One of the rules we get asked about the most as government contracts attorneys is what’s known as the nonmanufacturer rule, 13 C.F.R. § 121.406 (So much so that we felt it wise to go over the rule in one of our “Back to Basics” posts to help clear some things up). It’s pretty understandable why: It has numerous provisions, exceptions, and requirements that can make it pretty difficult to follow. It also shows up in two different regulations: 13 C.F.R. § 121.406 as mentioned above, as well as FAR 19.505. Unfortunately, this often leads to contractors getting tripped up by the rule, either not realizing it applies where it does or, as we’ll explore here, thinking it applies where it doesn’t. Recently, SBA addressed a size protest that asserted the awardee didn’t meet the requirements of the nonmanufacturer rule, and noted to the unfortunate protestor that the rule didn’t apply for the procurement anyways.
Continue readingCategory Archives: SBA Size Protests
Another One Bites the Dust: Incomplete Joint Venture Agreement Fails Once Again
Once again, an initial awardee has had its award revoked because of a noncompliant joint venture agreement addendum. We see it happen regularly at SmallGovCon. And the decision in Colt-Sunbelt Rentals JV, LLC is yet another data point highlighting that SBA requires strict adherence to the joint venture agreement requirements in 13 C.F.R. § 125.8. Here, an incomplete joint venture agreement and its addendum resulted in a finding of affiliation which resulted in Colt-Sunbelt losing its small business status for the contract at issue.
Continue readingBeyond Tax Returns: Federal District Court Says Contractors Must Include Information Outside Tax Returns in Calculating Size
When it comes to calculating a company’s receipts for size purposes, the procedure for is (or at least was) pretty simple: Look at the company’s tax returns. Indeed, it has long been SBA’s position that they can only consider tax returns, as noted in Nordstrom Contracting & Consulting Corp., SBA No. SIZ-5891 (Mar. 7, 2018) (“[T]here is no authority for an area office to consider any evidence apart from tax returns…when calculating a firm’s average annual receipts.”) among other cases. In other words, if something was not mentioned in a tax return, it couldn’t be considered by SBA. The only exception was if the tax returns were not filed, in which case SBA will review financial statements or similar information in lieu. 13 CFR § 121.104. Therefore, other than that exception, a contractor only needs to rely on the information in its tax return when making its size representation.
But the U.S. District Court of the District of Columbia (DDC) thinks otherwise. On May 18, 2023, it entered a decision on opposing motions for summary judgment in a size protest that had become a False Claims Act case. In this decision, it concluded the opposite: Contractors must in some cases consider information outside their tax returns. Let’s take a deeper dive.
Continue readingAdverse Inference, the Wrong Way to Lose a Size Protest
An adverse inference is a penalty that the Small Business Administration (SBA) can enforce as part of a size protest. During a size protest determination, SBA will ask the protested company lots of questions. Sometimes, a protester will not answer those questions, either on purpose or due to oversight. Depending on the circumstances, SBA can apply an adverse inference if a protested company fails to respond to questions. If SBA applies an adverse inference, that means that the SBA Area Office will determine that the information that was not provided would prove that the company is not a small business. A recent decision reminds us about this penalty. If you are in a similar situation, reach out to a firm like ours to help think of a way to respond to SBA.
Continue readingOHA: Respond to SBA Size Determination Questions, or Risk an Adverse Inference
SBA’s size protest rules contain a stick to force companies to respond to SBA as part of size determination. That stick is called the adverse inference rule. The adverse inference rule says that, if SBA requests specific information and a protested company refuses to provide it, SBA may assume that the missing information would show that the company is not a small business. In a recent decision, SBA’s Office of Hearings and Appeals (OHA) upheld the use of the adverse inference.
Continue readingOHA: JV Violates Two-Year Rule, Loses Award
The joint venture two-year rule always generates a lot of questions. But it’s an important one for small business joint venture members to understand and comply with. A recent decision from the Small Business Administration Office of Hearings and Appeals (OHA) shows why. In the case, a joint venture lost an award because it violated the two-year rule.
Continue readingKoprince McCall Pottroff’s GovCon Handbook, SBA Small Business Size and Affiliation Rules, is Now Available!
We are pleased to announce that the Second Edition of the GovCon Handbook, SBA Small Business Size and Affiliation Rules, is now available!
Is your small business really small? When it comes to federal government contracts, the answer can be a lot more complex than it sounds.
In this GovCon Handbook, government contracts attorneys provide an in-depth look at the size and affiliation regulations for federal contractors. Written in plain English and packed with easy to understand examples, this GovCon Handbook demystifies the SBA’s rules regarding small business status for government contracts.
This updated handbook was co-authored by me and Nicole Pottroff as well as firm founder Steven Koprince. It is now available through Amazon at this link.