As mentioned in previous articles Changes to SBA Regulations Impacting the 8(a) Program and Joint Ventures and New SBA Subcontracting Regulations Impact Size Status, Limitations, the U.S. Small Business Administration (SBA) issued a final rule on April 27, 2023, implementing various changes to numerous government contracting programs and regulations. This article discusses notable changes concerning the Women-Owned Small Business (WOSB) and Economically Disadvantaged Women-Owned Small Business (EDWOSB), Veteran-Owned Small Business (VOSB) and Service-Disabled Veteran-Owned Small Business (SDVOSB), and the Historically Underutilized Business Zone (HUBZone) programs. The SBA’s final rule can be found here.

WOSB/EDWOSB Programs

The SBA’s changes aimed to remove restrictive requirements to provide more flexibility for female entrepreneurs.

(1) The final rule replaced language that required the woman or economically disadvantaged woman who holds the highest officer position in the business to manage the small business on a full-time basis and to work full-time at the small business during normal business hours. Now, the woman or economically disadvantaged woman who holds the highest officer position may engage in outside employment as long as it does not prevent her from devoting sufficient time and attention to the business to control its management and daily operations.

If a woman or economically disadvantaged woman claiming to control a WOSB/EDWOSB devotes fewer hours to the business than its normal hours of operation, there is a rebuttable presumption that she does not control the business concern. She will have to provide evidence that she has ultimate managerial and supervisory control over both the long-term decision making and day-to-day management and administration of the business. The SBA determined it is unfair to conclude that a woman does not control her business solely because her hours of operation differ from the normal hours of a similar business. See 13 C.F.R. § 127.202(c).

(2) A certified WOSB/EDWOSB is no longer required to annually represent to the SBA that it meets all requirements of program eligibility. Instead, certified WOSB/EDWOSBs are now only required to undergo a program examination at least every three years to maintain program eligibility. See 13 C.F.R. § 127.400. The SBA’s rationale for this change is that the program examinations, paired with other various eligibility assessments (i.e. material change reviews, status protests, etc.), will be sufficient to capture eligibility information.

(3) In an effort to respond to inquiries regarding when the definition of “women-owned small business” applies, the SBA revised the definition in 13 C.F.R. § 127.102. A WOSB is now defined as “a concern that qualifies as small pursuant to part 121 of this chapter under the size standard corresponding to any NAICS code listed in its SAM profile, and that is at least 51 percent owned and controlled by one or more women who are citizens in accordance with §§ 127.200, 127.201 and 127.202. This definition applies to any certification as to a concern’s status as a WOSB, not solely to those certifications relating to a WOSB contract.”

Language was added to the definition to clarify that it applies to any certification of a small business’ status as a WOSB, not just certifications relating to a specific WOSB contract because it was always the SBA’s intention to extend the definition to all instances where a small business is a certified WOSB.

VOSB/SDVOSB Programs

The final rule’s implementation of the Veteran Small Business Certification Program previously resolved changes slated in the proposed rule for the VOSB/SDVOSB programs. However, SBA’s final rule still presented two important changes for the VOSB/SDVOSB programs.

(1) First, a new subsection was added to 13 C.F.R. § 128.500. The subsection provides that a small business found not to qualify as a VOSB or SDVOSB in a status protest, may not submit an offer on a future VOSB or SDVOSB procurement until it reapplies to the Veteran Small Business Certification Program and has been designated by the SBA as a VOSB or SDVOSB in the certification database. If a small business submits an offer despite being ineligible, then the small business may be subject to administrative and criminal penalties as well as suspension or debarment. See 15 U.S.C. 645(d). If the SBA determines a small business does not qualify as a VOSB or SDVOSB, the business must update its status on SAM.gov within two days of that determination as outlined in a previous article. See 13 C.F.R. § 128.500(d).

(2) One of the things the SBA considers when determining who controls a VOSB or SDVOSB is outside employment. The final rule revised language in 13 C.F.R. § 128.203(i) to change “outside obligations” to “outside employment.” The qualifying veteran who holds the highest officer position of the business concern may not engage in outside employment that prevents the qualifying veteran from devoting the time and attention to the business necessary to control its management and daily business operations. This change signals the SBA’s intent to make its analysis of who controls the business for WOSB/EDWOSBs and VOSB/SDVOSBs consistent.

Changes to the HUBZone Program

WOSB/EDWOSB programs and VOSB/SDVOSB programs were not the only socioeconomic programs that experienced changes from SBA’s final rule. The final rule made three noteworthy changes to the HUBZone program.

(1) The final rule amended the HUBZone regulations regarding timeliness for HUBZone protests. The SBA clarified when a protest challenging the HUBZone status of an apparent successful offeror must be filed:

• When an order or agreement is set aside for certified HUBZone small businesses but the underlying multiple award contract was not itself set aside or reserved for certified HUBZone businesses (see 13 C.F.R. § 126.801(d)(1)(ii)); and
• Where a contracting officer requires recertification in connection with a specific order under a multiple award contract set aside or reserved for certified HUBZone small businesses. See 13 C.F.R. § 126.801(d)(1)(ii).

In both of these situations, for a protest to be timely it must be submitted within five business days of notification of the identity of the apparent successful offeror.

(2) The SBA also clarified the grounds bases on which an interested party may protest a HUBZone award:

• The protested small business does not meet the HUBZone eligibility requirements set forth in 13 C.F.R. § 126.200;
• The protested JV does not meet the requirements set forth in 13 C.F.R. § 126.616;
• The protested small business is a HUBZone prime contractor that is unduly reliant on at least one small subcontractor that is not HUBZone-certified, or non HUBZone-certified subcontractors will perform the primary and vital requirements of the contract; and/or
• The protested small business failed to attempt to maintain compliance with the 35% HUBZone residency requirement during the performance of a HUBZone contract on the anniversary date of its initial HUBZone certification. See 13 C.F.R. § 126.801(b).

(3) The SBA acknowledged confusion on how to determine whether an entity qualifies as a HUBZone joint venture, so the final rule clarifies that a HUBZone joint venture should be registered on SAM.gov and identified as a HUBZone joint venture, with the HUBZone-certified joint venture partner identified. See 13 C.F.R. § 126.616(a)(1). The SBA noted that a HUBZone joint venture certification can only be made on SAM.gov, and the certification will not appear in the same section as the other socioeconomic self-certifications.

Changes That Impact WOSB/EDWOSB, VOSB/SDVOSB, and HUBZone Programs

The SBA set out to make changes to the regulations governing WOSB/EDWOSB, VOSB/SDVOSB, and HUBZone programs that enhanced consistency across those programs. The final rule made four changes and/or clarifications that affect multiple socioeconomic programs:

1. Agencies are prohibited from restricting competition(s) by requiring offerors to meet two or more socioeconomic programs. For example, an agency cannot limit competition to businesses that are both WOSB and VOSB. See 13 C.F.R. § 126.609 (HUBZone); 13 C.F.R. § 127.503(e) (WOSB/EDWOSB); 13 C.F.R. § 128.404(d) (VOSB/SDVOSB).
2. Agencies cannot give an evaluation preference to small businesses having more than one certification. For example, in an 8(a) set-aside contract, an agency cannot give a small business that is both an 8(a) and an SDVOSB more evaluation credit than a small business that is only 8(a) certified. See 13 C.F.R. § 126.609 (HUBZone); 13 C.F.R. § 127.503(e) (WOSB/EDWOSB); 13 C.F.R. § 128.404(d) (VOSB/SDVOSB).
3. If an applicant qualifies as small under a size standard corresponding to any NAICS code listed in its SAM.gov profile, it will be deemed to have met the initial socioeconomic program certification requirements for program eligibility purposes. See 13 C.F.R. § 126.200 (HUBZone); 13 C.F.R. § 127.200 (WOSB/EDWOSB).
4. Program participants can be a joint venture partner on only one offer that is submitted for a specific socioeconomic set-aside contract. See 13 C.F.R. § 126.616(a)(2) (HUBZone); 13 C.F.R. § 127.506(a)(3) (WOSB/EDWOSB); 13 C.F.R. § 128.402(a)(3) (VOSB/SDVOSB).

The final rule applies to all solicitations issued on or after the effective date, May 30, 2023. Contact a member of Taft’s Government Contracts team for questions regarding the changes stemming from the SBA’s final rule.

Taft summer associate Celeste Friel contributed to this article.