In a recent GAO bid protest decision, the GAO held that in evaluating past performance, the agency properly focused on the experience of the 8(a) prime, which was required to perform at least 51% of the contract work and manage the contract.

The GAO’s bid protest decision in Miracle Systems, LLC, B-407324.7, B-407324.8, B-407324.10 (Mar. 5, 2013) involved a Department of Transportation solicitation for information technology support services.  The solicitation was set-aside for 8(a) participants and included a provision requiring the 8(a) prime contractor to perform “at least 51% of the work.”   (The provision appears to vary slightly from the standard Limitation on Subcontracting restrictions under FAR 52.219-14 and the NDAA, but the distinction is irrelevant for purposes of this post).

In its evaluation of competitive proposals, the DOT assigned a “medium” past performance score to the proposal of Miracle Systems, LLC.  The DOT noted that Miracle proposed to subcontract to the incumbent prime contractor, which had received high ratings for its performance.  However, the DOT determined that Miracle itself did not possess significant relevant experience.  The DOT awarded the contract to a competitor.

Miracle filed a GAO bid protest, alleging in part that the DOT had erred by failing to award it a high past performance score.  Miracle asserted that it was entitled to the highest possible past performance score based on the strength of its subcontractor’s experience on the incumbent contract.

The GAO disagreed.  It noted that “while the record reflected relevant and highly-rated past performance” by Miracle’s subcontractor, Miracle itself “proffered past performance that was considerably less in value.”  Because “[t]he prime contractor itself is responsible for performing at least 51 percent of the contract, and will have ultimate responsibility for the overall performance of the contract,” the GAO saw “no basis to question” the DOT’s assignment of a medium rating.  The GAO denied Miracle’s protest.

When it comes to evaluating past performance, procuring agencies have broad discretion.  Often, agencies will treat a subcontractor’s experience no differently than the experience of the prime.  However, the Miracle Systems case shows that when it comes to set-aside contracts, there is no guarantee that this will be the case.  As happened in Miracle Systems, the agency may choose to weigh the experience of the small prime most heavily, since the prime will be responsible for managing the contract and performing a certain percentage of the overall work.

The SBA’s decision stands as a warning that SDVOSB verification does not guarantee SDVOSB eligibility–especially when an eligibility protest arises under a non-VA procurement.

SBA OHA’s decision in Reese Services, Inc., SBA No. VET-231 (2013) involved a Navy SDVOSB set-aside for the removal and replacement of asbestos duct work.  After evaluating competitive proposals, the Navy announced that Reese Services, Inc. was the apparent successful offeror.

An unsuccessful competitor filed an eligibility protest, challenging Reese’s status as a SDVOSB.  The protester alleged that Reese was not controlled by a service-disabled veteran.  Because the protest arose under a non-VA procurement, the protest was referred to the SBA’s Office of Government Contracting, not the VA OSDBU.

The SBA determined that Reese was 51% owned by Christopher Reese, a service-disabled veteran.  Mr. Reese also served as the company’s president, its highest officer.  The remaining 49% was owned by Mr. Goel, who is not a service-disabled veteran.  Mr. Goel served as the company’s vice president, treasurer and secretary.  Reese’s board of directors consisted of two members: Mr. Reese and Mr. Goel.

Examining Reese’s bylaws, the SBA noted that the bylaws specified that a “majority” of the company’s directors were required to constitute a quorum.  ”Accordingly, as one of [Reese's] two directors, Mr. Goel could block a quorum,” the SBA stated.   Although the SBA’s SDVOSB regulations say nothing about quorums, the SBA cited an 8(a) Program regulation, which provides that a non-disadvantaged individual may be found to control a company where the non-disadvantaged individual has the power to “block a quorum.”  The Area Office determined that Mr. Reese did not unconditionally control Reese and found the company ineligible for the Navy contract.

Reese appealed to SBA OHA.  Reese complained, in part, that the SBA had erred by applying the 8(a) Program regulation to a SDVOSB eligibility case.  Reese also alleged that the SBA’s determination was erroneous because it contradicted with the VA’s determination that Reese was an eligible SDVOSB, as evidenced by Reese’s VetBiz verification.

SBA OHA rejected both arguments.  Citing prior cases, SBA OHA wrote that “SBA may apply the regulations and case law from the 8(a) program to analyze the issue of control in SDVO SBC programs.”  Accordingly, it was proper for the SBA to consider the 8(a) quorum regulation in analyzing Reese’s bylaws.

Turning to Reese’s VetBiz verification, SBA OHA wrote, “under current law, VA determinations of SDVO SBC eligibility are binding only with respect to VA procurements.  For non VA procurements, SBA conducts its own review of SDVO SBC eligibility under 13 C.F.R. part 125.”   SBA OHA concluded, “the fact that [Reese] was found eligible under VA’s review does not establish that [Reese] also meets the requirements set forth in 13 C.F.R. part 125, or preclude the [SBA] from reaching a different conclusion.”  SBA OHA denied Reese’s appeal.

The Reese Services case is a good example of the regulatory mess that the Government’s SDVOSB programs have become.  As the case demonstrates, a small business like Reese may spend months trying to obtain its VetBiz verification, only to find that most procuring agencies do not recognize the verification.  To make matters worse, SDVOSBs self-certifying on non-VA procurements cannot rely solely on the SBA’s SDVOSB regulations to determine their eligibility; they must also familiarize themselves with the far more complex requirements under the 8(a) Program, just in case the SBA decides to apply a particular 8(a) Program regulation in their case.

Perhaps one day Congress will clean up the SDVOSB regulatory mess.  Until then, if you are a SDVOSB, Reese Services is just one more reason to be very, very careful out there.

As part of the public comment process, the VA is inviting the public to weigh in on previously-suggested changes, as well as answer specific questions about ways the VA might improve its verification rules.

In a Federal Register notice published yesterday, the VA seeks public comment on a number of questions regarding the verification process, including:

• What might be changed to improve the clarity of the regulations?
• Should more “bright lines” be drawn to clearly differentiate compliant and non-compliant companies?
• Should VA develop a list that would “clearly delineate what constitutes ownership and control and what constitutes lack of ownership and control?”
• How could the verification process be amended to improve efficiency?
• What additional training tools or assistance might be offered to provide more clarity?
• Would a hotline to report suspected ineligible SDVOSBs/VOSBs be a useful tool?

I commend the VA’s effort to improve its much-criticized verification process.  Having worked with many SDVOSB clients to address verification issues, I plan to submit comments of my own to the VA.  I will do my best to refrain from mean-spirited comments like  ”efficiency could be improved by performing reconsiderations in fewer than 128 days.”  (To be fair, the new pre-determination findings program hopefully will help address that glaring problem).

If you have had difficulties with the VA SDVOSB verification rules or process (and a lot of folks have), this is a chance to make your voice heard.  Public comments are due by July 12, 2013 and instructions for submitting them are contained in the Federal Register notice.

This was the decision of the SBA Office of Hearings and Appeals in a recent SBA size appeal case, in which SBA OHA held that a size protest was untimely when it was filed within five business days of the agency’s notification, after taking corrective action, that it would reaffirm its award to the protested contractor.

SBA OHA’s decision in Size Appeal of EFT Architects Inc., SBA No. SIZ-5460 (2013) involved a VA solicitation for architect/engineer design services.  The solicitation was set aside for SDVOSBs.

After evaluating competitive proposals, the VA notified offerors on October 23, 2012 that Triple C – The A&E Group, Inc. had been selected for award.  The next day, EFT Architects, Inc., an unsuccessful competitor, filed a bid protest with the GAO challenging the award.

The VA subsequently agreed to take corrective action, which consisted of re-reviewing Triple C’s proposal.  The VA did not cancel the award to Triple C, but stayed performance of the contract pending the re-evaluation.

On February 25, 2013, the VA notified EFT that it had completed its second review of Triple C’s proposal.  The VA stated that its re-review had confirmed that Triple C was fully capable of performing the contract, and therefore the original award to Triple C was upheld.

On February 28, 2013, EFT filed a size protest of Triple C.  In its size protest, EFT alleged that Triple C was affiliated with its subcontractor under the ostensible subcontractor rule.

The SBA Area Office dismissed Triple C’s size protest as untimely.  The SBA Area Office wrote that in order to be timely, Triple C’s size protest should have been filed within five business days of the October 23, 2012 notification.

EFT filed a size appeal with SBA OHA.  EFT argued that the February 25, 2013 confirmation was a “new award” to Triple C, and thus the size protest was timely filed within five business days of that new award.

SBA OHA disagreed.  It wrote that EFT’s argument “would be persuasive if the [VA] had canceled the award” and “then issued a new award.”  However, “the record establishes that the VA did not cancel the procurement and issue a new award prior to [EFT's] filing the size protest.”  Therefore, “the October 23, 2012 notification date is still the operative date for determining timeliness of the protest at issue.”  SBA OHA upheld the SBA Area Office’s decision dismissing EFT’s size protest as untimely.

The EFT Architects size appeal decision is a good reminder that the SBA’s size protest timeliness rules are strictly enforced and exceptions are rarely allowed.  As this case demonstrates, even an agency’s decision to take corrective action with respect to the procurement in question may not be enough to grant the protester a new five-day window.

According to a recent GAO bid protest decision, the GPO’s status as a legislative entity exempts it from the Certificate of Competency process–much to the disappointment of the small business protester in question.

The GAO’s bid protest decision in Colonial Press International, Inc., B-408031, B-408055 (May 6, 2013) involved two GPO solicitations for printing services.  In each case, Colonial Press International, Inc. submitted the lowest bid.  However, the GPO determined that Colonial Press was nonresponsible, a determination stemming from Colonial Press’s delivery problems on prior GPO contracts.  The GPO awarded the contracts to competitors.

Colonial Press filed a GAO bid protest.  Colonial Press argued, in part, that because it is a small business, the GPO’s concerns regarding responsibility should have been referred to the SBA under the Certificate of Competency program.

The GAO rejected Colonial Press’s contention.  Citing prior bid protest decisions, the GAO wrote, “our Office has consistently held that GPO, as a legislative branch agency, is not subject to the COC referral requirements of the Small Business Act.”  The GAO concluded, “[a]ccordingly, the GPO was not required to refer its nonresponsibility determinations of Colonial Press to the SBA.”  The GAO denied the protest.

The Certificate of Competency program allows small business contractors to “appeal” non-responsibility determinations to the SBA, which is empowered to overrule the procuring agency.  As such, the Certificate of Competency program can provide an important second bite at the apple for small contractors.  However, as Colonial Press International demonstrates, the COC program has its limits–including that it does not apply to the GPO.

In a recent bid protest decision, the GAO held that the procuring agency reasonably assigned the incumbent contractor the same past performance score as its competitor, and was not required to give the incumbent additional credit under the solicitation’s past performance evaluation factor.

The GAO’s bid protest decision in ABSG Consulting Inc., B-407956, B-407956.2 (Apr. 18, 2013) involved a Coast Guard solicitation for systems engineering and technical assistance services.  The solicitation called for competitive proposals to be evaluated under five factors: technical understanding and management approach, staffing, corporate experience, past performance, and price.

For the past performance factor, the solicitation directed offerors to submit completed performance evaluations.  The solicitation stated that the past performance evaluation would consider the offeror’s ability to successfully perform the contract based on the offeror’s past performance, as described in its references.

ABSG Consulting, Inc., the incumbent contractor, submitted a proposal.  Booz Allen Hamilton, Inc., or BAH, also submitted a proposal.

After evaluating competitive proposals, the Coast Guard awarded ABSG “Superior” ratings, the highest possible score, for its management approach and corporate experience.  ABSG was given “Excellent” ratings, the next-highest score, for its staffing and past performance.  BAH also received a “Superior” management approach score, and was given “Excellent” scores for the three other non-price factors, including past performance.  Despite ABSG’s higher corporate experience score, the Coast Guard awarded the contract to BAH on the basis of BAH’s lower evaluated price.

ABSG filed a GAO bid protest challenging the award to BAH.  Among its complaints, ABSG argued that the Coast Guard should have assigned it a “Superior” past performance score because of ABSG’s experience as the incumbent contractor.  ABSG apparently contended that because it had performed the incumbent contract, it should not have received the same “Excellent” past performance score as BAH.

The GAO disagreed.  After reviewing the past performance references for both companies, the GAO wrote that “both firms had been rated very similarly” and that “[t]he Coast Guard identified no weaknesses or deficiencies for either firm.”  Contrary to ABSG’s position, “the record does not show that ABSG’s performance was materially superior to BAH’s performance . . .”

Moreover, “[w]hile an agency may provide for evaluation of relevance, the agency is not required to evaluate the past performance of the incumbent contractor as superior to its competitors simply because the incumbent has the most relevant past performance.”  In this case, “[s]ince both firms received uniformly high ratings, and since the Coast Guard was not required to give ABSG a higher rating based only on its status as an incumbent, we have no basis to question the assignment of the same past performance rating to both firms.”  The GAO denied the bid protest.

There is no question that successful performance of the incumbent contract can often be an important advantage when it comes time to compete for a follow-on contract.  However, the ABSG Consulting case demonstrates that incumbent contractors cannot take this advantage for granted, because a procuring agency is not required to award past performance “extra credit” to the incumbent contractor.

In a recent decision, the SBA Office of Hearings and Appeals upheld the SBA’s decision to toss out the vague SDVOSB protest.  SBA OHA held that in order for a SDVOSB protest to be viable, it must set forth information or evidence supporting the protester’s allegations.

SBA OHA’s decision in Veterans Contractors Group JV, LLC, SBA No. VET-233 (2013) involved an Army Corps of Engineers solicitation for flood protection construction work.  The solicitation was set-aside for SDVOSBs.

After reviewing competitive bids, the Corps identified Industria Paschen JV, LLC, or IPJV, as the lowest bidder and apparent successful awardee.  An unsuccessful competitor, Veterans Contractors Group JV, LLC, subsequently filed a SDVOSB protest.

The SDVOSB protest stated that IPJV “does not appear to meet the requirements of forming a valid [SDVOSB joint venture] under 13 C.F.R. § 125.15 and that IPJV “appears to have exceeded the [maximum] number of contracts [allowed] in a two year period” under 13 C.F.R. § 121.103(h).  Although the protester quoted from the SBA’s regulations, it did not offer any specific facts, explanation or evidence as to why it “appeared” that IPJV did not satisfy the eligibility requirements.

The SBA’s Office of Government Contracting dismissed the protest as insufficiently specific.  The protester then appealed to SBA OHA.

In its appeal, the protester sought to introduce new evidence, primarily related to IPJV’s size status.  The protester did not explain why this new evidence was not included in its original protest.

SBA OHA agreed with the SBA’s decision to dismiss the protest.  The protest “at no point explained why [the protester] believed IPJV to be an ineligible bidder for the procurement at issue,” SBA OHA wrote.  ”Accordingly, the [SBA] correctly determined that [the protester's] protest was insufficiently specific, as the protest amounted to no more than bare assertions and did not provide the [SBA] with any basis upon which to initiate an investigation.”

SBA OHA rejected the protester’s effort to submit new evidence with its appeal.  ”[T]his information was not provided” in the protest, SBA OHA wrote, “and it is well-settled that an insufficiently specific protest cannot be cured by submitting more specific information on appeal.”  SBA OHA denied the appeal.

The Veterans Contractors Group SBA OHA decision is a good reminder that SDVOSB protests must contain specific evidence or information supporting the allegations.  If, as here, the protest vaguely alleges that the awardee does not meet the eligibility requirements, the SBA is likely to dismiss it without an investigation.

Previously, the VA CVE had taken the position that any restriction on a service-disabled veteran’s right to transfer his or her interest in the company was improper.  Because such transfer restrictions are commonplace, many otherwise-eligible SDVOSBs had their verification applications denied.

No more.  In a newsletter to SDVOSBs issued yesterday, the VA CVE stated that it would no longer deny verification based on certain ownership transfer restrictions–and offered an expedited reconsideration process to companies previously denied on this basis.

The VA CVE’s position is welcome news, but doesn’t mean that most SDVOSBs should rush to include transfer restrictions in their bylaws or operating agreements, because the SBA may not agree with the VA CVE’s change of heart.

In February, the U.S. Court of Federal Claims issued its ruling in Miles Construction, LLC v. United States, No. 12-597C (2013).  The Court held that a standard “right of first refusal” provision should not prevent a SDVOSB from being verified, writing that the VA’s position to the contrary was “arbitrary and capricious and contrary to law.”

After the Court issued its ruling, I wrote:

The question then becomes, “now what?”  Will the VA CVE revise its position on ownership restrictions in response to the decision?  If so, what happens when an ownership transfer restriction is stricter than the one at issue in Miles Construction–such as a “tag along” or “drag along” provision, or a requirement that the veteran owner sell at a specified price?  Much remains to be seen.

Now we have some answers.  In yesterday’s newsletter, the CVE stated:

“In accordance with the 38 Code of Federal Regulation (CFR) § 74.3(b) (Transfer Restrictions), companies will no longer be denied for the Veterans’ First Contracting Program based upon “Right of First Refusal” or similar provisions in applicable business documents. This ruling is not retroactive to companies who received determination letters before March 1, 2013.”

Although the change in policy does not directly affect companies with denial letters before March 1, those companies are entitled to expedited reconsideration:

“However, companies that received denial letters with 38 § 74.3(b) (Transfer Restrictions) as a single point of failure before March 1, 2013, can submit for reverification. These companies will receive “priority” processing and should have a determination within 30 business days as long as they have previously under-gone a full document review and no other changes have occurred within the company. Please send an email with the following subject line: TRANSFER RESTRICTION PRIORTY with your company name and DUNS number to vacorecons@va.gov.”

Kudos to the VA CVE not only for changing its misguided policy (albeit belatedly and in response to a federal judge), but for offering previously-denied companies a path to a quick verification.

As to my question regarding “tag along” provisions, and transfer restrictions other than those at issue in Miles Construction, the VA CVE has issued a new Verification Assistance Brief covering some of those issues.  For instance, the new Verification Assistance Brief indicates that ordinary tag-along provisions may be acceptable.

The VA’s changed position is welcome news, but does not mean that SDVOSBs should comfortably insert transfer restrictions in their bylaws or operating agreements.  The Verification Assistance Brief states that transfer restrictions “are unique conditions subject to a case-by-case review” meaning that a particular transfer restriction might not pass muster with the VA CVE.

In addition, the SBA’s Office of Hearings and Appeals has issued decisions suggesting that ownership transfer restrictions of any kind may be impermissible under the SBA’s SDVOSB program.  In Miles Construction, the Court emphasized that its ruling applied only to the VA’s SDVOSB program, meaning that SBA OHA’s decisions still stand, and could come back to haunt verified SDVOSBs who bid on non-VA SDVOSB set-asides.

In other words, despite the VA CVE’s heartening reversal, much still remains to be seen.

In Size Appeal of A&H Contractors, Inc., SBA No. SIZ-5459 (2013), SBA OHA overturned a finding of affiliation because most of the ties relied upon by the SBA Area Office had been severed before the applicable date for determining size.

The A&H Contractors SBA OHA decision involved an Army Corps of Engineers solicitation for dredging.  The solicitation was set-aside for small business under NAICS code 237990.

After the Corps reviewed competitive proposals, it announced that A&H Contractors, Inc. was the apparent successful awardee.  An unsuccessful competitor subsequently protested A&H’s size.

The SBA Area Office found that A&H was affiliated with three businesses owned or controlled by Mr. Avinash Rachmale: Lakeshore Engineering, Inc., Lakeshore HealthCare Investment Group, Inc. and Sky Group Grand, LLC.

According to the SBA size determination, the following ties existed between the companies:

• Thomas Hardiman Sr. was the president and 100% owner of A&H.  Mr. Hardiman had worked for Lakeshore for a number of years.  In 2003, Mr. Hardiman purchased A&H from Mr. Rachmale and his wife, who had founded the company.
• In 2006, Mr. Hardiman left his employment at Lakeshore.  However, he continued to serve as a consultant to Lakeshore until 2009.
• In 2009, A&H and Lakeshore formed a joint venture.  The joint venture was awarded two contracts.  Under the terms of the joint venture agreement, A&H received 51% of the profits and Lakeshore the remaining 49%.  The companies did not team on any other contracts.
• In 2010, Lakeshore loaned $354,128 to A&H, which was repaid in 2012.
• Mr. Rachmale served as a member of A&H’s Board of Directors until September 3, 2012, when Mr. Hardiman removed him.
• A&H leased office space from Sky Group Grand under a written lease agreement.  Lakeshore had separate space in the same building.
• In 2010, AH&H made a one time payment to Lakeshore for its share of expenses stemming from a building Christmas party.
• Mr. Hardiman owned 5% minority interests in LHIG and SGG.

Based on these ties between the companies, the SBA Area Office found A&H affiliated with Lakeshore, LHIG, and SGG, and deemed A&H ineligible for the Corps contract.  A&H appealed to SBA OHA.

SBA OHA noted that “[t]he Area Office devoted much of the instant size determination to reviewing the historic ties between [A&H] and Lakeshore, and between their respective principals.”  However, “none of these historic ties were still extant as of November 9, 2012,” when A&H submitted its proposal.  Accordingly, “while the historic ties may be indicative of past affiliation, they do not establish that [A&H] and Lakeshore are affiliated as of November 9, 2012.”

After rejecting affiliation based on historic ties, SBA OHA concluded that none of the current ties between the companies resulted in affiliation.  With respect to Mr. Hardiman’s minority interests in SGG and LHIG, “there is no reason to believe that such small interests could enable Mr. Hardiman to control SGG or LHIG, let alone Lakeshore.”  Similarly, “a lease of office space does not demonstrate any power to control; otherwise a concern would always be affiliated with its landlord.”  Finally, the joint venture did not violate the “three in two” rule, and “[t]he fact that two companies formed a single joint venture, compliant with SBA’s regulations, and without other significant business ties, is not sufficient to demonstrate that either company could control the other.”  SBA OHA granted A&H’s appeal.

The A&H Contractors size appeal decision stands for the commonsense principle that companies should not be bound by their historic ties when it comes to the SBA’s affiliation rules.  Otherwise, it might be difficult, if not impossible, to sever affiliation.  Fortunately for A&H, and other companies in a similar position, though diamonds may be “forever,” affiliation is not.

SBA OHA’s decision in Size Appeal of Washington Patriot Construction, LLC, SBA No. SIZ-5447 (2013) shows the importance of carefully drafting a small business’s corporate operating agreements or bylaws to prevent affiliation with other companies controlled by the small business’s minority owners.

The Washington Patriot Construction SBA size appeal decision involved an Army Corps of Engineers solicitation for the construction of an access point at Joint Base Lewis-McChord North.  The solicitation designated the procurement as a total set-aside for SDVOSBs.

After evaluating competitive proposals, the Corps announced that Washington Patriot Construction, LLC was the apparent successful offeror.  A disappointed competitor subsequently filed a SBA size protest.  In its size protest, the competitor alleged that Washington Patriot was affiliated with Wade Perrow Construction, or WPC.

According to Washington Patriot’s operating agreement, Mickey Traugutt was the 51% owner of Washington Patriot.  WPC owned the remaining 49%.  The operating agreement also stated that Mr. Traugett was the 51% manager.  Wade Perrow, Elizabeth Perrow, and Dan McKinney were also managers.  The Perrows and Mr. McKinney were all managers of WPC.

The operating agreement provided that all decisions made by the company would be made by the managers.  The operating agreement further stated that “any disagreement between or among Managers over a decision on Company matters, will be resolved by vote of a majority of Managers.”  The Operating Agreement also provided that a manager “may be removed only for acting in bath faith in office . . .”

After reviewing the operating agreement, the SBA Area Office concluded that WPC had the power to control Washington Patriot.  The SBA Area Office reasoned that the Perrows and Mr. McKinney were three-fourths of the company’s managers.  Because a “majority of managers” was necessary to resolve disputes, the three WPC managers could effectively control Washington Patriot.  Based on the overlapping control between WPC and Washington Patriot, the SBA Area Office found the companies affiliated.

Washington Patriot filed a size appeal with SBA OHA, arguing that the SBA Area Office had misconstrued the operating agreement.  SBA OHA disagreed.

SBA OHA pointed out that the operating agreement did not permit managers to be removed except for bad faith.  ”Thus, despite his majority ownership of the company, Mr. Traugett cannot simply remove managers that disagree with him,” SBA OHA wrote.

SBA OHA noted that the operating agreement called for disputes to be resolved by a “majority” of managers.  ”Notably, the agreement does not state that Mr. Traugett alone will resolve all disputes,” SBA OHA wrote.  ”Nor does the agreement state that disagreements will be resolved according to managers’ weighted voting interests.”

SBA OHA determined, “the Area Office correctly concluded that, notwithstanding Mr. Traugett’s 51% ownership and 51% management interests, the operating agreement enables Mr. McKinney and the Perrows to thwart Mr. Traugett’s control over [Washington Patriot] in cases of disagreement.”  SBA OHA upheld the SBA Area Office’s decision finding the companies affiliated.

The Washington Patriot Construction decision shows why it is critical for a small government contractor to carefully draft its operating agreement, bylaws, or other governing documents to avoid affiliation problems.  With a few relatively simple tweaks to its operating agreement, Washington Patriot could have ensured that Mr. Traugett controlled the company.  Instead, Washington Patriot found itself on the wrong end of a SBA size determination–and lost its contract with the Corps.