Growing past small business: size and recertification

A small business concern is a concern, including its affiliates, that is independently owned and operated, not dominant in its field of operation and qualified as a small business under the criteria and size standards in 13 CFR part 121, including the size standard that corresponds to the NAICS code assigned to the contract or subcontract 1.

The number of employees or annual receipts in a size standard indicates the maximum allowed for a concern and its affiliates to be considered small 2. Under 13 CFR 121.104, the annual receipts of a concern that has been in business for 5 or more completed fiscal years means its total receipts over its most recently completed 5 fiscal years divided by 5 3.

Practice: because receipts are averaged, size moves with a lag in both directions. Each year, project the average forward for every NAICS code you bid under, with and without the bids in your pipeline, and with any company you might acquire. The year you will cross a standard should be on the board's calendar years before it arrives.

For a contract, a concern and its affiliates must qualify as small 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 or response which includes price 4. Once awarded a contract as a small business, a firm is generally considered to be a small business throughout the life of that contract 5.

Check 1

Under 13 CFR 121.404, as of when must a concern qualify as small for a contract?The date it submits its self-certification as part of its initial offer or response which includes priceThe date the contract is awardedThe end of its current fiscal yearThe date of its next SAM.gov renewal

When you must rerepresent

FAR 52.219-28 calls for a new size representation within 30 days after execution of a novation agreement 6, within 30 days after a merger or acquisition that does not require a novation 7, and, for long-term contracts, within 60 to 120 days prior to the end of the fifth year of the contract 8.

The rerepresentation uses the size standard in effect at the time of the rerepresentation 9.

Practice: keep a size register the board can read in one page. For every contract: the NAICS code, the size standard, how you represented, the date of the next required rerepresentation, and which deals in discussion would trigger one. Organic growth alone generally leaves current contracts as they are; a deal, or the fifth year of a long-term contract, re-tests you.

Check 2

Under FAR 52.219-28, which event calls for a size rerepresentation within 30 days?A merger or acquisition that does not require a novationHiring a new chief financial officerWinning a new task order on another contractMoving the company's headquarters

Plan the transition before you outgrow

Practice: the hard years are the ones after you stop being small under your main codes but before you can beat much larger firms in open competition. Start building for them while you are still small. Win some work in open competition so you have relevant past performance without a set-aside behind it; build relationships with large primes who will need small subcontractors; decide which contract vehicles you need to hold as an other-than-small firm; and decide early whether acquisitions are part of the plan.

Compliance obligations grow too. FAR 52.203-13's compliance program and internal control paragraph does not apply if the contractor has represented itself as a small business concern pursuant to the award of the contract 10. Where it does apply, the contractor establishes them within 90 days after contract award, unless the contracting officer establishes a longer time period 11.

Practice: build the compliance program before your first award as an other-than-small firm, not in the 90 days after it. The lesson on governing compliance covers what it must contain.

Bids2Bank's qualification check fails its size dealbreaker on a set-aside notice when your SAM record does not show you as small under the notice's NAICS code 12.

Questions a board should ask once a year: Under which of our NAICS codes are we within two years of the standard, counting affiliates? Which contracts face a rerepresentation in the next 18 months, and what happens to that revenue if we come out other than small? How much of next year's pipeline depends on set-asides? What open-competition wins and prime relationships have we built for the day we graduate? Is our compliance program already operating at the level an other-than-small contractor needs?

Worked example. Company C, an IT services firm, bids under three NAICS codes. Its five-year average receipts are $28 million and rising; at its plan it will exceed its main code's standard in two years, while remaining small under one other code for a little longer. The board sets three goals for those two years: win two open-competition contracts as prime, take a subcontract role with two large primes, and have its ethics program, hotline and internal controls operating a year before the crossover.

Check 3

When does paragraph (c) of FAR 52.203-13, the compliance program and internal control system, not apply?When the contractor represented itself as a small business concern pursuant to the award of the contractWhen the contract is worth less than one year of revenueWhen the company has fewer than ten employees on the contractIt always applies

Indented paragraphs are invented worked examples. Tool links open Bids2Bank and need a free account.

Growing past small business: size and recertification

By the end you can

What "small" measures

When you must rerepresent

Plan the transition before you outgrow

Growing past small business: size and recertification

By the end you can

What "small" measures

When you must rerepresent

Plan the transition before you outgrow