for joining us. Do me a favor. I've I've now shared my screen. I think there were some comments about not getting everything in full screen, so just pop it in the chat. If, you can't see this in full screen, but hopefully now you you can. As you heard, my name is Maria Panicelli. I am a partner at the law firm of McCarter and English, which is a full service law firm. So we've got groups that handle everything from IP to employment law to general commercial litigation, etcetera. But my group, the federal government contract group, focuses exclusively on federal procurement. And we've got, although McCarter has about four hundred attorneys, we've got a a core group of individuals comprised of four partners and, one of counsel and three associates that, focus exclusively on federal government contracting and then a bunch of other attorneys, maybe about twenty or so, that practice in in hybrid areas such as labor and employment or, government I'm sorry, global trade, things like that that kind of overlap with our practice, and allow us to provide a a a greater base of services to our clients. You've got my information here up on the screen. I will show it again at the end of the presentation. And as you just heard, you will be getting a copy of the the slides. So if you've got a question that we don't get to today, you know, pop them in the q and a as we go, and I will try to answer them. Also AI to leave some questions at the some room for questions at the end. But we do have a lot of you guys joining today, and we also have a lot to get through. There were a lot of changes. So if you've got a question that we don't get to today or that you don't think of until after we're done today or if you just don't like asking or asking excuse me. I can't talk. Asking questions, live, you can feel free to reach out to me directly, and You can also feel free to to connect with me on social media. You've got my Twitter, or AI guess I should say x, and LinkedIn here as well. So by way of introduction, I will not be leaguer the point and introduce myself every any further since you guys already heard that that lovely introduction that I'm very grateful for. But as a federal a federal small business government contract attorney, you know, a a lot of what I do, obviously, is relating to these small business regs. So I am constantly monitoring and kinda keeping up with the changes. Two thousand twenty two and two thousand twenty three were big years in terms of proposed changes and actual changes to the small business regulations and to related laws. That is not necessarily unusual, though. This is an area of law. I mean, all law is constantly, you know, subject to change. Government contract law is, in particular, subject to a lot of changes, and small business in particular in particular is constantly a moving target. But even in the AI of that framework, the last few years have been very active, I would say, in terms of the amount of changes. So there's a a lot of stuff that got pushed through, a lot that's more in the works. We're trying to hit the highlights here specifically with regard to some stuff that happened kinda at the end of twenty two and then throughout twenty three. But like I said, there's there's a lot going on more than what we're gonna talk about today. There's even more in the, you know, the specifically that happened in April of last year that we can't fit into just an hour today. So strongly recommend that if you've got questions about your compliance or if you, you know, haven't yourself reviewed the rules we're gonna be talking about, you should go through a full review with your legal team to make sure that you're aware of all the different changes that might be impacting you. So with that, what we're gonna do today is we're gonna focus on kind of three major chunks or or major issues. First, we're gonna talk about the consolidation of the the veteran programs. Technically, this happened, you know, at the end of two thousand twenty two, so it seems a a little while ago. But, unfortunately, or for for whatever reason, a lot of contractors still aren't aware that this happened. Or if they're aware that it happened, they're not really aware of the the impact that the changes have had or or might have on them or might, you know, have on their eligibility. So we're gonna talk about that. We're then gonna talk about the final rule that was issued by the SBA in April of last year. Now the final rule, was about fifty seven, fifty six, something like that, pages long, small font, three columns. I think you get the point. And it kinda purported in the in the title of the rule to be related to the eight a regulations, but it related to a whole host of stuff. So we're gonna, again, try to hit the highlights, AI of the the most important pieces, the things that might, I think, impact the the broadest sector of you. But there are other issues that were changed in that rule, that we're not necessarily gonna spend that much time on today because there's only so much I can do in an hour. So if you've got questions about something else, you can feel free to reach out to me offline or, like I said, you know, you should review with your your legal team or an outside legal professional. Finally, we're gonna talk about some of the case law related developments and shakeup that were kind of the last quarter of, twenty twenty three, with relation to the eight a program. For those of you who have been following it, you might know that there was a little bit of a a a crazy activity flurry, at the the end of last year relating to that program and to the, you know, particular eligibility requirements, specifically the, quote, unquote, social disadvantage piece. So with that, let's dive in and talk first about this veteran owned program consolidation. So to fully understand what happened here and and kind of what stuff's gonna look like going forward, it's important to also be able to look back and understand the history. And when you're talking about the veteran owned programs, previously, there were two programs. Now there's just one as we're gonna see in just a little bit, but before there were two. There was one run by the Department of Veterans Affairs that was for veteran owned small businesses and also service disabled veteran owned small businesses, and it governed the eligibility for set aside procurements that were issued by the VA. So if the VA was gonna put out a contract for, I don't know, renovations to a VA hospital, They were going to set it aside for SDVOSBs, but then you had to be an SDVOSB under the VA program. And this was an application and verification based program. You had to apply and be kind of examined or investigated by the VA, particularly the the subset of the VA that was known by, was known as CVE. And then you would be verified, or certified, but a lot of the times, the the word used was AI, in the vet biz VIP database. So it was application based. The other program was run by the SBA related only to service disabled veteran owned, companies, and the vernacular they used or the acronym, I guess, I should say, was a little bit different. They, sometimes did SDVO space SBC, which just meant service disabled veteran owned small business concern. But, again, it was, you know, the equivalent of an SDVOSB, a small business that was owned by a a service disabled veteran. This program governed eligibility for any veteran owned set aside that was issued by any other agency other than the VA. So whether it was the corps of engineers or the GSA or the Department of Homeland Security or Department of Energy, etcetera. If they were setting something aside for service disabled veteran owned small businesses, then you had to be eligible under the SBA program. But the SBA program was just self certified. Basically, you could just say, I am a SD SDVOSB SBC. There was no application based process. So what a lot of companies did was they figured, well, you know, the application based program was stricter, so I'm gonna apply for that. If I get verified, then I'll know that I'm good, and I will feel, you know, comfortable self certifying for the the VA program. But, unfortunately, even though that seems very logical, the law is not always logical, one of the unfortunate realities of my job. And what happened is because these two programs, the VA program on one hand and the SBA program on the other hand, were governed by different sets of regulations, the SBA program was in the SBA regs at thirteen CFR one twenty five, and the VA program was in the VA regs. There was two different sets of regulations, and the wording used was slightly different. And in particular, for example, the wording used relating to unconditional control was slightly different. That resulted in AI different definitions being applied, and the case law developed in two different ways, which meant that there was a lack of predictability. You could say, hey. You know, these are the things that I've done. This is how I have my business set up, yada yada yada. I'm good for the VA program, but you might not be good for the SBA program. And because it wasn't an application application, excuse me, based program, it's really hard to tell, especially for contractors who, you know, aren't in the weeds on law of this stuff every single day. What ultimately ended up happening is this resulted in really inconsistent results and, you know, odd findings across these two programs. There was even a case before the Court of Federal Claims. Judge Leto basically said, hey. Look. I got no choice. AI even though these are inconsistent and nonsensical and draconian, meaning, you know, really strict to the point of almost nonfunctionality, results, I've got no choice because this is the way the case law has developed. And over time, this lack of consistency, this, you know, unpredictability, the fact that contractors were getting dinged even though they had done their best to to try to comply with the ranks, everyone got really dissatisfied with these programs, and there was a lot of clamoring and a lot of, you know, desire for there to be some changes and some you know, something that would promote consistency. So what happened is, first, that was acknowledged, and there was a streamlining of the definitions. They basically got rid of the definitions that were stricter, by putting the VA definitions, the the language that had been in the VA regs about, you know, how you define unconditional control. They moved that over to the SBA regs. And then the VA regs just AI pointed over to the SBA regs and said, like, go go look at the definition over there. So that streamlined the definitions and made them the same. So that started to promote consistency. But for a lot of contractors, that wasn't enough. They wanted the programs consolidated and ultimately congress agreed. So in January of, you know, twenty twenty one, the NDAA, National Defense Act author or authorization act, excuse me, of twenty twenty one, which is that, you know, the the big bill that comes down every year that a lot of government contracting stuff kinda comes out of, in twenty twenty one, so years ago, said, yeah. Let's consolidate these programs, directed the SBA to do so. And like it does sometimes with these things, the the SBA took a couple years to, you know, actually follow through. I think and, again, that's not a a criticism or a or a hit on the SBA. This was a really complicated overhaul that, you know, it affected a lot of different pieces of regulation, and I think they wanted to make sure that they were doing a a really thorough job. So when they finally issued the final rule, which was November of twenty twenty two and went into effect January first of last year, and if you get AI, you'll see this as a link so you can hyperlink to the the final rule in the federal register. It consolidated the programs. So, you know, as of January first last year, the programs are consolidated. It is now one single program that's run by the SBA. It is an application based program. It's the VET CERT program. So the VA's database of verified firms transferred over to SBA, Talk about that a little bit more in just a second. And now you need to be certified through the SBA program, through this application based program, you know, being in the database for any agency set aside SDVOSB or or VOSB. Now the VA still has a role in the in the program. Specifically, they still are the the agency that's going to continue to determine veteran status and disability status for veterans. They're gonna still maintain records that the SBA is gonna rely upon, and they had to take their whole database and kinda hand it over to the SBA. In addition, their Veterans First contracting authority is not affected. So they still, you know, have the ability to do what they were gonna do under that. They still have to set things aside, for SDVOSBs under the the Kingdomware line of cases. So that hasn't changed. But for the most part, you know, the SBA is now in control of the program. They're in control of eligibility for VOSB or SDVOSB companies, and you've VOSB or SDVOSB companies, and you've got to go through that program to be eligible no matter what agency is issuing the set aside contract. So in terms of, you know, what changed, obviously, the biggest change is that this program was consolidated. There's now one single program, you know, that the SPA runs. But there were also changes to the regs themselves relating to eligibility and kind of surrounding issues. So the first thing is you can see here, you know, to qualify as a VOSB, a veteran owned small business, and then, you know, the second piece is to qualify as an SDVOSB, which is a service disabled veteran owned small business. You've gotta be small, but they changed it from being small under your primary NAICS code to that you could be small under any NAICS code that's listed in your SAM profile. And we're gonna see that's a change that was made in a couple different contexts in this this latest rule changes in in April as well. So, you know, you no longer need to be small under your primary NAICS. It can be any NAICS code, which you do business in as listed in the SAM profile. I would not recommend I've gotten this question from people just listing every, you know, code, even ones you don't do business in, just to say, hey. I've got one where I'm small. I think, you know, anything where you're doing something disingenuous like that is generally gonna come back to to haunt you, so I wouldn't recommend that. But if you're genuinely doing business in a NAICS code and you're small in that NAICS code, then you could qualify as a DOSB or SDUSB. Granted, again, only for for contracts, you know, on that AI. You're still gonna have to make sure you're small, in general. But, that's the the big change or or one of the big changes. Other things that changed, where the regulations themselves are. I think I mentioned before, you know, whereas they used to be, in two different places, the VA regs and then the SBA regs at thirteen CFR one twenty AI, they're now at the in the SBA regs, but they've moved within the SBA regs. They're at thirteen CFR one twenty eight. So if you're looking for the old regs that you know, they're not gonna be where they were before. They also removed the requirement that these businesses need to demonstrate, quote, unquote, good character to receive certification. They still have to meet responsibility requirements. You still can't have, you know, misconduct in your record. You can't be excluded from SAM, can't have a debarment issue, etcetera. But there's not a per se, quote, unquote, good character requirement the way there used to be and the way there still is with the eight a program. So that's a little bit different. The regs also made some clarifications with regard to control, definition of extraordinary circumstances, and specifically the adjustment to the control rules, the the prior regulation, at the time of consider or consolidation. Excuse me. There was a list of situations in the the regulations talking about control and unconditional control of an SDVOSB or or VOSB company, and it kinda listed a bunch of scenarios where there'd be a rebuttable presumption that the the veteran, or service disabled veteran was not actually, quote, unquote, in control. They have eliminated in that new rule, that list, the list of rebuttable presumptions. They've instead made the the regulations a little bit more in line with, kind of the way the eight a and the the women owned program is set up, where they've put limitations on control by nonqualifying veterans. So there are specific things that, you know, nonqualifying veterans in other words, if you've got a minority owner or a non veteran that has some sort of management role and is assisting the company as a, you know, a principal or a key employee, that there are certain limitations on what they can and can't do before they're deemed to have a little bit too much control and the the vet or the service disabled vet is deemed to not have, you know, the the amount of control that they are supposed to have in order to remain eligible. The other thing that changed is, the the reg at the time of consolidation had some sections dealing with normal business hours and close proximity, basically saying that it was a rebuttable presumption that the veteran was not in control if he didn't work during normal business hours and if he wasn't working in close proximity. Those have been eliminated, but there were, in its place, limitations on outside employment put in there, which basically just says, hey. Look. The the veteran needs to be working, you know, full AI, so they can't engage in outside employment. But if they do, you know, you can prove that they're still in control of this business. You know? For example, a scenario where that might be possible, If you say, hey. You know? I'm just getting this business off the ground. I still have a full time gig for this this giant government contractor where I'm a a project manager or or whatever I am. But I'm starting my own company, and I've gotta do that kind of as my side hustle until it gets off the ground. So, obviously, I can't work during normal business hours. But I'm the one that's in control of the company, and and here's, you know, how I prove it. There's nobody else that's working normal business hours without me. There's nobody else that's, you know, working more hours than me. There's nobody else that's running the company while I'm at this other job. Those are the kinds of things where you can, you know, prove it. It's a rebuttable presumption. But, again, the way that it's been included in the regs is a little bit different. Two other things that don't necessarily impact eligibility itself. One, when you're talking about, oops. Didn't mean to move forward here, guys. When you're talking about status protests, they now go to the SBA OHA. That's been something else that's been in flux back under the the two program model. It used to be that status protests went to the VA and size protests went to SBA. Now you've got size protests going to SBA, and by that, I mean, area offices of SBA and status protests are going to SBA OHA. And the SBA OHA, the the process that you go through for a status protest is a little bit more detailed, and might require a little bit more involvement on behalf of the protester than it used to. So be aware of that. And AI and I was just involved in a a status protest, that, you know, went my client's way because we it should've, involving this issue. But the other big change is whereas under the old program, you have had to then get the joint venture verified in the database, that is no longer required. Both the the the new regs for SB I'm sorry. SDVOSB, VOSB eligibility and the VAR when talking about set aside eligibility have been modified to say that as long as the, you know, the the protege member or the requisite member of the joint venture is the managing member is certified. The JV itself does not have to be certified in the database. So you, you know, you got a little bit of a not as long of a lead time as you used to in terms of getting a JV up and ready and and ready to go for these set aside contracts. And I think there's gonna continue to be some confusion about that, so you'll have to AI watch this space in terms of how protests go. But I think, right now, people aren't aware that that's not a requirement anymore, and protesters are are being a little overactive in their protests because of that. Alright. So going forward, you know, if you were previously VA certified, you will have been transferred over to the SBA system, and you will have most likely gotten a grace year in addition to, you know, the amount of time that you you would have had kind of left on your, you know, re up for lack of a better term. So you don't necessarily have to do anything other than just make sure you're compliant with the new regs and that you kinda know where you stand and just, you know, get your ducks in a row. If you were previously self certified, but not VA certified, you had, if you got your application in by the end of last year, a grace period where you could continue to self certify until you were either verified or told that you had not properly, you know, you didn't meet the criteria. Unfortunately, if you missed that deadline or if you were just never self certified or or anything, you're just new to the program, in either of those cases, you're gonna be applying. It's gonna be a fresh start. Go through an application process with the SBA through this new VETS cert program. Alright. With that, I'm gonna move next into the the final rule that was issued on April twenty seventh of last year and covered a a lot of different things. And then we're gonna move, after that, like I said, to the the eight a program. So just by way of overview, the the source of these changes, like I said, is an April twenty seventh two thousand twenty three rule issued by the SBA, and that finalized an earlier proposed rule. And for those of you who don't know, I guess I should have said this upfront since the first piece was from a rule too. But for those of you who aren't familiar with the way regulatory lawmaking works in the United States, the the regulations that are published in the the CFR, the code of federal regulations, if there are going to be changes to those, a lot of times there are statutes or or other acts that kind of direct that there should be changes, but the changes themselves are made by the government issuing, basically, hey. Here's what we're gonna try to change them to. What do you guys think? So they issue these proposed rules that then, you know, you're allowed to comment on, and then after that, they AI the rule. So in April, what they did was they AI the rule, and the rule, quote, unquote, it's a weird name for it, but it's basically a a document that changes a bunch of the regulations. So the proposed rule came out in September of twenty two. The final rule was, you know, issued in April of last year, and it made a whole host of changes across a bunch of different small business categories. And like I said, if you look at the title of the final rule, it kind of is misleading because it seems like it really only applies or or primarily applies to eight a. And as you're gonna see, we're not gonna talk about a lot of the changes to the eight a program. We're gonna be talking about a lot of the other changes because I think those are perhaps the most important and the most of general applicability. And then we're gonna cover some of the the major case law changes to the eight a program at the end of this presentation. But, again, this is, you know, a final rule that kind of characterizes itself or is is kinda named as as though it is only for eight a, but it's not. It covers a a wide variety of things. And these changes went into effect at the end of May last year. So the first piece I wanna hit is in the category of affiliation. And for those of you who aren't familiar with the ostensible subcontractor rule, it is something that is included in the affiliation reg, which is thirteen CFR one twenty one one zero three, and specifically in the section of that reg that deals with joint ventures. But it's a little bit misleading because it actually deals with scenario where companies are not a part of a joint venture. They are part of a prime sub team, but the the subcontractor is kind of exercising too much control. They are only, quote, unquote, ostensibly or, you know, purportedly or, you know, they're saying they are a subcontractor, but they're kinda acting like a prime. So a sensible subcontractor is a subcontractor that is not a similarly situated entity. In other words, contractor that would have the same business program status, so, you know, a HUBZone to a HUBZone, a SVOS b to SVOSV, etcetera, that performs the the primary and vital requirements of a contract or an order or that a subcontractor, upon or or is a subcontractor upon which the the prime contractor is unusually reliant. And the reason that this is in the JV section of the regs is because if you are a prime and a sub and you're deemed to have this kind of ostensible subcontractor relationship, then you're going to be treated like a joint venture, which means your sizes are going to be added together, and your aggregate size is what's going to be compared to the applicable NAICS code size standard. So extensible subcontractor basically means you get affiliated, at least for purposes of the contract where you've got this extensible subcontractor relationship. And if the relationship seems kind of, you know, long standing enough, it might result in general affiliation or other control eligibility problems as well. So the final rule made two important revisions to the sustensible subcontractor rule. AI sorry. I know it's a little confusing that rule the word rule is being used in in two different places there. Ostensible subcontractor rule is basically a doctrine that, like I just said, means that if, you know, subcontractors and primes are allowing the subcontractor too much control, are gonna be deemed affiliated. And the final rule the rule in that case is, like I said, that the document that changes the regulations. But the first thing the the final rule did is to clarify how this doctrine, the ostensible subcontractor rule, is going to apply to general construction and then also provide guidance on the utilization of something called the Dover Staffing factors because Dover Staffing was a case that many years ago talked about some things that, you know, the SBA should be looking at when they're considering a sensible subcontractor affiliation. And these were never really codified in the rule itself. They've just kind of grown out of case law. So there was some idea about whether or not these should be included in the the actual regulatory language. So the the first piece, the general construction contracts. Like I said, if you saw I'm gonna go back for a second. The second bullet point here, the you know, you're an ostensible subcontractor if you're performing the primary and vital requirements of a contract. In other words, if the subcontractor is basically controlling the job by performing the the thrust, the crux of the work. But there was a lot of confusion about how this would be applied in the general construction contract context because AI definition, a lot of times, you know, the the prime contractor is serving as a construction manager or, you know, a a prime general contractor, and they're subcontracting out a lot of the specific work, a lot of the actual construction work. So what the rule did was to kind of clarify, yes. We understand that construction is a little bit different, that it regularly involves subcontractors with specialized experience like electrician or subcontracting or, you know, concrete or flooring or paving or whatever the case may be. So it clarified that, okay, in that context, the primary and vital aspects of a contract are the management, are the superintendents, are the oversight, are the supervision, are all of the things that a general contractor does. You don't need to be doing the the plumbing and the electrical work and the, you know, the paving and the landscaping. If you're managing all of it, then that is the primary and vital aspects of the contract such that you're not, in the general construction contracts, gonna have a problem. Now be aware that you still need to meet the subcontracting limitations AI or, you know, not go over those, as set forth in thirteen CFR one twenty five point six. And stay tuned because we're gonna talk about some changes to that regulation in just a little bit. But this makes it a little bit more predictable or a little bit, I guess, less nerve wracking for general construction contractors to say, okay. As long as I'm still kind of in charge, as long as I'm still supervising, superintending, managing, then I can subcontract out within the limits set forth in one twenty five point six without being worried that, you know, someone else's job is gonna be considered the primary or vital aspects of the job such that they're gonna be deemed an ostensible subcontractor and we're gonna be deemed affiliated. Now the second piece, remember I said we got those Dover staffing factors. Dover staffing is the case from, I think, it was two thousand ten or two thousand eleven. It's a it's an older case. It goes back a a long ways. And what that said is that there's four factors that the SBA should be looking at when trying to figure out if one contractor is, like, you know, too reliant on the other such that the ostensible subcontractor doctrine or or rule should apply. One, if the proposed subcontractor is the incumbent contractor and now ineligible. In other words, hey. I used to be small. I'm not. I've sized out, so now I'm just gonna continue to perform, but as a subcontractor to somebody else. Two, if the prime contractor plans to hire the large majority of its workforce from the sub. Three, the prime contractor's proposed management previously served with the subcontractor on the incumbent contract. And four, if the prime contractor lacks the relevant experience and is gonna have to rely on the more experienced subcontractor to kind of run the project. So the like I said, the the case law AI developed out of that, out of the the two thousand and eleven Dover Staffing case. The rule adds two of those four factors to the actual language of the regulation. It specifically adds the fact that the the SBA should consider reliance on incumbent management and reliance on the subcontractor's experience. But there was a lot, a lot, a lot of back and forth on this, in the comments. You know? Remember I said they put out a proposed rule, they seek comments, and then they they wanna get more information from AI of the public and from people in the industry. There was a lot of discussion about, you know, they didn't want the SBA just mechanically applying those four factors. So the idea was that they're going to include two of them, and kind of you know, they're kind of the most important in that way. But also add language saying no factor is determinative. This is still gonna be kind of a totality of the circumstances type analysis. You still need to take into account all of the surrounding facts and kind of what's going on and and where you need to go from there. So it has now added two of these factors in, which make them a little bit more important, but it's also said you know, but this is still just an overall analysis. So like everything with the SBA, it still remains somewhat subjective. AI. I'm sorry. I'm just checking. I got one question. Yes. You will get a copy of the slides and and a recording after the the webinar. Okay. So moving on, I've just been talking about, you know, the the ostensible subcontractor rule, and I did mention that you still need to stay compliant with the limitations on subcontracting at thirteen CFR one twenty five point six, but that regulation has changed as well. Now it has not changed in terms of the percentages. For those of you who do not know about this regulation, what it says and, again, it's thirteen CFR one twenty five point six. What it says is that for small business set asides over the the simplified acquisition threshold and for all, you know, specific, types of set asides AI eight a, HUBZone, women owned, service disabled, etcetera, you cannot, as a prime contractor, subcontract out more than a certain percentage of the work. Now what that percentage is differs depending on if it's construction, specialty or general, services, supply, etcetera. It could be from fifty percent to eighty five percent. So you could still subcontract out a decent portion of your subcontract. But, again, you've gotta make sure that you, you know, are are doing the math on that and and making sure that you're AI, and that's something that kinda needs to be read in conjunction with what I was just talking about about a sensible subcontractor as well as, you know, this is just something that should be forefront of mind that you're trying to be compliant with all the time. But, historically, there's a lot of contractors that aren't compliant with this. And because it is technically, hypertechnically, a, an an issue of responsibility and not eligibility, this isn't something that can be protested. So a lot of AI, if you try to bring it up as a bid protest, the GAO is gonna say, hey. Look. Unless it's clear on the face, which it never is because no one ever says, my subcontractor is gonna perform an illegal amount of work, unless it's clear on the face. The FGAO will be like, well, we're not gonna get into math. We're not gonna do this. We're not gonna, you know, say that they're they're violating this. And if you try to, you know, use it as a size protest basis, they're gonna say that doesn't have anything to do with eligibility. Now can you add it as one fact that supports, you know, an overarching totality of the circumstances argument about affiliation or control? Yeah. It's a it's a fact that can be used or, you know, used as leverage to try try to make an argument about an eligibility factor, but it is not itself an eligibility factor. So what happened a lot of times is that there were companies that were violating this willy nilly, and there was really nothing their competitors could do about it. So the big change I'm taking the the bullet points a little bit out of order, I guess. The big change is that there were finally some teeth added to this regulation. So depending on how you look at it, if you're one of the companies that's been a little bit lax, in terms of your compliance on this, that's probably bad news. If you're a company that, you know, is is very diligent about this and has been getting really angry that your competitors are not, this is good news. And, specifically, it still doesn't allow you to protest. It still doesn't make it an eligibility criteria, unfortunately. But what it does do is say that if a company has failed to comply with this, basically, the agency has to give them a bad CPARS. Now AI everything with government contracting and, like, especially everything with SBA, there's an exception. You know, if if basically the the the contractor can prove that it really wasn't their fault, that they tried, that it was extenuating circumstances, blah blah blah blah, those types of things, then they can convince the agency not to give them a bad CPARS. But, basically, the agency is obligated and has to document why and what justification it was given to not give them a bad CPARS if there's been noncompliance. AI, finally, some teeth on the limitations and subcontracting clause. The other thing that this regulation did was or I'm sorry. The regulatory change, I should say, the final rule did, was add some clarity with regard to multiple award contracts. There was, I guess, some confusion over, okay. You know, what if you've got a contract that's being administered by multiple agencies? You know, if you've got a a general contract, you know, one standalone contract or even a a multiple award contract where one agency oversees and monitors the whole thing, it it pretty easy to figure out how to comply with this. But if you've got a multi agency set aside contract where more than one agency is issuing orders under the contract, no one agency is really able to monitor and track the the overall compliance for the whole contract. So what the regulation did is say, hey. You know, if this is a question of, a multiple award I'm sorry. Multiple agency set aside contract where more than one agency is issuing orders, then compliance should be measured order by order for each ordering period. So that's a big change for for people who operate on that. So we're gonna go through these in kind of a summary fashion. Again, like I said, that that this was a an incredibly extensive rule change. So if you've got questions about any of this stuff in more detail, happy to talk to you offline. Covering it generally here because we only have fifteen minutes left. And you can see how much is how much information there was about the changes. So the the first thing, and these are all kind of in the category of affiliation, joint venture, mentor protege related issues. The two year rule, which itself is a relatively new rule, used to be that joint ventures could not perform more than three contracts in two years. Now it's just that joint ventures can't continue to compete for new contracts two years after they get their first contract. But one of the the big kind of carve outs to that is if you get a multiple award contract, you can continue to compete for orders under that award. So this rule clarified that and just made it clear that, you know, orders and contracts are not the same thing. Proposed rule added a sentence that specifically, you know, you're allowed to continue to compete for orders after the the two years are up. It also clarified a couple things with regard to recertification. There was some confusion based on a prior change to the rules in two thousand sixteen where the SBA had added the word sale in addition to mergers and acquisitions as an instance where recertification was required. So that led some people to question whether, you know, any de minimis sale of any portion of stock required recertification, and the SBA said, nope. That wasn't our intention. Not required when there's just a sale or an acquisition of, you know, some stock. Only required where there's a merger, where there's an acquisition, where the sale results in a change in control. So they clarified that in the the new regulation or the the revised regulation. They also specifically, in the context of joint ventures, talked about the fact that, you know, recertifying your contract or recertifying your eligibility rather for a new award is not the same as getting a new contract. So that, you know, in the context of the, you know, the the two year rule we just talked about is an important clarification. Some issues specifically relating to mentor protege and mentor protege joint venture, AI that you could, instead of having two six year mentor experiences with two different mentors, you could just renew for a second six year term with the same mentor as long as they were gonna be continuing to provide additional business development. There's also an added prohibition now on the new regulations. You cannot be a member of multiple joint ventures, all of which are going after the same contract. So I can't be large co, and I have, you know, three proteges, and I form a joint venture with each of those proteges, and then all three joint ventures go after the same project. Because the whole idea is that, you know, I'm allowed to be a mentor to multiple companies so that they can all benefit and they can't be in competition with each other. You obviously then can't have all of your proteges in competition with each other to go after one contract because you want to ensure that the money's gonna go to get no matter what. So no self competition. There were also some clarifications relating to the amount of proteges you could have and what happens if there's a merger or an acquisition. The old regulation used to be that, you know, you could only have three proteges. At a time, they couldn't be in competition with each other, etcetera. But and and that was designed, you know, to to keep the large business mentors from kinda taking advantage of the process, like I just said. But proteges can only have two mentors in their lifetime. So the SBA realized, like, hey. Even though the rules are AI strict about this because we were trying to protect proteges, it's absolutely super not helpful to proteges if we allow, you know, their mentors to be AI, and then, like, they they get dropped, because that still counts as one of the two times they were allowed to have a mentor. So what they said, they changed the rule to say, okay. Well, you know, if if a company acquires another company and the company that they acquire, the target company, has mentor protege they're they're their mentor, and they have mentor protege agreements in place, the the new company, the acquiring company, can continue to fulfill those obligations, can continue to serve as a mentor even if they had their own, and this pushes them over the three. They obviously can't go after any new ones in the meantime, and they're not allowed to kind of apply to any more until they go back down under the three. But it allows companies that acquire other companies to continue to fulfill their target mentor obligations, and, hopefully, that helps the the proteges as well. Two final things related to joint ventures AI that, HUBZone joint venture should be rest registered in Sam and identified as a HUBZone joint venture with the HUBZone certified joint venture partner identified, but that the the HUBZone joint venture didn't itself need to be separately certified. And then AI, there was some clarification relating to populated and unpopulated JV. The proposed rule clarified that the requirement was meant to apply only to contract set aside or reserved for small business and also clarified that a populated joint venture could be awarded a contract that was set aside or reserved when both of the partners were similarly situated. So a little bit different than kind of the the overall rule or what was being interpreted as an overall rule against unpopulated or, I'm sorry, populated joint ventures. Alright. I wanna go quickly through a couple changes relating to size standards and the interplay between I'm sorry. Size protests and the interplay between size protests and, GAO or or court of federal claims or agency bid protests. The first thing is that there were some changes to who can protest a size of, of another company. This is relating to, quote, unquote, standing. Not everyone can file bid protests or size and status protests. You have to be an interested party, and the definition of who is a, quote, unquote, interested party used to be different, even with regard to the size protest portion, even before you get to the status portion for every different program. So if you were challenging, like, the size of a HUBZone versus the size of a, eight a versus the size of a WOSB, You had to fulfill different criteria. The rule said, nope. Let's make that consistent, and we're gonna use the same language across all of these, and it's gotta be, you know, that it's a a company that was not eliminated from consideration for any procurement related reasons, such as nonresponsiveness, technical unacceptability, or outside the competitive range. So if you are an actual prospective bidder, and you haven't been eliminated for any of those reasons, then you arguably would have standing to to protest. And, again, in in some cases, that's a narrowing, and in some cases, that's a broadening of the language that was there before. In terms of the timing, they specifically clarified this with relation to sealed bids where the original, you know, low identified bidder is then later determined to be ineligible because the rule used to be five days after bid opening, but that didn't account for scenarios where, okay, there's a bid opening. You know, it seems to be that we're gonna go with this person for award, but then later that person is deemed to be ineligible and a new person is identified a new company, I should say, is AI. Well, you know, that then it would be too late to protest that new company, and that didn't make any sense. So they extended it to make it clear that, you know, where the identified low bidder is later determined ineligible, then, you know, any other protest protesting that the subsequent identified low bidder could be timely if it was received within five days of identifying that new low bidder. Finally, getting to the the interaction between GAO protests and size and status protests. For those of you who have gone to any of my webinars on on protests or, you know, if you haven't, you you should. You got questions about protests. It's not unusual for a protester to both be challenging a an award decision at the the bid protest level, saying the agency did something wrong as part of source selection, but also challenging the company's eligibility. That's the size or status protest piece. So there has been an SBA policy, but it was never in the rule, that if the SBA receives a size protest, but that same procurement is the subject of a bid protest at the GAO, the SBA will suspend the size protest. So, basically, they just codified that in the new rule saying that it's gonna be suspended if there's a a GAO protest going on. Similarly, if there is corrective action taken in a bid protest, then the SBA is generally going to dismiss any size protest related to that initial apparent successful offer. Unless there's some sort of situation where that still needs to be done and the agency requests that within a certain amount of time, then the the SBA will still do that analysis. But, otherwise, that's a waste of their time. It's AI of moot, so they're not going to do that anymore. So some selected changes to the HUBZone program. Again, these are kind of the highlights, and I'm I'm summarizing them very briefly. But like with the, the veteran owned program that we saw above, no longer do you have to be small in your primary NAICS code. It's enough to be small in any NAICS code in which you conduct business. There were some clarifications with regard to HUBZone applications, specifically that if the, the agency is not able to determine the validity of your, AI guess, the the statements that you're making is the easiest way to say it. If you're not able if the SBA is unable to determine your compliance with any of the eligibility requirements because what you've kind of, you know, used to apply is inconsistent or or contradictory, they're gonna not certify you. It basically puts the burden on you. They're gonna decline your application. And it also added language saying that if the SBA ever determines that an applicant has knowingly submitted false information, whether or not it was material, whether or not it made a difference in the SBA's decision, the SBA is gonna deny the application. And if it finds out later that something happened, it can decertify. The SBA can decertify you. And those changes were made not only with regard to HUBZone, but with relation to the women owned program and relation to the the HUBZone program I'm sorry, the, SDVOSB program as well. The other thing is that it clarified the specific grounds that you could file a HUBZone status protest, specifically that the protested concern did not meet the HUBZone eligibility requirements set forth in one twenty six point two hundred, that a joint venture did not meet the requirements set forth in one twenty six six sixteen, that the protested concern as a HUBZone prime contractor was unduly reliant on one or more small subcontractors that were not HUBZone certified. So that's kind of similar to the ostensible subcontractor rule. Right? It's just another place in the regulations where they're kind of firm up that same AI, or that the protested concern on the anniversary date of its initial certification failed to attempt to maintain compliance with the HUBZone residency requirement during performance. So kind of, again, AI the exact grounds on which someone can file a status protest. Some changes to the women owned program. Again, we see that change with the the primary NAICS, changing to any NAICS in which it does business. Also, some changes with relation to unconditional ownership, specifically adding the language of death or incapacity. So saying certain things can happen, you know, if the the the the woman dies or is incapable and if you've got certain kind of protections in your corporate governance documents. In those eventualities, that is not necessarily a problem that renders her, you know, not, quote, unquote, in control. Similarly, and we saw this again at the the, SDVOS b regs, there's a limitation on outside employment. The woman, the regs before basically had a per se, you cannot be involved in any sort of outside employment or you're gonna be deemed not to be in control. The the new reg makes that a rebuttable presumption. As long as you can show that you're devoting sufficient time and that you really are in control and are the one managing things, then you are going to be okay for purposes of, you know, the the unconditional control piece. But, again, that could be kind of a complicated analysis in terms of what you need to do to show control. So if you've got questions about that, you can feel free to reach out to me. Also, they changed it from having to, kind of, quote, unquote, recertify every year to the fact that it's gonna be a three year period similar to the the SDVOSB regulations. And, again, they added that decertification language that was similar to the the HUBZone, where they say if you misrepresented anything, then you're gonna be decertified. Like I said, that's a highlight, of AI some of the most important changes, but there were changes to the eight a program relating to the bona fide place of business, some unconditional ownership stuff there, some things relating specifically to Indian tribes or or tribally owned concerns, ANCs, NHOs, some things relating to early graduation. But what I really wanna focus on with our last few minutes with regard to the eight a program is the changes that came out of Ultima services. So if you've got questions relating to the the the other requirements or or changes from that rule, I'm happy to talk to you about that offline. But in terms of the the eight a program in general, the big changes are that it for those of you who are familiar with the eight a program, the company needs to be small, and it needs to be directly and majority owned and and unconditionally controlled by an individual who is, amongst other things, quote, unquote, socially disadvantaged. There used to be two ways for you to prove social disadvantage, and technically speaking, the regulations right now, if you didn't know the context, you would think there still were. You either can be a member of a specific racial or ethnic class or or group, and they basically are defined, again, by race or or ethnicity, black Americans, Hispanic Americans, Asian Americans. These are the, you know, Pacific Islander Americans. These are the the the words that the regulation itself uses. Or if you're not a member of one of those groups, because those groups are presumed or or were presumed to be socially disadvantaged. But if you were not a member of those groups, you could affirmatively establish your social disadvantage through drafting a narrative. Well, what happened is there was this case called Ultima Services in a federal court in Tennessee, which basically said, hey. That's a violation of equal protection. You can't have some races that get a benefit and are automatically presumed to be disadvantaged and other races, you know, have to go through, you know, a burden. So contrary to kind of what the law has been regarding the eight a program for years and years and years, the the court said, yeah. We agree with that. That's you know? So they enjoined or prohibited the SBA from, basically, allowing anyone to continue and and accepting any new, applications on the basis of that presumption of social disadvantage. All new applicants now have to draft a narrative or they need to answer certain questions. If you go through the the application on the SBA website, it guides you through it. But there are very specific things that the SBA is looking for, and it's very important that you talk to a legal professional to make sure you understand how to properly establish social disadvantage. Because even those people who are already in the SBA program and had gotten in under the social disadvantage presumption had to go back and do a narrative in order to kind of firm up their their eligibility. Now the plaintiff in that Ultima Services case, to her, that was not enough. She is continuing to push for additional changes relating to ANCs and, NHOs that, you know, she's continuing to push that all contracts that were awarded under this presumption be rescinded. So right now, there's a lot of kind of back and forth and and still kind of fighting over this case. There's also an appeal going up on the, you know, Ultima Services decision that prohibited the the use of the presumption being used going forward. So there's all sorts of changes that might still occur. But for now, the big thing is even though the regs, if you look at them, make it seem like you could have a a rebuttable presumption of social disadvantage if you're a certain ethnic or racial group, That is not the case anymore. You actually have to go through a process where you affirmatively prove using a personal narrative and examples from your past showing that you have been discriminated against and that you are socially disadvantaged. So that's the big change there. So with that, I know we are a couple minutes over. Like I said, I know there was a lot to get through. So I will stick around for a couple extra minutes if you've got questions. But if you don't have time to stick around, or AI I said, if you got questions that pop into your head later, on this or any other legal topic, you can feel free to reach out to me. You've got my information on the screen. Alright. So with that, I do see one question. For a small business not in a set aside subcategory, so I think by that, you just mean small business, you know, straight, not HUBZone, not SDVOSB, not eight a, just a small business. Does the primary NAICS rule apply to other NAICS categories? So if you're just small, then it's always going to be a question of the the NAICS code that has been assigned or or I should say the size standard corresponding to the NAICS code that's been assigned to the specific contract you are going after. So it's a little bit different when you're applying for status overall because you have to kind of, you know, you need to have a foothold. But if you're just talking about being a small business, then you represent yourself to be small for certain purposes, you know, for certain NAICS codes and not small for others on your Sam registration. And then whether or not you are eligible for a particular contract is going depend on what NAICS code was assigned to that contract and if you are small for purposes of the size standard that's associated with that NAICS code. So I hope that helps. What is the annual revenue to be considered small? So it's not always annual revenue. It's actually not act it it's it's never annual revenue, actually. It's sometimes annual receipts averaged over the last five years, and it's sometimes number of employees averaged over the last two years, and it depends on the NAICS code. So every NAICS code has an associated size standard. And if you look up the size standards, some are in terms of dollars and some are in terms of just pure numericals. If it's a pure numerical, that represents number of employees. Again, you're gonna be looking at the average number of employees then over the last two years. And, again, how you calculate that can be complicated. So if you've got questions, you should talk to a a legal professional. And if it's a number in terms of dollars, then it's average annual receipts over the last five years. So there's not one answer to what is a small business. It's NAICS code and size standard specific. Yeah. I'm hoping everyone can hear me. Yep. Mary. Yep. Maria, this has been so informative. I learned so much too. I wanted to thank you again for do hosting for doing this webinar with us. Everyone that's on the phone, Maria is always very gracious and, off and always offers, for people to ask her questions. So if you have a question, please please please do make sure you reach out to her. A link will be sent to everyone with the recording and the presentation. And then we have another webinar with Maria, I wanna say, in March, talking about, Maria. I forgot what we're talking about, but I wanna say it is, on limitations of subcontracting, if I mistake not. Yes. And key concepts in federal subcontracting, that is on March twelfth. Again, you all can go to, there will be an email with the link to register for the next one. And, again, thank you so much, Maria, and for everyone joining this. I don't think there were any other questions. Thanks to everyone for joining. Have a good day.