Category Archives: SBA Size Protests

Ostensible Subcontractor Rule: A Look At A Compliant Team

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The ostensible subcontractor rule can be challenging, because there is no magic formula for compliance.  When a protester raises an ostensible subcontractor rule allegation, the SBA evaluates all aspects of the prime/subcontractor relationship to see whether the ostensible subcontractor rule was violated.  If the SBA concludes that the small prime contractor is unduly reliant on it subcontractor, and/or the subcontractor will perform the primary and vital portions of the contract, it will find the prime affiliated with its subcontractor.

Although there is no single recipe for ostensible subcontractor rule success, it can be useful to examine SBA Office of Hearings and Appeals cases to see exactly what sort of prime/sub relationships SBA OHA deems problematic–and which pass muster.  Today’s post is in the latter category: a recent SBA OHA decision finding that the ostensible subcontractor rule had not been violated.

What did the prime and subcontractor in that case do right?

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SBA Size Protest Timeliness: Solicitation Doesn’t Extend Filing Deadline

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SBA size protests are only timely if received within five business days.  The SBA size protest timeliness rule can confuse potential protesters, because it is different than the 10-day rule applicable to most post-award GAO bid protests.

In a recent SBA Office of Hearings and Appeals decision, a would-be protester apparently got tripped up by the different filing periods, incorrectly interpreting a solicitation provision regarding GAO bid protests as establishing an extended SBA size protest filing deadline.  SBA OHA held that the protester’s misunderstanding did not entitle it to file a late SBA size protest.

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SBA OHA: Not The Place To “File” A SDVOSB Protest

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For small government contractors, SBA size and eligibility issues are of critical importance.  Recognizing this, the SBA provides an independent forum–the SBA Office of Hearings and Appeals–to review potential mistakes made by the SBA Area Offices, which decide SBA size protests.

Small government contractors must remember, however, that SBA OHA exists to evaluate the decisions made by SBA Area Offices, not to evaluate new allegations raised for the first time in the course of a SBA OHA appeal.  Case in point: SBA OHA’s recent decision in Size Appeal of In & Out Valet Co., SBA No. SIZ-5354 (2012), in which the protester apparently attempted to “file” a SDVOSB protest with SBA OHA during the course of its SBA size appeal.

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Small Business Violates Ostensible Subcontractor Rule, Wins Contract Anyway

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The SBA’s ostensible subcontractor rule has tripped up many small businesses over the years.  The rule states that a small prime contractor is affiliated with its subcontractor when the prime is unusually reliant upon the subcontractor and/or the subcontractor will perform the primary and vital portions of the contract work.

It is worth remembering, however, that the ostensible subcontractor rule only matters if affiliation between the prime contractor and subcontractor would cause a size standard problem.  If the sizes of the prime contractor and its ostensible subcontractor, added together, do not exceed the size standard, a violation of the ostensible subcontractor rule doesn’t matter.

That is what happened in one recent decision of the SBA Office of  Hearings and Appeals, in which a small prime contractor had an ostensible subcontractor–but was declared an eligible small business anyway.

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Joint Venture Between Small Business, Large Company Not “Small”

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Go on, go on.  Call me Captain Obvious for writing this post if you must, but the question actually comes up quite often: can a small business joint venture with a large business and qualify as “small” for purposes of a federal small business set-aside contract?

The answer, as confirmed in a recent SBA Office of Hearings and Appeals SBA size appeal decision, is “no,” unless the joint venturers are participants in the SBA’s 8(a) mentor-protege program.  Unfortunately for the joint venturers in Size Appeal of BY&R Contractors, LLC & West Coast Contractors of Nevada, Inc. JV, SBA No. SIZ-5349 (2012) not only were they not an 8(a) mentor and protege, but neither company was even an 8(a) participant.

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Small Business Wins SBA OHA Size Appeal–But Contract Not Reinstated

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A SBA size protest can be a matter of life and death for a small business, which may find it impossible to effectively compete if it is found “other than small.”  If a protested contractor loses a size protest, it is not necessarily the end of the road: it has the option of filing a size appeal with the SBA Office of Hearings and Appeals.

Winning a SBA OHA size appeal often results in “small” status once again, but a SBA OHA victory may have its limits.  As one contractor recently discovered, if the procuring agency terminates a contract award following an adverse SBA size protest decision, the agency is not required to reinstate the contract if the contractor subsequently prevails in its SBA OHA size appeal.

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8(a) Mentor-Protege Joint Venture Shielded From “Three-In-Two” Rule Affiliation

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According to the SBA Office of Hearings and Appeals, an 8(a) mentor-protege joint venture may be entitled to an affiliation “shield,” even if the joint venture violates the so-called “three-in-two” rule by receiving more than three contracts over a two-year period.

SBA OHA’s decision in Size Appeal of Magnum Opus Technologies, Inc., SBA No. SIZ-5372 (2012), should reassure 8(a) proteges and their mentors that if the SBA District Office has approved a contract award to an 8(a) mentor-protege joint venture, the joint venturers are very unlikely to be found affiliated as a result of that contract award.

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