Category Archives: SBA Size Protests

Ostensible Subcontractor Rule: Hiring Incumbent Employees “En Masse” Causes Affiliation

Posted on by

In the syndicated television show Crossing Over, psychic John Edward (not to be confused with former presidential candidate and tabloid mainstay John Edwards), claimed to carry on conversations with deceased relatives of audience members.  Perhaps not surprisingly, some critics have been skeptical of Mr. Edward’s supposed paranormal abilities, accusing him, according to Wikipedia, of using “prior knowledge or a wide array of quick and sometimes general guesses to create the impression of psychic ability.”  In other words, according to the critics, Crossing Over was one big sham.

Crossing Over–and the significant questions surrounding its legitimacy–is an apt metaphor for a question I commonly get from small companies planning a subcontracting relationship with an ineligible incumbent.  “Can we just hire all the prime’s employees?” they ask.  While this type of “crossing over” of employees, from ineligible incumbent subcontractor to eligible small business prime contractor, is not always impermissible, hiring too many of an ineligible incumbent’s employees–particularly managerial employees–can be seen as a sham of sorts by the SBA, as seen in one recent decision of the SBA Office of Hearings and Appeals.

Continue reading →

Teaming Agreements and the Ostensible Subcontractor Rule: SBA OHA Decision Provides Some Guidance

Posted on by

Teaming agreements for small business set-aside contracts can be tricky.  On the one hand, unlike 8(a) and SDVOSB joint venture agreements, there are no mandatory provisions.  On the other, if a competitor files an SBA size protest challenging the award, the teaming agreement may be “Exhibit A” in the SBA’s evaluation of whether the team violated the ostensible subcontractor rule.  In other words, mess up the teaming agreement, and you could have a big problem on your hands.

The SBA has never published a road map to a perfect teaming agreement, but a recent SBA OHA decision–which found no ostensible subcontractor rule violation–highlights a few provisions that prime contractors and their subcontractors would be wise to consider including.

Continue reading →

SBA OHA: Inactive Employees Count for SBA Size Purposes

Posted on by

Back in my undergraduate days at Duke, I attended almost all of the home basketball games.  Occasionally, sometime in the second half, with the Blue Devils up 20 points or more, an opposing player would execute an impressive dunk, and proceed to do a little celebration.  I, along with my fellow Cameron Crazies, would immediately begin chanting, “scoreboard, scoreboard,” while pointing at the device in question.  Our message was, “that’s nice, but it just doesn’t matter.”  (Actually, we Crazies sometimes chanted “just doesn’t matter,” too).

“That’s nice, but it just doesn’t matter” is what the SBA’s Office of Hearings and Appeals had to say in a recent size appeal decision involving the question of whether employees who are sick, on vacation, or even comatose count toward a company’s employee-based SBA size standard.  SBA OHA’s answer: if they’re on the payroll, they count.  Period.

Continue reading →

Three Website Mistakes Small Government Contractors Should Avoid

Posted on by

The late, great Whitney Houston famously mused, “How will I know?”  Whitney was singing about the uncertainty of love, but small government contractors often ask the same question in a different sense—that is, “How will I know if my competitor is too large for a particular size standard?”

There are plenty of places to research a competitor’s size, but one of the most fruitful may be the competitor’s own website.  Of course, small government contractors should be aware that their competitors know how to use Google, too.  Often, SBA size protests arise from information a government contractor should have thought twice about posting on its website.

Here are three common website mistakes small government contractors make, sometimes leading to SBA size protests.

Continue reading →

Three Common SBA Size Protest Mistakes

Posted on by

Nobody’s perfect, the old saying goes.  While I might beg to differ in the case of my daughter (who, in my unbiased opinion, is perfectly adorable), the saying definitely holds true when it comes to SBA size protests.

I read every published SBA Office of Hearings and Appeals decision (I’m sure you are jealous), and I see many of the same mistakes repeated over and over,  Often, these mistakes cost the protester its chance at a successful size protest.

So, without further ado, here are my top three most common SBA size protest mistakes.

Continue reading →

SBA Affiliation Rules and Control: The Minority Owner Trap

Posted on by

Does a person who owns a minority share of a company “control” the company under the SBA affiliation rules?  Yes, if the company has no majority owner and the minority share owned by the individual in question is the largest, or is similar in size to, the largest other minority shares.

Get all that?  An example may help.  The decision of the SBA Office of Hearings and Appeals in Size Appeal of Advent Environmental, Inc., SBA No. SIZ-5325 (2012), demonstrates how this rule can be a trap for the unwary.

Continue reading →

SBA Size Protests and the Ostensible Subcontractor Rule: The Task Order Loophole

Posted on by

The tax code is famous (or infamous) for perceived loopholes, but the IRS isn’t the only regulatory agency with a loophole in its regulations.   The SBA’s affiliation rules contain—or at least used to contain (more on that later)—a gaping loophole when it comes to Multiple Award Task Order Contracts, or MATOCs, and the ostensible subcontractor rule.

Continue reading →