New FAR size-status rules go final

The FAR Council finalized its rule with new size and socioeconomic rerepresentation requirements for contractors under multiple-award IDIQ contracts, which we'll call MACs, here. These changes, effective 17 January 2025 align with SBA guidance and could pose challenges for small businesses that anticipate outgrowing size standards via organic or M&A means.

New rerepresentation rules at the order level

The new FAR rule (FAR Case 2020-016) expands rerepresentation requirements for MAC order competitions under three circumstances:

1. When bidding on orders set aside exclusively for small businesses under unrestricted MACs.
2. When orders are set aside for a socioeconomic category (e.g., HUBZone, woman-owned) that differs from the overall MAC designation.
3. When a contracting officer explicitly requires rerepresentation for a particular order.

Notably, the most common occurrence—an X set-aside order issued under an X set-side MAC—does not require rerepresentation; orders under GSA's Multiple Award Schedules are also exempt from the expansion.

Loss of small business status on MACs

A bigger issue for some is the rule's striking socioeconomic business status at the order level even when a contractor qualified when the MAC was awarded. For example, if a small business no longer qualifies as "small" under the North American Industry Classification System (NAICS) code assigned to the MAC, it will lose eligibility for small business set-asides and any such awards will not count toward agencies' goals. Growing small businesses may find themselves excluded from set-aside opportunities, reducing their ability to win new work and retain contracts critical to their growth.

Industry concerns and responses

The new requirements have drawn criticism from small businesses, particularly over concerns about administrative burden and fairness. Critics argue that rerepresentation creates additional compliance costs and could force smaller contractors into an uneven playing field when competing for orders against larger firms that have grown out of their small business designation.

Some respondents to the proposed rule suggested that rerepresentation requirements should be applied only to new MACs or exempt small businesses whose size status changes mid-performance. However, the final rule stands firm in requiring rerepresentation for affected orders across all applicable contracts.

Implementation challenges

Agencies will need to verify contractor eligibility for set-aside task orders, particularly on unrestricted MACs. While this ensures that orders align with small business goals, it adds complexity to the award process. Notably, the Federal Procurement Data System (FPDS) does not yet support tracking size and socioeconomic status at the order level, which could result in reporting inaccuracies. DOD, GSA, and NASA anticipate that FPDS updates will address this gap, but in the interim, contracting officers must manage these issues manually.