SBA finalizes small-business certification process

The Small Business Association has implemented a new policy to help the government monitor contracts when small businesses are acquired.

Businesses now will have to recertify themselves as small for federal contracts transferred to them from another business if the contracts are to be counted as a small-business contract.
The new policy, which took effect yesterday, recognizes that a business can be considered small when it is awarded a contract, but can grow beyond the small-business classification by merging with or being acquired by another company. Until recently, the acquired company did not need to recertify if it transferred the contract to the acquiring business.

The novation process occurs when a small business has been purchased and contracts are rewritten to reflect the transfer of ownership. When a small business is purchased by another small business, the acquiring company must self-certify that it is still a small business. A written self-certification statement is sent to the contracting officer of the agency that awarded the contract. After the new owner establishes the small-business status, the contracting officer can count the contract toward the agency's small-business contracting goals.

When a small business becomes part of a larger company through a purchase, federal contracts that are transferred to the larger, acquiring business must be counted as contracts held by large businesses.

Because government awards can last as long as 20 years under multiple-award contracts, such as the General Services Administration's schedules, policies on small-business reporting must take into account potential changes in business ownership and control that may occur over time, the SBA said.

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