Ostensible Subcontractor Rule: SBA OHA Confirms “Four Key Factors” To Avoid

In determining whether a prime contractor and subcontractor are affiliated under the ostensible subcontractor rule, the SBA is supposed to consider the totality of the relationship between the parties.  But when it comes to determining whether the ostensible subcontractor rule has been violated, not all components of the prime/subcontractor relationship are created equal.

In a recent decision, the SBA Office of Hearings and Appeals confirmed that there are “four key factors” that are strongly suggestive of ostensible subcontractor affiliation–especially if the subcontractor will perform a large percentage of the overall contract work.

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Offeror With “Relatively Weak Proposal” Can File Size Protest, Says SBA OHA

An offeror with a “relatively weak proposal” can nonetheless file a size protest challenging the small business eligibility of the prospective awardee, provided that the protester was not found technically unacceptable or otherwise incapable of being selected for award.

In a recent size appeal decision, the SBA Office of Hearings and Appeals held that the mere fact that the protester was evaluated as “less than satisfactory” on four out of five non-price factors did not justify dismissing the protester’s size protest for lack of standing.

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Businesses Controlled By Brothers Were Presumed Affiliated, Says SBA

Businesses controlled by brothers were presumed affiliated under the SBA’s affiliation rules.

In a recent size determination, the SBA Office of Hearings and Appeals held that a contractor was affiliated with companies controlled by its largest owners’ brother, even though the companies had only minimal business dealings.  OHA’s decision highlights the “familial relationships” affiliation rule, which can often trip up even sophisticated contractors–but the decision, which was based on a March 2016 size determination request, did not take into account changes to that regulation that went into effect a few months later.

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SBA Size Protests: Investigation Not Required Outside Of Protest Allegations

When the SBA evaluates a size protest, it is not required to investigate issues outside of those raised in the size protest itself.

A recent decision of the SBA Office of Hearings and Appeals demonstrates the importance of submitting a thorough initial size protest–and confirms that the SBA need not investigate issues outside of the allegations raised in the protest.

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SBA OHA: No “Unfair Competitive Advantage” Appeals

The SBA Office of Hearings and Appeals lacks jurisdiction to consider whether an entity owned by an Indian tribe or Alaska Native Corporation has obtained a substantial unfair competitive advantage within an industry.

In a recent size appeal case, OHA acknowledged that an unfair competitive advantage is an exception to the special affiliation rules that tribally-owned companies ordinarily enjoy–but held that only the SBA Administrator has the power to determine that an Indian tribe or ANC has obtained, or will obtain, such an unfair advantage.

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GAO Won’t Evaluate Subcontractor’s Small Business Status

GAO ordinarily will not hear any argument that is based on a company’s small business status, even if the alleged large company is only a proposed subcontractor.

In a recent decision, GAO declined to hear a protester’s argument that the awardee’s supposedly-small subcontractors were affiliated with other entities, holding that such a determination is reserved solely for the SBA.

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SBA Size Protests: Protester Must Be In Competitive Range

A small business cannot file a viable SBA size protest if the small business has been excluded from the competitive range, or if its proposal has otherwise found to be non-responsive or technically unacceptable.

In its recent final rule addressing the limitations on subcontracting, the SBA also clarifies when small businesses can–and cannot–file viable size protests.

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