One common way that contractors attempt to avoid affiliation is by limiting a particular individual to a minority ownership interest (often 49%).
But as a recent SBA Office of Hearings and Appeals case demonstrates, when a company’s owners are spouses (or other close family members), the SBA may disregard the legal ownership split, and treat the family members as one person for purposes of the affiliation rules.
The Supreme Court’s landmark ruling in Kingdomware Technologies, Inc. v. United States does not require SDVOSBs to recertify their eligibility in connection with individual GSA Schedule task orders.
In a recent decision, the SBA Office of Hearings and Appeals held that Kingdomware doesn’t affect the SBA’s SDVOSB eligibility regulation for multiple-award contracts, which specifies that if a company qualifies as an SDVOSB at the time of the initial offer for a multiple-award contract, it ordinarily qualifies as an SDVOSB for all orders issued under the contract.
To encourage joint venturing, the SBA’s size regulations provide a limited exception from affiliation for certain joint venturers: a joint venture qualifies for award of a set-aside contract so long as each venturer, individually, is below the size standard associated with the contract (or one venturer is below the size standard and the other is an SBA-approved mentor, and they have a compliant joint venture agreement). In other words, the SBA ordinarily won’t “affiliate” the joint venturers—that is, add their sizes together—if the joint venture meets the affiliation exception.
Because of this special treatment, it can be easy for the venturers to assume that they are completely exempt from any kind of affiliation. But as the SBA Office of Hearings and Appeals recently confirmed, however, the exception isn’t nearly so broad.
A Program Management Office manager was not a “key employee” within the definition of the SBA’s affiliation regulations, according to the SBA Office of Hearings and Appeals.
In a recent size appeal decision, OHA found that the fact that a small business’s CEO served as another company’s PMO manager did not result in affiliation between the two companies because the individual in question could not control the second company through his PMO manager role.
Companies controlled by a father and son, respectively, were affiliated under the SBA’s affiliation rules because there was no clear fracture of the family members’ business relationships.
In a recent size appeal decision, the SBA Office of Hearings and Appeals held that a son’s company was affiliated with a company owned by his father because the son had worked for many years at the father’s company, the son’s company leased office space from the father’s company, and the two companies engaged in significant amounts of subcontracting.
The Supreme Court’s now-famous Kingdomware decision doesn’t affect the timeliness of SBA size protests of GSA Schedule orders.
In a recent decision, the SBA Office of Hearings and Appeals rejected the notion–based in part on Kingdomware–that an GSA Schedule order is a “contract” for purposes of the SBA’s size protest timeliness rules. Instead, OHA held, the SBA’s existing rules clearly distinguish between contracts and orders, and often effectively do not permit size protests of individual orders.
The SBA Office of Hearings and Appeals reaffirmed recently that a business need not manufacture the most expensive component of an item in order to be considered its manufacturer.
Rather, under the SBA’s size rules, a company may be considered a manufacturer if it adds important functionality to the end product, even if the proportion of total dollar value added by the company is relatively small.