If your small business is thinking about acquiring all or most of another company by way of an asset purchase agreement, you may wonder what effect it will have on your small business size status. Yes, your company will be bigger now that it used to be, and will have to take that into account going forward. But you may not be aware that an asset purchase agreement could create an affiliation problem and affect your size status looking backward, too.
Author Archives: Steven Koprince
SBA Affiliation Rules and Spin-Offs: Beware ‘Newly Organized Concern’ Affiliation
When a small business draws close to its size standard ceiling, it may consider forming a small business “spin-off” company as one way to keep itself in the small business set-aside game. Done right, a spin-off may be able to successfully compete for and win small business set-aside contracts.
But be careful: if the spin-off doesn’t pass muster with the SBA, the “newly organized concern” affiliation rule may cause the spin-off to be ineligible for small business set-aside contracts, as occurred in Size Appeal of eTouch Federal Systems, LLC, SBA No. SIZ-5280 (2011), a decision of the SBA’s Office of Hearings and Appeals.
Subcontracting Plans, Full and Open Competition, and Your Small Business
If your small business competes on an unrestricted (aka “full and open”) solicitation, you probably don’t submit a small business subcontracting plan. After all, small businesses are typically exempt from the subcontracting plan requirement, so why do the extra paperwork (and potentially foreclose subcontracting opportunities with large businesses?)
However, even on unrestricted procurements, you must be careful to forego a subcontracting plan only if you are actually small under the NAICS code assigned to the procurement. Otherwise, you could end up losing a contract, as one unfortunate contractor discovered in eTouch Federal Systems, LLC, B-404894.3 (Aug. 15, 2011), a GAO bid protest decision.
Lack of Detail on Subs’ Pricing Leads to Lost Contract
Small government contractors competing on set-asides are in a unique position. Unlike in the commercial world (and on unrestricted government contracts), small primes in the set-aside arena routinely subcontract to larger and more powerful companies. Sometimes these large subcontractors aren’t used to being in a secondary role, and can make life difficult for their smaller primes.
Case in point: subcontractors sometimes balk at providing small government prime contractors with their direct labor, fringe benefit, General and Administrative, or other pricing information, preferring to simply offer a fixed-price lump sum. Even when the government is uninterested in such details, having a full breakdown can help ensure compliance with the FAR’s subcontracting limits. But as one prime contractor found out, when the government wants a pricing breakdown, failing to include a subcontractor’s information can be fatal.
One small contractor recently learned this lesson the hard way.
JVs Must be Listed in VetBiz for VA SDVOSB Set-Asides
Under the Department of Veterans Affairs’ Veterans First contracting program, an eligible service-disabled veteran-owned small business must be listed as a verified SDVOSB in the VA’s Vendor Information Pages to qualify for a SDVOSB award. But does this requirement apply to joint ventures?
Yes, according to the VA—and the GAO has upheld the VA’s interpretation. In A1 Procurement JVG, B-404618.3 (July 26, 2011), A1 Procurement LLC and Green Carpet Landscaping & Maintenance, Inc. created a joint venture, named A1 Procurement JVG. A1 Procurement LLC was a SDVOSB firm verified in the VetBiz system. Green Carpet was not a SDVOSB.
The VA rejected the joint venture’s proposal because the joint venture was not listed in the VetBiz database. The joint venture filed a bid protest with the GAO, arguing that the VA should have accepted its offer because the managing partner, A1 Procurement LLC, was listed in the database, and that a joint venture should not be required to be separately listed if the managing venture is listed.
SBA OHA Dismisses SBA Size Protest Based on Contractor’s CCR Profile
To survive dismissal, a SBA size protest must be “specific,” that is, it must explain why the protested contractor is not small, and (in many cases), provide third-party evidence supporting the claim.
In Size Appeal of SoftConcept, Inc., SBA No. SIZ-5197 (2011), the SBA’s Office of Hearings and Appeals held that a SBA size protest was insufficiently specific when the protester alleged that the contract awardee did not list the NAICS code in question, NAICS code 541519, in its Central Contractor Registration profile.
GAO Bid Protest Timeliness: Read That Government Email Right Away!
GAO bid protest timeliness can be one of the most frustrating aspects of GAO bid protests. Typically, unless the contractor receives a debriefing, any post-award protest must be filed within ten days after the contractor knew or “should have” known of the basis of protest.
The “should have known” portion of the GAO bid protest timeliness rule has tripped up contractors for years, and continues to do so. In Golight, Inc., B-401866 (Sept. 10, 2009), the GAO held that a disappointed offeror “should have” known of its basis for protest on the day the contractor received an email—even though the recipient didn’t open the email until several days later.