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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SBA OHA: Foreign Subsidiary Was “Small Business”

We are quickly approaching our 1000th blog post on the SmallGovCon blog. To celebrate we want to reward one lucky reader with a free one hour custom webinar for up to 50 people presented by Steven Koprince on the government contracting topic of your choice! You can enter by using the hashtag #SGC1000 on Twitter or Facebook just by telling us why you read the blog or what you love most about. You can also simply fill out this form to be entered. Good Luck!


When many people think of small business federal contractors, they probably picture a local business and not a subsidiary of a foreign entity. But this image isn’t always accurate—small business federal contractors don’t often neatly fit in the mold of local, mom-and-pop shops.

The SBA’s small business regulations confirm this to be true. Indeed, to qualify as a small business for most federal contracting purposes, a company can be a subsidiary of a foreign firm—so long as certain criteria are met. This point was recently affirmed by the SBA Office of Hearings and Appeals, when it found that a domestic affiliate of an international conglomerate qualified as a small business.

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Ostensible Subcontractor Affiliation Can’t Be “Fixed” After Final Proposals

Affiliation under the ostensible subcontractor rule is determined at the time of proposal submission–and can’t be “fixed” by later changes.

In a recent size appeal decision, the SBA Office of Hearing and Appeals confirmed that a contractor’s affiliation with its proposed subcontractor could not be mitigated by changes in subcontracting relationships after final proposals were submitted.

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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 Explains “Key Employee” for Affiliation Purposes

A contractor successfully challenged an adverse size determination that found affiliation under the newly organized concern rule, by establishing that its president and chief executive officer was not a former key employee of its supposed affiliate.

In a recent size appeal decision, the SBA Office of Hearings and Appeals clarified the definition of “key employee” under the newly organized concern rule, by noting that such a former employee’s title was not conclusive—instead, to be a key employee, that person had to have influence or control over the operations of the business as a whole.

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SBA Required To Dismiss Unspecific SDVOSB Status Protest

A protester’s failure to be specific enough in an SDVOSB status protest will result in dismissal of the protest.

The decision of the SBA Office of Hearings and Appeals in Jamaica Bearings Company, SBA No. VET-257 (Aug. 9, 2016), reinforces the SBA’s rule concerning specificity in filing a service disabled veteran-owned status protest. The rule provides, “[p]rotests must be in writing and must specify all the grounds upon which the protest is based. A protest merely asserting that the protested concern is not an eligible SDVOSB, without setting forth specific facts or allegations is insufficient.”

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No Size Appeal If Outside Competitive Range, Says SBA OHA

An unsuccessful offeror lacked the ability to file a valid SBA size appeal involving the size status of a competitor, because the unsuccessful offeror was eliminated from the competitive range–and its elimination had been upheld in a GAO bid protest decision.

In a recent size appeal decision, the SBA Office of Hearings and Appeals confirmed that an offeror that cannot possibly be awarded the contract ordinarily lacks standing to file a size appeal.

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