When many people think of small business federal contractors, they probably picture a local business and not a subsidiary of a foreign entity. But this image isn’t always accurate—small business federal contractors don’t often neatly fit in the mold of local, mom-and-pop shops.

The SBA’s small business regulations confirm this to be true. Indeed, to qualify as a small business for most federal contracting purposes, a company can be a subsidiary of a foreign firm—so long as certain criteria are met. This point was recently affirmed by the SBA Office of Hearings and Appeals, when it found that a domestic affiliate of an international conglomerate qualified as a small business.

In Size Appeal of Global Summit, Inc., SBA No. SIZ-5804 (2017), OHA considered an appeal of a size determination that found LORENZ International to be an eligible small business under an FDA procurement for software maintenance and support services. Among the issues considered was LORENZ’s eligibility as a supposedly-foreign company.

LORENZ is the American subsidiary of LORENZ Archiv, a German company that also owns subsidiaries in Germany, Canada, India, and the United Kingdom. According to the protester (Global Summit, Inc.), because most of the business conducted by this family of companies occurred outside of the United States, LORENZ was not an eligible small business under SBA’s regulations.

The regulations, in pertinent part, define a business concern eligible for assistance from SBA as a small business (including participation in small business contracting programs) as “a business entity organized for profit, with a place of business located in the United States, and which operates primarily within the United States or which makes a significant contribution to the U.S. economy through payment of taxes or use of American products, materials or labor.” 13 C.F.R. § 121.105(a)(1).

Citing this definition, OHA wrote that it has “long recognized” that the SBA’s regulations “[do] not bar foreign-owned small businesses from participating in small business set-asides, provided that the small business is based in the U.S. and contributes to the U.S. economy.” In this case, LORENZ provided evidence showing that it had a location in the United States “and has made contributions to the U.S. economy by paying U.S. taxes and employing American workers.” Thus, OHA held, LORENZ qualified as a “business concern eligible for assistance from SBA as a small business.”

What about LORENZ’s parent company and sister companies? The SBA Area Office considered them to be affiliates, but held that the affiliations did not cause LORENZ to exceed the applicable size standard. Global Summit did not present any evidence to demonstrate that the Area Office’s math was wrong.

OHA denied Global Summit’s appeal and affirmed the SBA’s size determination.

At their most basic, SBA’s regulations are designed to foster small business participation in federal contracting programs. Global Summit shows that this participation is encouraged even among small American affiliates of international firms, so long as these businesses have a location in the United States and contribute to the U.S. economy.