We have had repeated inquiries concerning the change in a company's size status as a result of the influx of Alliant contract dollars. More specifically, business executives have inquired whether their company may keep their Alliant contract if their business becomes a large one during the term of the contract. Until last Wednesday, the question could not be definitively answered. Under a recently-released federal regulation, companies receiving Alliant Small Business contract awards may keep their Alliant contract if they become large.

On November 15, 2006, the Small Business Administration (SBA) published a new regulation concerning when small businesses must recertify their size status if they become large. The effective date of this regulation is June 30, 2007. In the past, a company's small business size status has been determined on the date the firm submits its initial proposal. The firm's designation as a "small business" lasted for the duration of the contract in question. The new regulation addresses longer-term contracts (i.e., contracts for more than five years) and provides for (i) the continuation of a company's initial size certification for a maximum of five years, and (ii) subsequent size re-certification thereafter.

The new regulation has two key requirements.

• Small businesses must recertify their size status if (i) they are merged, (ii) are acquired by another company, (iii) they acquire another company, or (iv) if a contract is novated. The foregoing applies to all contracts without regard to their duration.
• For long-term contracts (those for more than five years), small businesses must recertify their size status at the end of the first five-year contract term and also before execution of every contract option thereafter.

The two critical questions about what happens when a company becomes large during a contract are:

Does the new regulation affect contract terms?

No. The regulation does not affect the terms and conditions of contracts. However, federal agencies will not receive credit for awards to small businesses if the contract recipients are no longer small.

Does the size re-certification regulation require termination of contracts to firms that are no longer small?

No, the regulation does not require termination of existing contracts held by firms that can no longer certify that they are small.

The new regulation is particularly exciting for small businesses bidding for the Alliant Small Business contract. Any company receiving an award will become large within a year or so if they win their share of Alliant task orders. The new regulation guarantees that companies will keep the contract for the full ten-year contract term regardless of their size status.