Month: January 2019

Similarly Situated Entities: The New Rule to Help You Meet the Limitations on Subcontracting!

Posted on by Eric Coffie

Starting out as a small business, but can’t meet the percentage of work? Read this article to learn more about similarly situated entities, the new rule to help you meet the limitations on subcontracting!

SIMILAR SITUATED ENTITIES

The latest class deviation issue, DARS Tracking Number 2019-O0003, about similarly situated entities on January 8, 2018 has created rules that favor the little guys in the federal marketplace. 

With this new rule, contractors can now meet their subcontracting percentage goals by utilizing what the government terms as a “similarly situated entity.”

A “similarly situated entity” means a first-tier subcontractor, including an independent contractor, that has the same small business program status as you are. 

Previously, your only option was to self-perform the entire percentage goal of your contract or not accept the contract at all. But with this new rule, you can now meet that performance goal with the help of a firm similar to your small business size. 

For instance, if you are on a contract as an 8a business, then you can bring in another 8a firm to help you meet your 50% requirement while you subcontract the other 50% to others. 

Note: If the project is a set-aside, the respective firm must have the same set-aside to deem you eligible for satisfaction of the requirements.

“So, this is great news for small businesses out there because a lot of times people are just getting started and you may not have everything that you need to get the wheels turning, so… the government is creating rules, policies to allow small businesses to really embark on this journey. So, they’re making it more favorable for the little guys to get started and to start growing their business.”

RESOURCES

So, for those firms that may find it difficult to fully staff up the job on a large contract, then this is an effective alternative that is now being accepted at the federal level.

However, if you can meet the percentage requirement, then this rule does not impact your firm at all. You can still self perform all of your respective prime contracting work within your ability.

With this in mind, if you want to learn more about certain federal contracting rules or how to navigate the federal marketplace overall, then check the resources below. 

You can also join us here at GovCon Giants or check the new GovCon Edu where you learn everything about government contracting!

Similarly Situated Entity helps Limitations on SUBCONTRACTING for small firms 

https://www.youtube.com/watch?v=8-4Lml2bZj4&t=132s

Explaining the rules for subcontracting small business contracts

https://www.youtube.com/watch?v=ajwQiCAS1No

Here’s What You Need to Know About the Small Business Runway Extension Act of 2018!

Posted on by Eric Coffie

Just before the year ends, the Small Business Runway Extension Act was signed. But what is this law and how does this affect small businesses? Read this article to learn more!

THE SMALL BUSINESS RUNWAY EXTENSION ACT

On December 17, 2018, the President of the United States signed the Small Business Runway Extension Act of 2018 into law.

The Bill is a total of 10 lines that amend the Small Business Act to modify the method for prescribing size standards for business concerns.

It also modifies the determination for size standards from evaluating small businesses on a 3-year average to now looking at their 5-year average.

So, what does this mean? This means that small businesses can rein as small businesses for a longer period of time. 

Consider that in the old system, the Small Business Administration typically determines small businesses based on the number of employees or dollar amount of revenues from a three-year average.

However, with this new law, they’re already looking at a five-year average which means that the government is now taking your previous five years of history and they’re using that to determine whether or not you’re a small business under the respective primary NAICS code.

HOW DOES THIS AFFECT US?

So, this is great news because existing small businesses who are growing quickly can now remain smaller for longer periods.

Let’s say if you start off in the year zero with no revenues yet and you start winning contracts years later, you can’t directly be bumped up into the large business status because of that. 

This is why, you can still take advantage of being a small business for a little bit longer as you’re continuously growing and getting contracts. 

To give you more information, we have an example below:

NAICS 238910 – Site Preparation Contractor – $15M

Company A (High growth Small Business)

  • Year 1 – $500k
  • Year 2 – $1M
  • Year 3 – $10M
  • Year 4 – $22M
  • Year 5 – $25M

3-year average – $19M (large business)

5-year average – $11.7M (small business)

On the other hand, this new law does hurt large businesses that have declining revenues because they’re going to remain large businesses for a longer period of time.

To give you an idea, we have this another example below:

Using the same NAICS code 238910, Site preparation Contractor – $15M.

Company B (Large Business)

  • Year 1 – $25M
  • Year 2 – $22M
  • Year 3 – $15M
  • Year 4 – $10M
  • Year 5 – $8M

3-year average – $11M (small business)

5-year average – $16M (large business)

Hence, depending whether you are the little guy taking on Goliath or the big guy who just recently lost a few large contracts, this rule can impact your business moving forward.

RESOURCES

Some attorney’s even suggested modifying the rule to use both formulas and take the smaller of the averages as your size, but I disagree with that evaluation.

“I think it is time that someone started introducing policies to help small companies effectively compete in this arena. I do not believe that we can ever do enough for small upstart firms. I am happy for the new policy and thank everyone who participated in it.”

With this in mind, if you want to learn more about certain federal contracting rules or how to navigate the federal marketplace overall, then check the resources below. 

You can also join us here at GovCon Giants or check the new GovCon Edu where you learn everything about government contracting!

Congress give Small Businesses a Boost with new 2018 Act

https://youtu.be/8xhjUQWtMOA

Similarly Situated Entity helps Limitations on SUBCONTRACTING for small firms 

https://www.youtube.com/watch?v=8-4Lml2bZj4&t=132s

Explaining the rules for subcontracting small business contracts

https://www.youtube.com/watch?v=ajwQiCAS1No