Can a contractor file an SBA size protest alleging so-called “ostensible subcontractor” affiliation, without knowing the identity of the subcontractor in question? Yes. According to the SBA Office of Hearings and Appeals, a size protest should not be dismissed as “non-specific” just because it alleges ostensible with an unknown subcontractor–or a “mystery subcontractor,” if one is inclined to be a bit more dramatic.
Category Archives: SBA Size Protests
The Non-Manufacturer Rule: More Than Employees
Back in 1976, Boston (the band, not the city), released its self-titled debut album, featuring the hit “More Than a Feeling.” The tune is still a staple on classic rock stations everywhere. Before you curse me for getting the song stuck in your head, think of it as an easy way to remember a critical aspect of the “non-manufacturer” size rule. Simply put, it’s about more than employees.
When an agency issues a solicitation for supplies or products, it’s easy for small businesses to assume that non-manufacturer rule applies, meaning that a business qualifies as “small” so long as it has less than 500 employees. But, as the SBA’s Office of Hearings and Appeals has confirmed, a company can only submit a valid offer if your company meets all five “prongs” of the non-manufacturer rule. Having less than 500 employees only gets you part of the way there.
Asset Purchases and SBA Affiliation: Buyer Beware
If your small business is thinking about acquiring all or most of another company by way of an asset purchase agreement, you may wonder what effect it will have on your small business size status. Yes, your company will be bigger now that it used to be, and will have to take that into account going forward. But you may not be aware that an asset purchase agreement could create an affiliation problem and affect your size status looking backward, too.
SBA Affiliation Rules and Spin-Offs: Beware ‘Newly Organized Concern’ Affiliation
When a small business draws close to its size standard ceiling, it may consider forming a small business “spin-off” company as one way to keep itself in the small business set-aside game. Done right, a spin-off may be able to successfully compete for and win small business set-aside contracts.
But be careful: if the spin-off doesn’t pass muster with the SBA, the “newly organized concern” affiliation rule may cause the spin-off to be ineligible for small business set-aside contracts, as occurred in Size Appeal of eTouch Federal Systems, LLC, SBA No. SIZ-5280 (2011), a decision of the SBA’s Office of Hearings and Appeals.
Subcontracting Plans, Full and Open Competition, and Your Small Business
If your small business competes on an unrestricted (aka “full and open”) solicitation, you probably don’t submit a small business subcontracting plan. After all, small businesses are typically exempt from the subcontracting plan requirement, so why do the extra paperwork (and potentially foreclose subcontracting opportunities with large businesses?)
However, even on unrestricted procurements, you must be careful to forego a subcontracting plan only if you are actually small under the NAICS code assigned to the procurement. Otherwise, you could end up losing a contract, as one unfortunate contractor discovered in eTouch Federal Systems, LLC, B-404894.3 (Aug. 15, 2011), a GAO bid protest decision.
SBA OHA Dismisses SBA Size Protest Based on Contractor’s CCR Profile
To survive dismissal, a SBA size protest must be “specific,” that is, it must explain why the protested contractor is not small, and (in many cases), provide third-party evidence supporting the claim.
In Size Appeal of SoftConcept, Inc., SBA No. SIZ-5197 (2011), the SBA’s Office of Hearings and Appeals held that a SBA size protest was insufficiently specific when the protester alleged that the contract awardee did not list the NAICS code in question, NAICS code 541519, in its Central Contractor Registration profile.
Contradictory, Post Hoc Statements Don’t “Fix” Ostensible Subcontractor Rule Problem
When a small government contractor gets its hand caught in the “affiliation” cookie jar, the natural reaction is to scramble to fix the problem, even if it means contradicting the contractor’s own proposal. But don’t expect post hoc efforts at fixing a problem with the SBA affiliation rules to pan out. The SBA’s Office of Hearings and Appeals has held that where a contractor’s after-the-fact statements regarding affiliation contradict its proposal, the language of the proposal governs.