SBA 8(a) JVs: No OHA Appeals Of Disapprovals

The SBA’s Office of Hearings and Appeals does not have jurisdiction to hear an appeal challenging the SBA’s refusal to approve a joint venture for an 8(a) set-aside contract.

In a recent decision, OHA dismissed an appeal filed by an 8(a) mentor-protege joint venture, in which the joint venture attempted to challenge the SBA’s decision not to approve the joint venture to pursue an 8(a) set-aside.

OHA’s decision in Size Appeal of Kisan-Pike, A Joint Venture, SBA No. SIZ-5623 (2014) involved an Air Force solicitation for construction.  The solicitation was issued as an 8(a) set-aside.

Kisan Engineering Company, an 8(a) participant, formed a joint venture with its mentor, The Pike Company.  As required by the SBA’s regulations, Kisan and Pike sought the SBA’s approval of the joint venture to pursue the Air Force procurement.

The SBA’s Buffalo District Office declined to approve the joint venture (for reasons that are not clearly specified in OHA’s decision).  Kisan-Pike subsequently filed an appeal with OHA, challenging the District Office’s decision to disapprove the joint venture.

OHA asked Kisan-Pike to explain why the appeal should not be dismissed for lack of jurisdiction.  Kisan-Pike responded that the rejection of its joint venture was “at its very essence a size determination.”  Kisan-Pike reasoned that the 8(a) joint venture mentor-protege exception from affiliation is only available when the SBA approves a joint venture, and that the SBA’s refusal to approve the joint venture thus caused Kisan-Pike to be an ineligible large business.  Kisan-Pike argued that this was a size issue, and fell under OHA’s jurisdiction to hear size status appeals.

Kisan-Pike’s argument was creative, but OHA didn’t buy it.  After citing the regulatory definition of a size determination, OHA wrote “[h]ere, the District Office’s disapproval of the JVA is not a formal size determination according to this definition.”  OHA continued, “[t]he disapproval did not come from a Government Contracting Area Director, and it was not issued as the ‘response to either a size protest or a request for a formal size determination.'”  Thus, OHA reasoned, it lacked jurisdiction to hear Kisan-Pike’s appeal, and dismissed it.

OHA distinguished Kisan-Pike’s situation from an instance in which a SBA Area Office examines an 8(a) joint venture agreement in connection with a formal size determination.  In Kisan-Pike’s case, the procurement at issue was an 8(a) set-aside, and the District Office’s prior approval of the joint venture was necessary for the joint venture to avail itself of the mentor-protege exception from affiliation.  The mentor-protege exception from affiliation can also be used on non-8(a) contracts, such as small business set-asides.  In such cases, the SBA District Office does not review the joint venture agreement prior to award.  However, if a size protest is filed against a mentor-protege joint venture on a non-8(a) procurement, the SBA Area Office will examine the joint venture agreement in order to determine whether the joint venture qualifies for the exception from affiliation.  These Area Office determinations–which are size determinations–do fall within OHA’s jurisdiction.

The Kisan-Pike case demonstrates how important it is for an 8(a) joint venture to secure the District Office’s prior approval of the joint venture to pursue an 8(a) contract.  If the District Office declines to approve the joint venture, there is no appeal right to OHA.

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