SBA OHA: Shared Ownership In Eight Companies Caused Affiliation

Individuals who had common investments in eight different companies were treated as a single person for purposes of the SBA’s affiliation rules–and the aggregation of those owners’ interests cost one company a small business set-aside award.

In a recent decision, the SBA Office of Hearings and Appeals explained how the little-understood common investments affiliation rule works, and in so doing, provided an important warning to business owners who may not realize that affiliation can result from common investments in multiple entities.

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Nonmanufacturer Rule: Post-Proposal Substitutions Don’t Work

The nonmanufacturer rule requires, among other things, that the prime contractor supply the end items of a small business manufacturer, or obtain a SBA waiver of that requirement.  Compliance with the nonmanufacturer rule is determined as of the date of the final proposal–and a subsequent switch in manufacturers won’t be recognized by the SBA.

In a recent decision, the SBA Office of Hearings and Appeals held that the SBA had erred by evaluating a prospective prime contractor’s nonmanufacturer rule compliance because the small business end manufacturer in question had not provided a quotation to the prime until well after the prime’s proposal had been submitted.

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SBA Affiliation Rules: Beware Supermajority Voting Requirements

Under the SBA’s affiliation rules, a minority owner may “control” a company where the company’s governing documents impose supermajority voting requirements that require the minority owner’s consent for the company to make ordinary business decisions.

In a recent size appeal decision, the SBA Office of Hearings and Appeals confirmed that supermajority voting requirements may establish control (and affiliation), even where the minority owner does not actually exercise its control.

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SDVOSB Protests Versus Bid Protests: SBA OHA Provides Some Clarity

A protest challenging a company’s status as a service-disabled veteran-owned small business is not the same as a protest challenging other aspects of an agency’s award decision (such as the evaluation of the protester’s proposal)–and these differences can determine whether a protest is timely and correctly filed.

In a recent case, the SBA Office of Hearings and Appeals provided some clarity on key differences between SDVOSB protests and bid protests, including important limits on the SBA’s jurisdiction.

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SBA Size Protests: SBA Need Not Seek “Outside Sources” Of Information

When the SBA evaluates a size protest, it need not obtain and consider “outside sources” of information–that is, information that is not provided by the protester or the protested business.

A recent decision of the SBA Office of Hearings and Appeals highlights the need for a size protest to include specific, detailed information about why the protested firm is alleged to be “other than small.”  If the protester does not include information from outside sources, the SBA is not required to seek out such information on its own.

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Ostensible Subcontractor Rule: Hiring Subcontractor’s Project Manager Didn’t Create Affiliation

Ostensible subcontractor affiliation was not created when the small prime contractor proposed to hire its subcontractor’s current employee to serve as the prime contractor’s project manager.

In a recent size appeal decision, the SBA Office of Hearings and Appeals held that, where the prime contractor would retain supervision and control of contract performance, the prime contractor was not dependent on its subcontractor for contract management.

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Nonmanufacturer Rule: Large Manufacturers OK’d For Certain Simplified Acquisitions

In a small business set-aside simplified acquisition of $25,000 or less, small business offerors may propose using large business manufacturers while still complying with the requirements of the nonmanufacturer rule.

In a recent decision, the SBA’s Office of Hearings and Appeals held that an apparent ambiguity contained in the nonmanufacturer regulation for certain simplified acquisitions should be resolved in favor of exempting offerors from the requirement that the manufacturer be a small business concern.

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