Recent decisions made by the Government Accountability Office (GAO) and the US Small Business Administration’s (SBA) Office of Hearings and Appeals (OHA) may affect how your corporate transactions influence your eligibility for a government contract you’ve recently bid on. If you’re competing to be awarded with an opportunity in your bid pipeline, just how much of an impact would a completed or pending corporate transaction have on your bid? Are there steps you can take to prevent a contemplated corporate transaction from negatively impacting your eligibility for a pending bid? Keep reading to learn more, and get some practical insight on how you can mitigate these risks.
Questioning How the Transaction Will Impact Your Performance
The primary reason that corporate transactions (particularly mergers and acquisitions) can impact your pending bids is that it calls into question whether or not this change will impact your ability to perform the work you’re bidding on. Government entities, as any government contractor well knows, require extremely detailed information on your business to review your bid and make an award determination. If you have a pending corporate transaction, or if you’re considering such a transaction while your bid is being reviewed, this sudden change to your company’s ownership or structure can effectively void your pending bid.
Corporate transactions in the middle of the bidding process are effectively asking the government entity reviewing your bid to make a determination based on blind faith that the upcoming change will not impact your performance or capabilities. Generally speaking, government entities do not operate on blind faith. One example of this happening involves the maintenance of USAF aircraft. The contract for this maintenance was awarded to eight different contractors, but soon after, one contractor became the immediate parent company of another. GAO ultimately determined that there was insufficient documentation and analysis to conclude that the awarded companies would still be capable of performing the task ordered, and the contract was given to another company.
Providing Notice to the Government
If you’re a government contractor and anticipating major corporate transaction, it’s important that you provide notification to any government entities you work with. They should then adequately document the expected transaction so that they can take this transaction into consideration when reviewing and awarding bids. If the corporate transaction alters your corporate identity, you’ll need to reregister in the SAM database for government contractors.
Taking the time to provide notice to the government gives you the opportunity to assert that the transaction will not impact your performance in any way, and makes it much less likely that you’ll lose a bid or have a rewarded contract successfully protested due to the transaction. It is far better to get ahead of these situations than to wait until a problem arises.
Recertifying as a Small Business
In addition to recertifying on the SAM database, you’ll also need to recertify as a small business if you hope to be awarded small-business contracts through the government. As you likely know, government entities are incentivized to award a certain percentage of their contracts to small businesses. In order to qualify for that percentage of contracts, the government will review your company size and structure. Naturally, if you’ve gone through a major corporate transaction (for example, merging with another business), this can drastically change the size of your company. So, you’ll need to be reevaluated and recertified in order to continue receiving small-business contracts.
The good news is that such transactions will not impact existing contracts. If you’ve already been awarded a small-business contract, then gone through a merger, you can retain existing contracts, regardless of your new business size. If your bid is still in progress, however, you will need to recertify your size status if you hope to be awarded a contract that’s exclusively for small businesses.
Plan for Corporate Transactions Early On
For government contractors, it’s essential that you plan for corporate transactions early in the process. You must analyze the potential impact on current federal awards, pending bids, and any upcoming opportunities in your pipeline. Because the impact on your bids can vary depending on the timing and how the opportunity is being procured, early planning can help you to better time your transaction to minimize the impact on your business.
At Peter Witts CPA, we specialize in working with government contractors like you and helping you to more effectively manage your transactions. If you’re considering a corporate transaction in the near future, we invite you to schedule an appointment with one of our experienced accountants to discuss the possible implications of that transaction.