SBA Size Protests: Subsidiary Couldn’t File for Parent

A subsidiary cannot file an SBA size protest on behalf of its parent company.

Last week, I wrote about an SBA Office of Hearings and Appeals case holding that a parent couldn’t file a size appeal on behalf of its subsidiary.  Unsurprisingly, it turns out that the same principles apply to initial size protests, too.

OHA’s decision in Size Appeal of Conrad Shipyard, LLC, SBA No. SIZ-5873 (2017) involved a DOT solicitation for the construction of an ice-breaking tugboat.  The solicitation was issued as a small business set-aside under NAICS code 336611 (Ship Building and Repairing), with a corresponding 1,250-employee size standard.

Conrad Shipyard, LLC submitted a proposal.  Conrad Shipyard, LLC is part of a family of companies ultimately owned by Conrad Industries, Inc.  Conrad Shipyard, LLC has two wholly-owned subsidiaries: Conrad Orange Shipyard, Inc. and Conrad Shipyard Inc.  (In this case, the two relevant companies are Conrad Shipyard, LLC and Conrad Orange Shipyard, Inc.  For ease of reference, I am going to call them “Conrad Shipyard” and “Conrad Orange,” respectively).

After evaluating competitive proposals, the DOT announced that Gulf Island Shipyards, LLC was the apparent successful offeror.  Conrad Orange then filed a size protest, arguing that GIS was not an eligible small business.  In the size protest, Conrad Orange stated that it was an interested party because it had submitted an offer in response to the DOT solicitation.

The Conrad companies apparently realized their mistake.  Five days after filing the initial size protest, Conrad Shipyard–the offeror–filed a “Notice of Amendment” to the size protest.  Conrad Shipyard asked the the size protest be amended to reflect Conrad Shipyard, not Conrad Orange, as the protester.

The SBA Area Office held that Conrad Orange was not an interested party because it did not submit an offer.  The SBA Area Office dismissed Conrad Orange’s size protest.  The SBA Area Office treated Conrad Shipyard’s “amendment” as a separate size protest, and dismissed it too, holding that it was untimely filed outside the five-day size protest window.

Conrad Shipyard filed a size appeal with OHA.  Conrad Shipyard alleged that it should have been permitted to correct a “minor, clerical error” by substituting Conrad Shipyard for Conrad Orange as the protester.  Alternatively, Conrad Shipyard alleged that Conrad Orange was an interested party because “as a member of the same corporate family as [Conrad Shipyard], it has direct economic interest in the award to GIS.”

OHA wrote that “[a] size protest against an awardee of a small business set aside contract may be filed by: any offeror the contracting officer has not eliminated from consideration for any procurement-related reason, the contracting officer, the SBA Area Director, and other interested parties.”  A size protest filed by anyone other than the SBA or Contracting Officer “must be filed within five business days after the CO has notified the protestor of the identity of the apparent successful offeror.”

Here, there was no dispute that the “amendment” filed  by Conrad Orange was filed after expiration of the five-day period.  Thus, if the SBA Area Office was correct to treat it as a separate protest, the amendment was untimely.

Under the SBA’s size rules, OHA said, “protestors are not permitted to amend protests after the filing deadline.”  Indeed, “[a]fter filing a protest, the regulation contemplates no further role for the protestor in the size determination process.  It has no further submissions to make.”  Otherwise, “new protest allegations could constantly be added up until issuance of the size determination.”  Here, Conrad Shipyard’s “time for filing had expired, and the Area Office was not compelled to accept the October 11th filing as an amendment.”

OHA then turned to Conrad Shipyard’s contention that Conrad Orange, as its wholly-owned subsidiary, was an interested party.  OHA wrote that GAO has held in its bid protest cases that “a parent corporation has no standing to file a protest on behalf of a subsidiary, because it is not the parent who would be contracting with the Government.”  OHA found the GAO’s reasoning persuasive.  Here, “Appellant’s subsidiary attempted to file a protest on its behalf, but it was not the offeror on this procurement.  Where a parent may not file for its subsidiary, a subsidiary surely may not file for its parent.”

OHA denied the size appeal and affirmed the SBA Area Office’s decision.

As I wrote in my post last week, in practice, parent and subsidiary companies often downplay or largely ignore the legal distinctions between them. But when it comes to the SBA size protest and appeals process, those distinctions are critical.  As demonstrated in the Conrad Shipyard case, members of the same corporate family are not permitted to file size protests for one another.