Small business government contractors should be aware of the following recent developments that address some long standing inconsistencies that previously existed within certain federal procurement regulations and policies.

Release of Updated FAR Rule on “Limitations on Subcontracting” Addressing Inconsistency between SBA Regulations and the FAR.

Background: In December 2014, the U.S. Small Business Administration (SBA) issued a proposed rule as mandated by the FY 2013 National Defense Authorization Act (NDAA) that would radically change the composition of the “limitations on subcontracting” rule for set-aside contracts. The final rule, which was released in May 2016, not only changed the manner in which the allowable amount of subcontracting in a set-aside contract was to be calculated but it also included the new concept that any work performed by “similarly situated” entities (i.e. those sharing the status of the firm awarded the set-aside contract) would be excepted from the calculation of the amount of subcontracted work for purposes of the rule. Unfortunately, it has taken over five years for the FAR Council to update the version of the “limitations of subcontracting” rule in FAR 52.219-14 to match the SBA regulation found 13 C.F.R. §125.6.

Development: The release announcing the modification to the FAR rule was issued on August 11, 2021. The new version of FAR 52.219-14 went into effect on September 10, 2021 thereby eliminating the prior inconsistency between the two different versions of the “limitations on subcontracting” rule.

Implications: No longer will small government contractors awarded set-aside contracts have to concern themselves about how they should calculate applicable “limitations on subcontracting” requirements given the inconsistency between 13 C.F.R. §125.6 and the prior version of FAR 52.219-14. Going forward, awardees of set-aside contracts will be able to confidently calculate subcontracting limits and seek out “similarly situated” entities to assist in contract performance.

GAO Decision Addressing Inconsistency between DoD and SBA policies on Facility Security Clearance Requirements for Joint Ventures.

Background: Among the numerous rule changes that were announced by the SBA in October 2020 and became effective in November 2020 was a clear direction to federal agencies regarding facility security clearance requirements for joint venture entities. Under the new regulation set forth in 13 C.F.R. § 121.103(h)(4), an agency would no longer be able to require that a joint venture entity seeking award of a set-aside contract including classified work have a facility security clearance so long as the joint venture participants performing the classified work possess the necessary facility security clearance. Shortly thereafter however in December 2020, the Defense Counterintelligence and Security Agency (DCSA) released its own guidance indicating that it would not be following the SBA’s new regulation for the award of Department of Defense (DoD) classified contracts to joint venture entities but would continue to follow its prior policy as reflected in its FCL Handbook. DSCA took this position despite the fact that Congress had included the following provision in the FY 2020 NDAA:

TERMINATION OF REQUIREMENT FOR DEPARTMENT OF DEFENSE FACILITY ACCESS CLEARANCES FOR JOINT VENTURES COMPOSED OF PREVIOUSLY-CLEARED ENTITIES. A clearance for access to a Department of Defense installation or facility may not be required for a joint venture if that joint venture is composed entirely of entities that are currently cleared for access to such installation or facility.

Pub. L. No. 116-92 § 1629; 133 Stat. 1198, 1741 (2019).

Development: In May 2021, InfoPoint LLC, a joint venture, filed a pre-award bid protest with the U.S. Government Accountability Office (GAO) challenging the terms of a Department of the Air Force solicitation that expressly required a joint venture competing for the award, as opposed to the members of the joint venture, to have a top secret facility clearance. In a decision issued on August 27, 2021, GAO ruled that the FY 2020 NDAA “clearly and unambiguously prohibits DOD agencies, like the Air Force here, from issuing solicitations that require a joint venture, rather than the members of the joint venture, hold the required facility clearance.”

Implications: The InfoPoint decision should end the prior inconsistency in the application of joint venture facility security requirements by DoD and civilian agencies for set aside contract procurements. This will allow joint venture participants to avoid the additional effort and expense of obtaining a separate facility security clearance for the joint venture entity.

For more information, please contact MWL Partner Peter Fish.