Ostensible Subcontractor Affiliation: Hiring Third-Party Employees OK

Under the SBA’s ostensible subcontractor affiliation rule, hiring incumbent employees can be evidence of affiliation, but the importance of that staffing plan in an affiliation analysis depends on what role the incumbent contractor will play in the awardee’s performance of the contract.

In a recent size appeal decision, the awardee proposed to hire 85% of its personnel from the incumbent contractor, but the incumbent wasn’t proposed as a subcontractor–in fact, the incumbent was the company protesting the awardee’s small business size.  Under these circumstances, the SBA Office of Hearings and Appeals held, the awardee’s hiring of incumbent employees did not establish ostensible subcontractor affiliation.

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Unequal Evaluation: Incumbent Not Credited For Retaining Its Own Employees

In its evaluation of proposals, a procuring agency gave a challenger a strength for proposing to recruit incumbent employees, but didn’t give the incumbent contractor a strength–even though the incumbent contractor proposed to retain the very same people.

Unsurprisingly, the GAO found that the evaluation was unequal, and sustained the incumbent’s protest.

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