SBA size protests are often dismissed when contractors misunderstand the size protest timeliness rules.
A recent SBA Office of Hearings and Appeals decision offers an important reminder that for negotiated procurements, the clock starts ticking on a potential SBA size protest upon notification of the prospective awardee–not when the contract is actually awarded.
Avoiding affiliation under the SBA’s ostensible subcontractor rule can be difficult, especially since the ostensible subcontractor rule itself, 13 C.F.R. § 121.103(h)(4), does not provide many examples of the factors that may cause ostensible subcontractor affiliation.
A recent decision of the SBA Office of Hearings and Appeals, Size Appeal of InGenesis, Inc., SBA No. SIZ-5436 (2013), demonstrates that even when a proposed subcontractor will play a major role in the procurement, ostensible subcontractor affiliation may be avoided if the parties carefully structure their relationship.
A director does not “control” a company under the SBA affiliation rules when that director can be removed at any time by the majority shareholder, according to a recent size appeal decision of the SBA Office of Hearings and Appeals.
In Size Appeal of Environmental Quality Management, Inc., SBA No. SIZ-5429 (2012), SBA OHA arrived at the commonsense conclusion that when a majority shareholder has unfettered discretion to fire a company’s directors, the majority shareholder–not the directors–control the company for purposes of the SBA affiliation rules.
No matter a company’s actual size, the company will be deemed an ineligible large business if it fails to timely respond to a SBA size protest.
Just ask American Blanching Company, which was recently found ineligible for a small business set-aside contract because it did not respond to a SBA size protest within the short size protest response window.
You would think a company as large as Northrop Grumman would know how to avoid ostensible subcontractor affiliation with a small prime, wouldn’t you?
You’d be wrong. In a recent SBA Office of Hearings and Appeals decision, a Northrop Grumman entity entered into a teaming arrangement with a small prime, in which all three key employees identified in the proposal were employed by the large subcontractor. The result: ostensible subcontractor affiliation.
Affiliation based on family relationships is perhaps one of the least understood SBA affiliation rules, and continues to trip up many small government contractors. Case in point: a recent SBA Office of Hearings and Appeals decision finding a small business affiliated with a company controlled by the mother of the small business’s owner, based on the family relationship and subcontracts between the companies.
The SBA Office of Hearings and Appeals will reject a contractor’s attempt to submit new evidence in a SBA size appeal unless the contractor shows “good cause” to admit the new evidence.
And, as demonstrated by a recent SBA OHA size appeal decision, when the evidence was publicly available at the time the size protest was filed, but was not submitted with the size protest, it will be very difficult to convince SBA OHA to review the new evidence.