To be eligible for a small business set-aside procurement seeking a manufactured product, an offeror has to either be the product’s manufacturer or otherwise qualify under the nonmanufacturer rule.
Determining whether a business qualifies—either as the manufacturer or nonmanufacturer—can be a fact-intensive and confusing task. But it’s a vitally important one, as the penalty for not qualifying can be the loss of an awarded contract.
Recently, however, the SBA Office of Hearings and Appeals provided important clarity on how a small business might qualify as a nonmanufacturer.
Let’s take a look.
An SBA size appeal must be filed by someone “adversely affected by a size determination.” Because parent and subsidiary companies are not directly affected by contracts bid upon by their corporate affiliates, those entities cannot file SBA size appeals on behalf of one another.
In a recent size appeal decisions, OHA confirmed that a parent company cannot file a size appeal on behalf of a subsidiary.
A recent SBA Office of Hearings and Appeals decision confirms that there is no exception for nonprofit organizations when it comes to affiliation issues.
In the case, SBA OHA found affiliation between a self-certified small business and a nonprofit organization based on close family members controlling both the business concern and the nonprofit. Adding in the receipts from the affiliated nonprofit made the business in question ineligible for small business status.
Under the SBA’s economic dependence affiliation rule, two companies can be deemed affiliated when one company is responsible for a large portion of the other company’s revenues over time. But must both companies count one another as affiliates—or does the rule only apply when the recipient’s size is challenged?
A recent SBA Office of Hearings and Appeals case answers these questions: when a company is economically dependent upon another company, it is affiliated with the company on which it depends, but the opposite is not true. In other words, economic dependence affiliation is a one-way street.
A “similarly situated entity” cannot be an ostensible subcontractor under the SBA’s affiliation rules.
In a recent size appeal decision, the SBA Office of Hearings and Appeals confirmed that changes made to the SBA’s size regulations in 2016 exempt similarly situated entities from ostensible subcontractor affiliation.
So you’ve teamed with an ineligible incumbent contractor to bid on some government work and, to try and maintain continuity, the incumbent would like to retain project management functions. “No big deal,” you think, “I’ll just create a management position to oversee the project manager.”
Actually, it could be a big deal if you’re trying to avoid ostensible subcontractor affiliation. Among the four key factors for determining ostensible subcontractor affiliation is whether the management previously served with the subcontractor under the incumbent contract. And according to a recent SBA Office of Hearings and Appeals decision, creating a figurehead management position to oversee the project manager won’t negate this indicia of ostensible subcontractor affiliation.
A communication to a contracting officer taking issue with an awardee’s size can be treated as a size protest–even if the offeror making the communication didn’t intend to file a size protest.
That’s what happened in Sea Box, Inc., SBA No. SIZ-5846 (Aug. 7, 2017), when an offeror accidentally initiated a size protest after losing an award. Continue reading