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SBA Small Business Penalties

Small BusinessThe Small Business Administration (SBA) recently released a Final Rule amending the SBA’s regulations to implement provisions of the Small Business Jobs Act of 2010 relating to the size and status integrity of small businesses. These new regulations go into effect on August 27, 2013.

This rule has added new regulations that specify the penalties for a business concern misrepresenting itself as a small business in the pursuit and award of small business set-asides. The highlights are:

Potential Small Business Penalties

  • Any time a contractor seeks and obtains a federal contract or subcontract through willful misrepresentation of its small business size/status, there is a presumption of loss to the government equal to the value of that contract or subcontract. This means that if you win a small business set aside contract and you are NOT a Small Business, then the government gets to keep whatever items you delivered PLUS they get their money back that they paid the contractor. This is also applicable for subcontractors!
  • The new regulations clarify the penalties for individuals and businesses misrepresenting small business size/status, including suspension and debarment, as well as civil and criminal penalties;
  • An offer for a federal contract set aside for small businesses will in certain circumstances be deemed a certification of small business size/status;
  • An authorized official of the offeror must sign a certification of small business size/status included with every offer on procurements set aside for small businesses; and
  • Small business concerns must annually update their size/status in the applicable database (SAM), and concerns failing to do so will not be identified as small (or disadvantaged) until updated.

If you are a Small Business government contractor, be very careful how you represent your business size and status. To be certain, consider contacting  for expert guidance to avoid any potential penalties.

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