The much anticipated U.S. Small Business Administration’s (SBA) final rule on small business size recertification requirements will affect not only which companies can pursue government funds set aside for small businesses, but also company value and the ability of a business to merge or be acquired. This rule will have tremendous impacts not only on how federal contracting is done by small and large businesses, but also on merger and acquisition activities.
The new rule, which took effect June 30, applies to new long-term federal contracts that last for more than five years, to any contract in existence when the new rule goes into effect regardless of term, as well as to all contracts where a novation, acquisition or merger has taken place. The new rule requires contracting officers to request companies to recertify their small business size status within 120 days prior to the end of the fifth year and within 120 days prior to the exercise of any option thereafter. In addition, recertification of the business’s size will be required within thirty days of the finalization of any novation and any merger and acquisition activity.
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