Category Archives: SBA OHA Decisions

Includes decisions of the SBA Office of Hearings and Appeals, including size appeal decisions, service-disabled veteran-owned small business appeal decisions, NAICS code appeal decisions, and women-owned small business appeal decisions.

SBA OHA: Subcontractor Costs Cannot Be Excluded From Receipts

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I’m a government contracts lawyer these days, but when I was much younger, I was a would-be prime contractor.  During my senior year of high school, I took a part-time job at the Grand Forks Herald, my hometown newspaper in North Dakota.  Flush with cash (at least compared to where I’d been before), I then attempted to subcontract my household chores—things like taking out the trash and feeding the dog—to my younger brother.

My parents put the kibosh on that one, explaining that as a member of the family, I needed to personally contribute some labor to it (as a dad now, I can see where they were coming from).  But imagine I had been successful, paying Pete, say, $20 weekly to toil on my behalf for the Koprince household.  Could I have told the IRS, come tax season, that the money I paid Pete didn’t count toward my income, because I passed it through to him?

“Of course not,” you’re probably saying, and you are right.  And, on a much larger scale, the same is true when it comes to a small government contractor’s subcontract costs.  As the SBA Office of Hearings and Appeals has held, all of a company’s receipts—with very limited exclusions—count toward its size under a revenue-based SBA size standard.  Just because you subcontract a portion of a government contract to another company does not mean that the money you pay your subcontractor doesn’t count toward your own receipts.

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8(a) Mentor-Protege Joint Ventures: SBA OHA Confirms Broad Exception from Affiliation

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I find Google Trends, which catalogs “hot searches” on any given day, rather fascinating.  Half of the hot searches seem related to one celebrity or another, but others reveal that many folks are spending their time Googling such things as “zombie apocalypse” and “national doughnut day.”  Does anyone remember what office workers actually did all day before the Internet?

If Google Trends had a government contracts subsection, “joint ventures” would be one of the trendiest of search terms.  Joint ventures are a hot topic these days, for small and large government contractors alike.  8(a) joint ventures are perhaps the trendiest of all, thanks to a special exception from the ordinary SBA affiliation rules.  In a recent SBA size appeal decision, SBA OHA confirmed that this exception from the affiliation rules is broad, even allowing an 8(a) mentor-protege joint venture–potentially–to violate the so-called “three in two” rule.

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SBA OHA Decides First EDWOSB Eligibility Appeal

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My daughter is learning to take her first steps, while holding onto the furniture.  Yesterday, she started pushing her stroller around the living room, essentially using it as a walker.  My wife and I looked at each other and said something like, “things are about to get really interesting around here.”

Things are also about to get interesting when it comes to the women-owned small business program, and its subset, the economically disadvantaged women-owned small business program.  Ever since the WOSB program formally came into being last year, I’ve been saying that it was only a matter of time before WOSBs and EDWOSBs started protesting one another’s eligibility for WOSB and EDWOSB set-aside procurements.

Now, the SBA Office of Hearings and Appeals has ruled on its first WOSB appeal.  What happened?  Well, for one, all WOSBs should make sure their facsimile machines are in good working order before submitting another bid.

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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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SDVOSB Eligibility: Lack of VetBiz Verification Irrelevant for Non-VA SDVOSB Set-Asides

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“So what?”

That, in essence, is what the SBA Office of Hearings and Appeals had to say in a recent SDVOSB appeal decision, in which the protester contended that the service-disabled veteran-owned small business in question was not listed in the VA’s VetBiz database.  The SBA OHA decision serves as an important reminder: CVE verification only matters for VA SDVOSB set-asides.  When another agency sets-aside a procurement for SDVOSBs, there is no requirement that the awardee be listed in the VetBiz database.

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

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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.

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SBA OHA: VA Mentor-Protege Program Does Not Protect Participants From Affiliation

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My parents taught me that it’s not polite to say, “I told you so.”  Mom and Dad are big proponents of being polite, and their lessons (by and large) stuck.  For instance, even in this day and age of abbreviated text messages and quick emails written on handheld devices, I always begin and end every business email with a salutation, and end with “regards,” or something along those lines.  Unnecessary?  Perhaps.  But I like to think I am going the extra mile toward being polite.

Today, however, politeness is going to have to take a little hiatus, because I can’t resist saying, “I told you so.”  For more than a year, I have been warning small government contractors that assistance received from a mentor firm under any federal mentor-protege program other than the SBA 8(a) mentor-protege program or DoD mentor-protege program is probably not shielded from the SBA’s affiliation analysis.

Now, the SBA Office of Hearings and Appeals has confirmed that participating in the VA’s mentor-protege program does not offer any protection from affiliation.

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