I’m just back from El Paso, where I had a great time discussing small business size and affiliation issues at the Contract Opportunities Center. This presentation got me thinking: “Wouldn’t our loyal SmallGovCon readers want to know 5 Things about size protests and appeals?”
“Of course they would!” I immediately answered my own internal monologue. “After all, who wouldn’t?”
Here are 5 Things You Should Know about size protests and appeals:
If you’ve ever responded to an SBA size protest, you know that the process is quite involved: SBA will require your company to provide a complete response to the protest (including production of corporate, financial, and tax records for all implicated concerns) within only a few business days. The consequences for not providing all of the requested information can be quite severe, as the SBA can presume that the responsive information would demonstrate that the concern is not a small business (through its “adverse inference” rule).
A recent OHA appeal shows the dangers of failing to adequately respond to a size protest. In Size Appeal of Perry Johnson & Associates, SBA No. SIZ-5943 (2018), the OHA affirmed the SBA’s reliance on an adverse inference and, as a result, found the protested company was not an eligible small business.
I am excited to announce the publication of SBA Small Business Size and Affiliation Rules, the second volume in our series of new government contracting guides called “Koprince Law LLC GovCon Handbooks.”
Written in plain English and packed with easy-to-understand examples, this GovCon Handbook demystifies the SBA’s rules regarding small business status for government contracts.
Ordinarily, a company isn’t affiliated with the affiliates of its affiliates.
That sentence may sound a little silly, but it encapsulates an important principle about the breadth of the SBA’s affiliation rules. As demonstrated in a recent SBA Office of Hearings and Appeals decision, the SBA doesn’t apply its rules to create “chain affiliation.”
The owner of a 1/120th interest was presumed to control a company under the SBA’s affiliation rules.
You read that right. In a recent size appeal decision, the SBA Office of Hearings and Appeals held that where 120 owners each held one share of stock in a company, all 120 were presumed to control the company for size purposes.
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.