Joint ventures can be formally organized as limited liability companies–and that should come as no surprise, given how often joint ventures use the LLC form these days.
In a recent size appeal decision, the SBA Office of Hearings and Appeals rejected the argument that, because a company was formed as an LLC, its size should not be calculated using the special rule for joint ventures. Instead, OHA held, the LLC in question was clearly intended to be a joint venture, and the fact that it was an LLC didn’t preclude it from being treated as a joint venture.
The U.S. Small Business Administration, Office of Hearings and Appeals recently affirmed–for now–its narrow reading of the so-called interaffiliate transactions exception.
In a recent size appeal decision, Newport Materials, LLC, SBA No. SIZ-5733 (Apr. 21, 2016), OHA upheld a 2015 decision in which OHA narrowly applied the exception, holding that interaffiliate transactions count against a challenged firm’s annual receipts unless three factors are met: 1) the concerns are eligible to file a consolidated tax return; 2) the transactions are between the challenged concern and its affiliate; and 3) the transactions are between a parent company and its subsidiary.
So-called “common investments” affiliation under the SBA’s affiliation rules arises most frequently when individuals own common interests in at least two operating companies. But common investments affiliation can also be based on common interests in real estate.
In a recent decision, the SBA Office of Hearings and Appeals held that the SBA had performed an inadequate size determination because the SBA Area Office asked the protested company about common investments in companies–but didn’t directly ask about common investments in real estate.
Under the SBA’s affiliation rules, one of the many ways a small business can be deemed affiliated with another is through the economic dependence rule: where a small business derives 70% or more of its revenues from another entity, the SBA ordinarily considers it to be economically dependent upon—and thus subject to the control of—that other entity.
So it was in a recent decision from the SBA’s Office of Hearings and Appeals (“OHA”), which confirmed the so-called “70% rule” for economic dependence.
The SBA Office of Hearings and Appeals is an appellate forum and lacks jurisdiction to hear initial size protests.
As explained in a recent SBA OHA decision, size protests must be filed with the relevant Contracting Officer, who then refers the matter to the appropriate SBA Area Office. Only after the SBA Area Office issues a size determination does OHA have jurisdiction to consider a size appeal.
An 8(a) mentor-protege joint venture didn’t qualify for an SDVOSB set-aside because the mentor firm was not a small business.
In a recent decision, the SBA Office of Hearings and Appeals held that a SDVOSB-specific regulation requires all members of an SDVOSB joint venture to be small–notwithstanding language in the SBA’s size regulations and 8(a) Program regulations specifying that an SBA-approved mentor-protege joint venture may bid, as a small business, on any government contractor or subcontract, provided that the protege is small.
As few as two common outside investments can result in a presumption of identity of interest, and therefore likely affiliation, according to a recent decision by the Small Business Administration Office of Hearings and Appeals.
OHA’s decision in W. Harris, Government Services Contractor, Inc., SBA No. SIZ-5717 (Mar. 7, 2016), lends some clarity to the SBA’s identity of interest affiliation rule, which provides that businesses or firms are affiliated when they have identical or substantially identical business interests. Although it brings the rule more into focus, the decision in W. Harris could prove troublesome to some small business owners, who may have assumed that a handful of common outside investments would not result in affiliation.