GSA's Polaris makes a mockery of the SBA size protest process
Plus: Could SBA cut 85% of its rules?, entity-owned 8(a)'s missed getting $150 million sole-source authority, the joint-venture rule that COFC missed, and the FAR Overhaul isn't all about statute
I made an oversight in the first version about the deadline for SBA size protests being 5 calendar days. It’s actually five business days. That’s fixed below. My apologies for the error.
Small-business status is a peer-policing system. Unlike the socioeconomic categories (8(a), HUBZone, women-owned, and veteran-owned), SBA does not certify businesses as small. Instead, businesses self-certify their size when they sign up for SAM.gov. Then SBA relies on competitors to file protests with the contracting agency when they suspect that another business might have falsely certified and is, in fact, a large business. That peer-policing process has existed since the first size rule from 1956 and deters fraud effectively because it relies on the incentives of competitors to keep small businesses honest.
Until now. On Thursday before this long weekend, GSA published its first lists of HUBZone and service-disabled veteran-owned small businesses that won spots in the respective pools of the governmentwide Polaris contract. Polaris is a best-in-class IT vehicle that emphasizes emerging technologies, and it is set aside exclusively for small businesses. I say these are the “first lists” because GSA stated that Thursday’s lists were published under a “phased award approach.” This means that there will be other lists, and companies that are not on the Thursday lists might be on future ones. As GSA put it, if your company isn’t on the list, “your proposal is still under consideration and you have not been eliminated from competition.”
But what about the small-business status of the companies on these first lists? There’s no one to play police here. Because the remaining firms haven’t been eliminated yet, there’s no reason for them to consider filing protests. In fact, they might even think that filing a protest could hurt their chances of being selected. Maybe the firms on the list might police each other, but you rarely see an awardee protest another awardee.
I’d expect that GSA won’t actually eliminate offerors until at least 5 business days after the last list is published. It’s always the case that losing offerors are, by far, the most likely to file size protests. If GSA waits until after the 5-business-day filing deadline passes to announce who lost, those losing offerors won’t be able to file their protests in time. (And if GSA doesn’t wait, and notifies the losing offerors at the same time, then it’s really bad luck to be on the last list because those will be the most likely targets for protests.)
GSA’s Polaris has been burned on the small-business rules before (h/t
). Polaris is the contract that was delayed for years because of litigation over how to evaluate mentor-protégé joint ventures. Out of that experience, GSA appears to have found a way to avoid the SBA small-business protest process: Don’t eliminate firms until after the filing deadline.By the way, GSA’s “phased approach” isn’t a problem for GAO bid protests, which aren’t due until after a debriefing. SBA might consider using the same deadlines so that its peer-policing system doesn’t become ineffective.
Could SBA cut 85% of its rules?
Senator Ed Markey, the ranking member on the Senate Small Business Committee, published his letter to the SBA that questioned the use of an AI tool to review SBA’s regulations. According to the letter, the AI tool flagged up to 85% of SBA’s rules for removal or change. Is it really possible to cut SBA’s rules by 85%?
Granted, there are a few areas in the government-contracting rules where SBA could consolidate rules that are duplicated across multiple programs. The joint-venture rules are basically the same across all the socioeconomic programs, and the control rules between the women-owned and veteran-owned programs are identical.
But that doesn’t get you to 85%. While I can’t speak for other agencies, SBA’s contracting rules fall into three major categories:
implementing statutory programs—things like subcontracting plans, procurement center representatives, and the HUBZone program;
deterring fraud—see the size protest rules that I discussed above; and
creating small-business-friendly exceptions within statutory programs—think the exclusion for IRAs from net worth for economic disadvantage, or the treatment of mixed contracts under the limitations on subcontracting.
In many cases, cutting rules would either make the programs more susceptible to fraud or make compliance harder for small businesses.
If the desire is to return agencies to their “original purpose,” here’s another solution. As a baseline, roll back SBA rules to the original rules published with each program when it became statutorily authorized. Then add back in statutorily required changes, or those necessary for program operation. For some rules, that would mean going all the way back to 1950s at the founding of SBA. The affiliation rule could be boiled down to a paragraph. The HUBZone program wouldn’t allow for legacy employees. And this could all be done without AI.
Entity-owned 8(a) firms just missed getting $150-million sole-source authority
In my first article for this newsletter, I wrote about how the Department of Defense’s proposed inflation adjustment would increase the authority for sole-source contracts with entity-owned 8(a) firms from $100 million to $150 million:
Well, it didn’t happen. DoD published its final inflation adjustment, and, because of lower-than-predicted inflation, the entity-owned sole-source authority in DFARS 219.808-1 was one of those that “did not reach the statutory calculation formula amount for escalation and are removed from this final rule.” (Credit
for telling people that it wasn’t a done deal.)The difference between another five years of the $100 million authority and an increase to $150 million was just a handful of pennies. The necessary inflation level to increase to $150 million was $321.218, and DoD used the inflation level from April 2025 of $320.795. (The inflation level that DoD used, the CPI-U, measures what something that cost $100 in 1983 would cost today.) Had prices in April been just 43 cents higher, the threshold would have increased. Also, if DoD had used May prices—as I showed in my article—that would have been enough.
The lower-than-expected inflation also had other effects. The FAR’s inflation rule raised the threshold for small-business subcontracting plans to $900,000, rather than $950,000 as originally proposed. And the level for sole-source contracts with service-disabled veteran-owned businesses won’t be the same as all the other SBA programs; it’ll be $5 million, rather than $5.5 million for 8(a), HUBZone, and women-owned small business. The FAR rule increases two often-used thresholds: The micropurchase threshold goes from $10,000 to $15,000, and the simplified acquisition threshold increases from $250,000 to $350,000.
Alaska-Native-owned and Indian-tribe-owned firms will benefit, though, from higher sole-source authority for civilian agencies. Inflation brought that authority up from $25 million to $30 million. All these increases are effective October 1.
One more point: The FAR increased the $100 million threshold for sole-source approvals by the senior procurement executive for DoD, NASA, and Coast Guard contracts to $150 million. This could help entity-owned 8(a) firms in rare cases. But, even with that increase, contracts between $100 million and $150 million still would require a sole-source justification, albeit one approved at a lower level.
Alert COFC: JV past performance isn’t all or nothing
In an earlier article, I calculated how contracts to joint ventures have increased sharply to over $14 billion, due to the expansion of SBA’s Mentor-Protégé Program.
One of the consequences is that small businesses are increasingly using past performance gained from joint ventures to qualify for their own contracts. This showed up in court recently. In a Court of Federal Claims decision, SOFITC3 v. United States and Delviom, both the protester and the awardee submitted previous joint-venture corporate experience with their proposals. The protester, which was itself a joint venture, stated that its member “performed 100% of the work” on a joint-venture project. So the protester criticized the awardee for not being clear about how much work the awardee did on a prior joint-venture project. The protester wrote that the awardee was “not even responsible for the full value of” the joint venture’s work.
This is going to become more common, so it’s worth pointing out that SBA regulations address this issue. In SBA’s 2022 final rule on Past Performance Ratings for Small Business Joint Venture Members, SBA implemented a statute that required agencies to consider the past performance that a small business gained as part of a joint venture. In submitting the past performance, though, the small business needed to be clear on what work it did for the joint venture. SBA wrote that “the joint venture member should establish its participation in the joint venture’s contract in order to receive past performance evaluation.” In other words, joint-venture past performance isn’t all or nothing; the small business needs to tell the agency how much it did for the joint venture’s project. The court’s decision doesn’t discuss SBA’s rule, a missed opportunity.
The FAR Overhaul isn’t all about statute
One last callback to an earlier article, pointing out a theme that I’m noticing. Though OMB directed that the FAR Overhaul return the FAR “to its statutory roots,” recent overhauled FAR parts inserted the drafters’ policy preferences, even where not required by statute. For Part 8, it was the mandatory preference for best-in-class contracts, a category that includes participation by only 5% of small-business vendors:
Now, it’s Part 33, which covers agency-level protests, other bid protests, and claims. The big question before publication was whether the FAR Council would keep agency-level protests. Those aren’t required by statute, so they could have been on the chopping block. Much to the acquisition community’s relief, the Overhaul kept agency-level bid protests based on a Bill Clinton executive order, Agency Procurement Protests.
In the process, though, the Overhaul added a whole new section to Part 33. There’s now an extra 250 words at the beginning about the purpose of the bid-protest system, including it not being a way to get “additional insight into the Government’s acquisition decision” or to “induce extensions.” I agree with the overall sentiment of the section—especially the parts about why the protest system exists—but adding new text wasn’t something expected for the FAR Overhaul. The Overhaul is becoming about more than distilling the FAR to statute; it’s now policy in its own right.
Sam Le is the managing member of Sam Le Law, where he draws on his 20 years of Federal legal experience and deep knowledge of SBA programs to counsel small businesses through complex regulatory challenges. His website is www.samlelaw.com.