As Federated Maritime, LLC, SBA SIZ-6360, 2025 demonstrates, an agency’s review of a size protest must be more than just a surface-level review and a rubber stamp. This size appeal started with a disappointed bidder (here, the Appellant) that questioned the relationship between Federated Maritime, LLC (or Awardee), a company that won two cargo charter contracts, and its alleged affiliates. The contracts were 100% set-aside for small businesses under NAICS Code 483111 – Deep Sea Freight Transportation.
Appellant’s size protests claimed that the Awardee was ineligible for both awards because it was affiliated with four other businesses as well as each of those businesses’ affiliates, thereby exceeding the 1,050 employee size standard of the NAICS code assigned to the contracts. What evidence did the Appellant base that claim on? According to the Appellant, the following facts demonstrated that Awardee was affiliated with each of these companies and their affiliates:
For the first alleged affiliate, Bold Ocean LLC (Bold Ocean), Awardee’s website stated that it was “a Bold Ocean Company.” The website also stated that Bold Ocean was Awardee’s parent company and indicated that Bold Ocean was located at the same address, although they were in different suites. Additionally, Awardee claimed that Bold Ocean was ultimately owned by the Global Transport Income Fund Master Partnership. (“GTIF” or the “Fund”), a standalone investment fund that invests in transportation assets. GTIF GP has hired JPMorgan Asset Management (Europe) Sarl (“JPMAM”) to be the Fund manager. JPAMAM and its ultimate parent, JPMorgan Chase & Co. are not affiliated with the Fund.
The second alleged affiliate, NOVA Infrastructure Management, LLC (NOVA), owned and controlled Bold Ocean from 2020 until 2024, based on a press release from July 31, 2024 that stated that Nova sold Bold Ocean to “institutional investors advised by J.P. Morgan Global Alternatives’ Global Transportation Group” (GTIF GP). Therefore, the third alleged affiliate was GTIF GP.
The fourth alleged affiliate was J.P. Morgan Asset Management (JPAM). Like GTIF GP, it was also alleged that JPAM purchased Bold Ocean from NOVA on July 31, 2024. For this alleged affiliate, Appellant claimed that JPAM is not a small business because publicly available information about JPAM’s assets in the shipping industry alone would be considered other than small. As stated by the Appellant, “JPAM is reported to control a portfolio of over 140 ships which means JPAM (via its affiliates) assuredly employs more than 1,050 employees.” And that was before “factoring in that JPAM is a controlled subsidiary of JP Morgan – the fifth largest bank globally by assets under management that has 309,926 employees globally.”
When is size determined and other size regulations
Now, a quick aside regarding when size is determined, 13 C.F.R. § 121.404(a) states that a company, “including its affiliates, must qualify as small . . . as of the date the concern submits a written self-certification that it is small to the procuring activity as part of its initial offer or response which includes price.” So, the correct date to determine Awardee’s size was February 4, 2025, the date that it had submitted its initial offer that included price. Keep this date in mind.
Additionally, 13 C.F.R. § 121.106(b)(1) states that a NAICS code that has its size determined by the number of employees, size will be determined using “[t]he average number of employees of the concern … based upon numbers of employees for each of the pay periods for the preceding completed 24 calendar months.” This includes any employees of domestic and foreign affiliates.
Finally, 13 C.F.R. § 121.106(b)(4)(ii) is clear that “[t]he employees of a former affiliate are not counted if affiliation ceased before the date used for determining size.” It is also clear that “[t]his exclusion of employees of a former affiliate applies during the entire period of measurement, rather than only for the period after which affiliation ceased.”
Size Determination
The Area Office’s size determination found the following:
- Awardee acknowledged it was affiliated with Bold Ocean and its affiliates.
- Awardee was affiliated with NOVA and its affiliates but is no longer affiliated because of the six months between when NOVA sold Bold Ocean and the February 4 date that size is determined. (Remember, former affiliates are not included in calculating size if the affiliation ceased prior to the date used to determine size.)
- Awardee was not affiliated with GTIF GP or its subsidiaries because Bold Ocean is owned by institutional investors advised by JPAM and “SBA has already reviewed this exact allegation in connection with a prior size protest … [and] SBA concluded that a standalone investment fund that hires a large investment firm to be its manager is a customer of the large investment firm rather than an affiliate.” However, the Area Office determined that Awardee was affiliated with the other firms in the portfolio held by JPAM. But this affiliation does not, at least according to the Area Office, flow down to any of the individual investors or other companies owned outside of the portfolio.
Therefore, the Area Office determined that Awardee and its affiliates, when combined, did not exceed the 1,050 employee size standard and was small for the procurement.
Appeal
On appeal, Appellant argued that the Area Office failed to look at evidence or legal precedent when making its decisions. Additionally, Appellant claimed that the Area Office simply cited and quoted much of Awardee’s response to the size protest and that it “made no affirmative determination on whether an individual or entity controls [the investment fund].” Finally, Appellant asserted that the Area Office failed to even address all of its protest allegations.
Regarding the Area Office’s failure to identify who or what controls the investment fund, OHA found that the Area Office simply cited the Awardee’s response with no independent analysis or evidence. There was no explanation as to “how JPAM’s ability to control the day-to-day operations, strategy, and direction of Bold Ocean – and therefore Schuyler – does not constitute control under SBA’s regulations.” SBA regulations require that there must be someone or some entity that controls a concern. Most frequently that is an individual, but “a group of minority shareholders can be deemed to control a concern if the minority holdings are approximately the same size, and the aggregate of these holdings is large compared with other stock holdings.” 13 C.F.R. § 121.103(c)(2). In the event the “voting stock is widely held and no single block of stock is large as compared with all other stock holdings, the concern’s Board of Directors and CEO or President will be deemed to have the power to control the concern in the absence of evidence to the contrary.”
Appellant also raised the issue that the Area Office incorrectly calculated the total number of employees that the Awardee had. Publicly available information showed that GTIF had a fleet of at least 140 vessels operating worldwide with a crew of approximately 20 mariners each coming in with a total of roughly 2,800 employees. That alone greatly exceeded the 1,050 size standard, and did not take into account any of GTIF’s other alleged affiliates.
Supplemental Appeal
Appellant’s supplemental appeal was based on the Appellant’s belief that the Area Office failed to “investigate the protest allegations and establish a record” and included the following arguments.
While the size determinations found that GTIF and Awardee were affiliated, the case file showed that the Area Office failed to look further than that to determine who or what controlled GTIF to determine whether they were affiliated with Awardee as well. The Area Office also relied on conclusory statements from Awardee’s counsel, failed to independently analyze Appellant’s allegations, and erred in accepting heavily redacted documentation intended to “hide the ball” of who actually controlled the Awardee. Documentation that was overlooked included a GTIF organizational chart and a limited partnership agreement that confirmed that GTIF GP has the ability to control GTIF. Instead of looking at the documentation in the case file, the Area Office relied solely on a letter from Awardee’s counsel which acknowledged that GTIF GP had the ability to control GTIF.
But why is it so important, at least in the eyes of the Appellant, to know who or what controls GTIF GP? After all, it’s clear that the Awardee is affiliated with GTIF and GTIF GP. Remember how the Area Office determined that affiliation did not flow down to individual investors, aka the limited partners, in the fund? Well, that determination by the Area Office completely ignored the minority shareholder rule, that “if two or more shareholders hold equal, or approximately equal, minority interests, and those interests together are large as compared with any other stock holding, then each minority owner is presumed to control the concern based on their minority interests.” 13 C.F.R. § 121.103. If limited partners are shown to control GTIF GP via the minority shareholder rule, affiliation between Awardee and the limited partners could potentially spread the affiliation further than simply being affiliated with GTIF and GTIF GP. According to the Appellant and, later, OHA, there is no way the Area Office could have determined who controls GTIF based on the information in the letter from Awardee’s counsel, which is what the Area Office cited and appeared to base the entire size determination on.
So where exactly did the Area Office err? First, the Area Office accepted a GTIF Limited Partnership Agreement that redacted 97 of the 135 total pages. Next, the case file failed to identify the identities of GTIF’s limited partners and instead took Awardee at its word. Third, the Awardee did not provide sufficient information or documentation to determine what companies were in the GTIF portfolio. Nonetheless, the Area Office found that GTIF’s portfolio companies were affiliated with Awardee despite not having enough information to determine who those portfolio companies were.
The final argument noted that:
[T]he Area Office also failed to fully investigate Appellant’s claims that JPAM and/or JP Morgan controls the entity (or entities) that own or control Schuyler. Appellant cited to numerous news articles that contained JPAM statements asserting control over Bold Ocean to bolster this claim. Despite this clear and specific allegation, however, the agreement between GTIF and JPAM – the Alternative Investment Fund Management (the “AIFM”) Agreement – is not included in the case file.
Decision
OHA found that “the Area Office cited no evidence, case law or any other legal precedent or authority in making either of its Size Determinations,” instead relying on Awardee’s size protest response with no further investigation. Next, OHA found the Area Office’s “failure to fully investigate Appellant’s claims that JPAM and/or JP Morgan control[ed] the entity (or entities) that own or control Schuyler” to be highly troubling.
It also found that the Area Office failed to consider all of the allegations in the initial size protest due to both a lack of documentation and the Area Office’s failure to review all documentation in the case file. Appellant cited numerous articles that contained statements from JPAM that demonstrated JPAM had control over Bold Ocean, and Awardee had previously acknowledged affiliation with Bold Ocean. The record contained “multiple news articles and press releases from industry organizations and publications, including quotes from the acquiring entity JPAM itself, announcing the acquisition.” But the Alternative Investment Fund Management (the “AIFM”) Agreement – was not included in the case file. Without the AIFM Agreement, the Area Office was incapable of verifying the information vital to one of Appellant’s central claims.
OHA summarized its finding this way:
Appellant filed its initial Size Protests challenging Schuyler’s small business eligibility for the subject procurements. Appellant did so primarily on the claim that Schuyler is controlled by, or affiliated with, JP Morgan, one of the largest financial institutions in the world. Appellant bolstered its claims through evidence that appeared credible, from trade publications and press releases containing quotes from the supposed controlling entity itself. If what Appellant alleges is true, then one of the largest financial institutions in the world is using one subsidiary to establish a standalone investment fund which will use a separate subsidiary to manage that same investment fund. The Area Office’s Size Determination would imply that this fund can control the small business without a finding of affiliation between the large investor and the small business. This contradicts a core principle of SBA’s size regulations, that affiliation is based upon control or the power to control. 13 C.F.R. § 121.103(a)(1).
Conclusion
In the end, OHA remanded the case back to the Area Office for further review, requiring the Area Office to “obtain complete unredacted copies of all relevant documents.” Additionally, OHA warned that any information that Awardee declined to submit would justify the Area Office drawing an adverse inference against Awardee.
This case is a reminder that the Area Office does not always do a thorough review on size protests. It may be worth an appeal to have OHA take a second look at this review. In addition, OHA reminds contractors that investment funds may indeed control an entity, but it depends on the specifics of the governing documents. SBA must examine those, even if is complex.
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