Category Archives: SBA Size Protests

SBA OHA: SBA Cannot Belatedly Oppose Size Appeal

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No matter your political persuasion, it’s hard to forget the image of Senator John Kerry windsurfing in the famous 2004 Bush-Cheney ad.  The ad attacked Kerry for supposedly changing his mind too often–“flip-flopping,” in political parlance.

It turns out that the dangers of flip-flopping are not limited to politics.  In a recent SBA size appeal decision of the SBA Office of Hearings and Appeals, SBA OHA held that if the SBA’s Office of Government Contracting, or OGC elects not to formally oppose a SBA size appeal, it cannot later change its mind and ask SBA OHA to revisit the size appeal decision.  Because the SBA OGC does not formally oppose most SBA size appeals, SBA OHA’s decision forces the SBA OGC to make up its mind quickly about whether it will play a role in the SBA size appeal process.

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Subcontractors And Past Performance: What Are The Risks?

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Inexperienced small government contractors sometimes rely primarily (or completely) on larger subcontractors to boost their past performance scores.  Although this practice sometimes results in better past performance scores, there are two risks small government contractors should be aware of when it comes to relying on a subcontractor’s past performance: poor evaluations and ostensible subcontractor affiliation.

A recent GAO bid protest decision, coupled with a decision of the SBA Office of Hearings and Appeals, demonstrates how each risk may affect a small government contractor.

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SBA OHA: On SBA Size Rules, We’re The Boss

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“You’re not the boss of me now” is the chorus of “Boss of Me,” a catchy tune by They Might Be Giants.  But when it comes to the SBA size and affiliation rules, there is a boss: the SBA Office of Hearings and Appeals.

Under the SBA size regulations, SBA OHA has the final authority to determine whether a company is small or “other than small” for purposes of a particular procurement.  And,as one recent SBA OHA decision demonstrates, if a lower SBA office neglects to follow SBA OHA’s orders, SBA OHA will make sure that the lower office remembers who is the boss.

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Ostensible Subcontractor Rule: More Than Subcontract Value

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I travel with some frequency, but will readily admit that I hate flying (I trace it largely to an unpleasant incident several years ago involving a rapid cabin depressurization and emergency landing).  I’ve been known to pay a few dollars more to take a direct flight rather than a less expensive option involving a connection.  For me, while price is an important factor, other factors, like convenience–and fewer takeoffs and landings–matter, too.

A recent size appeal decision issued by the SBA Office of Hearings and Appeals demonstrates that, like my flying arrangements, price is not the only factor when it comes to determining whether a prime/subcontractor team has violated the ostensible subcontractor rule.  As this size appeal decision shows, in some cases, there may be no ostensible subcontractor affiliation even if the subcontractor will perform the bulk of the overall contract value.

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The SBA Affiliation Rules, Trustees, and Negative Control: A Cautionary Tale

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Small government contractors ask me, with some frequency, whether placing a company’s stock in a trust will protect the company from affiliation under the SBA affiliation rules.

I typically answer this question with one of my own: “who will control the trust?”  I tell them that if the same people who currently control the company will continue to control it once the stock is placed in trust, the mere act of placing the company’s stock in the trust is unlikely to shield the company from affiliation with other companies controlled by those same people.

A recent size appeal decision of the SBA Office of Hearings and Appeals confirms that the ordinary SBA affiliation rules typically still apply when a company’s ownership is placed in trust.  In fact, in this size appeal decision, the company in question lost out on a contract because one of the trustees had so-called “negative control” over the company–essentially, the ability to veto the decisions of the other trustee.

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SBA Size Protests and the Brooks Act

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The so-called “Exception Paradox” is one of those un-winnable logic games.  It goes something like this, “if every rule has an exception, then doesn’t the rule that every rule has an exception have an exception, too?”

These are the sorts of brain teasers that sometimes kept me busy in grade school (what can I say, I wasn’t a very cool fourth grader).  Fortunately, when it comes to SBA size protests, the SBA Office of Hearings and Appeals has made it easy to understand an exception to one common rule.  In a recent decision, SBA OHA held that the ordinary rule governing when an offeror is deemed “small” for a particular federal procurement does not apply to a SBA size protest filed in connection with an architect-engineer competition conducted under the federal Brooks Act and FAR 36.6.

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

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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.

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