A perennial question is: Can small businesses maintain contracts if they no longer qualify as small? Companies do grow, whether organically or through mergers and acquisitions. The Small Business Administration has policies for this situation, but a proposed amendment to a flawed rule could make things worse.
On “The Federal Drive” with Tom Temin, Haynes Boone procurement attorney Zach Prince provides analysis:
- The general rule is that a company’s size is measured at the time of proposal submission, which determines its qualification for that procurement.
- Under set-aside Multiple Award Contracts (MACs, e.g., IDIQs), a firm remains eligible even if acquired by a larger company or grows beyond the size standard for the set-aside IDIQ. However, the government must be notified within a specific period if a firm merges or is acquired and thus becomes other than small.
- The proposed rule would render small businesses that are acquired or merge to become other than small ineligible for small business set-asides.
- This change will significantly reduce the interest that larger firms have in mergers and acquisitions (M&A) with small businesses holding MACs.
The proposed rule change threatens to undermine the growth opportunities and market competitiveness of small businesses. By disqualifying firms that grow beyond the “small” designation from set-asides, the new rule could stifle entrepreneurial spirit and discourage strategic partnerships that drive innovation and economic expansion.
