The SBA (Small Business Administration) revised their rules for when government contractors with a small business status are sold or merged into larger government contractors.
Many government contracts are now IDIQ which means Indefinite-Delivery/Indefinite-Quantity. In these IDIQ contracts essentially the small business has won the opportunity to receive purchase orders for future work. There is no guarantee that purchase orders will be issued to the small business but usually these contracts result in future work. These IDIQ agreements often last for up to five years including extensions and often greatly increased value in the business sale of small government contractors.
Under the old rules if a small business was purchased generally the small business status for that IDIQ award continued and the larger purchaser could complete to IDIQ term. The exception was if the contracting officer requested a recertification for a specific order.
Under the new rules that became effective May 25, 2018 eligibility for set-aside purchase orders is barred and the acquiring company would no longer be eligible for the work under the small business IDIQ. Therefore the small business government contractor will lose value related to that IDIQ agreement when going to sell to larger government contractors.
This greatly limits who can buy a small business government contractor and will reduce the value of many small business government contractors.
Want to know more? Please click here for the downloadable e-book. “7 Things You Must Know Before You Order a Business Valuation”
Considering Selling Your Business? Please click here for a downloadable e-book, “ 10 Ways to Increase the Value of Your Business“.
Clients choose Harvest Business Advisors for our consistent ability to deliver a high price as part of a smooth exit transaction and our accurate business valuations.
Connect with Harvest Business Advisors today – email firstname.lastname@example.org or call 443.334.8000