When it comes to the SBA’s ostensible subcontractor rule, managing a contract, by itself, is not enough to avoid affiliation.
As demonstrated in a recent decision of the SBA Office of Hearings and Appeals, a small business and its subcontractor violate the ostensible subcontractor rule whenever the subcontractor will perform the primary and vital work required under the prime contract–even if the small business will perform the management function.
The SBA misevaluated a joint venture by basing its ineligibility decision on the joint venture’s revenues, rather than determining whether each joint venturer, individually, qualified as a small business, according to a recent decision of the SBA’s Office of Hearings and Appeals.
SBA OHA’s decision highlights what I like to call the “individual size treatment rule,” a special regulation requiring the SBA to deem a joint venture “small” under certain circumstances, even when the combined sizes of the joint venture’s members exceed the applicable size standard.
A procuring agency’s decision to take corrective action in response to a GAO bid protest did not extend the standard five-business day deadline to file a SBA size protest.
This was the decision of the SBA Office of Hearings and Appeals in a recent SBA size appeal case, in which SBA OHA held that a size protest was untimely when it was filed within five business days of the agency’s notification, after taking corrective action, that it would reaffirm its award to the protested contractor.
A history of close ties between companies does not mean that the companies are presently affiliated, according to a recent size appeal decision of the SBA Office of Hearings and Appeals.
In Size Appeal of A&H Contractors, Inc., SBA No. SIZ-5459 (2013), SBA OHA overturned a finding of affiliation because most of the ties relied upon by the SBA Area Office had been severed before the applicable date for determining size.
In a recent SBA Office of Hearings and Appeals size decision, a service-disabled veteran-owned small business’s operating agreement caused affiliation under the SBA’s affiliation rules, despite the fact that the majority owner was also labeled as the 51% manager.
SBA OHA’s decision in Size Appeal of Washington Patriot Construction, LLC, SBA No. SIZ-5447 (2013) shows the importance of carefully drafting a small business’s corporate operating agreements or bylaws to prevent affiliation with other companies controlled by the small business’s minority owners.
A contractor is not economically dependent upon another firm where it receives only a small proportion of its revenues from the other firm as of the self-certification date for a set-aside contract–even if the contractor previously received more than 70% of its annual revenues from the other firm.
This was the commonsense decision of the SBA Office of Hearings and Appeals in a recent size appeal case, in which SBA OHA held that a contractor’s prior economic dependence on another company does not necessarily mean that the companies are still affiliated under the SBA’s affiliation rules.
If a contractor ends up on the losing end of a SBA size protest, the contractor has the right to appeal to the SBA Office of Hearings and Appeals. The problem is that SBA OHA size appeals can take months. A contracting officer may be unwilling to wait, and simply award the contract to the next company in line.
Neither the FAR nor the SBA’s regulations require the contracting officer to suspend award or performance pending SBA OHA’s decision. However, as a recent case demonstrates, if the SBA OHA appeal has a reasonable likelihood of success, the U.S. Court of Federal Claims may issue an injunction prohibiting the procuring agency from awarding the contract pending the result of the SBA OHA size appeal.