Joint Venture Affiliation Exception Isn’t Unlimited, OHA Says

To encourage joint venturing, the SBA’s size regulations provide a limited exception from affiliation for certain joint venturers: a joint venture qualifies for award of a set-aside contract so long as each venturer, individually, is below the size standard associated with the contract (or one venturer is below the size standard and the other is an SBA-approved mentor, and they have a compliant joint venture agreement). In other words, the SBA ordinarily won’t “affiliate” the joint venturers—that is, add their sizes together—if the joint venture meets the affiliation exception.

Because of this special treatment, it can be easy for the venturers to assume that they are completely exempt from any kind of affiliation. But as the SBA Office of Hearings and Appeals recently confirmed, however, the exception isn’t nearly so broad.

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SBA OHA: Historic Ties Do Not Equal Affiliation

A history of close ties between companies does not mean that the companies are presently affiliated, according to a recent size appeal decision of the SBA Office of Hearings and Appeals.

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.

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SBA OHA: Tribal Companies Entitled to Broad Affiliation Exceptions

Indian tribes, their holding companies, and companies owned by those holding companies are entitled to broad exceptions from the ordinary SBA affiliation rules, according to a recent SBA Office of Hearings and Appeals size appeal decision.

SBA OHA’s decision in Size Appeal of Roundhouse PBN, LLC, SBA No. SIZ-5383 (2012), holds that the SBA cannot use non-applicable affiliation rules to circumvent the regulatory exception from affiliation between tribal companies.  In its ruling, SBA OHA also sidestepped an interesting tribal size question: did Congress truly intend for some tribal companies to be “small” for 8(a) program purposes, but “other than small” for all other government contracts?

As you can probably tell, the Roundhouse PBN case is not your run-of-the-mill SBA OHA size appeal decision, meaning a slightly longer-than-normal blog post is in order.  Let’s dive right in.

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