Remember the famous “Soup Nazi” episode of Seinfeld? The mustachioed title character, brilliantly played by Larry Thomas, will forever be known for barking, “no soup for you!” to anyone who dared break his many rules. In the SBA size protest arena, as in the Soup Nazia’s restaurant, technical rules abound. For instance, if your proposal was technically unacceptable, “no SBA size protest for you!”
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.
The Ostensible Subcontractor Rule and Key Personnel
According to Executive Order 13,495, follow-on contractors must offer a “right of first refusal” to certain incumbent personnel. Based on the Executive Order, the SBA Office of Hearings and Appeals has previously held that hiring non-management personnel from a subcontractor is no longer evidence of unusual reliance under the ostensible subcontractor rule.
I emphasize “non-management” for a reason: the Executive Order does not apply to non-management personnel. According to SBA OHA, hiring a subcontractor’s management team—particularly when the subcontractor is an ineligible incumbent—continues to be strong evidence of a violation of the ostensible subcontractor rule.
Debriefings and SBA Size Protests: Sorry, No Extension
Today’s public service announcement comes to us courtesy of the SBA Office of Hearings and Appeals. Here it is: asking for and receiving a debriefing does not extend the deadline to file a SBA size protest. Asking for a debriefing may extend the time frame for filing a GAO bid protest but does not extend the five-business-day period for filing a SBA size protest.
Case in point: the decision of SBA OHA in Size Appeal of Garco Construction, Inc., SBA No. SIZ-5308 (2011). In that case, a small business learned of award to a competitor on September 26, but waited until after it received its debriefing on October 21 to file its SBA size protest. The small business argued that its size protest should be considered timely, because it has no knowledge of the grounds of protest until after the debriefing.
Nice try. SBA OHA made short work of this argument, stating “that a protester did not learn of the grounds for its protest until the debriefing is no basis for extending the deadline for filing a protest.” SBA OHA held that the SBA Area Office had properly dismissed the size protest as untimely.
And that concludes today’s public service announcement for small government contractors. As they say on NBC, “The More You Know.”
SBA Affiliation Rules and Family Matters: OHA OK’s Minor Business Dealings
When it comes to the SBA affiliation rules, it’s a good idea to keep Steve Urkel in mind. Why remember this lovable suspender-wearing nerd? Well, because in the SBA affiliation world, “family matters.”
Okay, bad joke. But hold the rotten tomatoes, because I have a point here. In my experience, one of the most common ways small businesses find themselves with an SBA affiliation problem is through family relationships. Many small government contractors are surprised to learn that the SBA presumes that firms controlled by close family members are affiliated due to a supposed “identity of interest” between the family members. For example, if you control Company A and your spouse controls Company B, the two firms are presumed affiliated for SBA size purposes, and you must rebut the presumption (not an easy task) to avoid affiliation.
In some prior size appeal cases, the SBA Office of Hearings and Appeals held that two firms controlled by family members could not rebut the presumption if the companies had any business dealings whatsoever. However, in a commonsense decision—albeit one creating a bit of a gray area—SBA OHA recently held that two companies controlled by family members are not necessarily affiliated just because they have minor business relations.
SBA Affiliation Rules, the Passive Investor, and Weekend at Bernie’s
Remember Weekend at Bernie’s, the 1980s comedy about a couple of young corporate employees who pretend their murdered boss is still alive? (Random note: did you know that they made a Weekend at Bernie’s 2 in 1993? Neither did I, until I was writing this post).
What does Bernie have to do with the SBA affiliation rules? In the movie, Bernie appears to control his company—even though he is not exactly in a position to make executive decisions. Like Bernie, in the SBA’s eyes, a person can be deemed to control a company, even if he or she does not actually exercise any power. The decision of the SBA Office of Hearings and Appeals in Size Appeal of BR Construction, LLC, SBA No. SIZ-5303 (2011) shows that SBA affiliation problems can arise when bylaws and operating agreements contain certain provisions that the SBA will find give legal control to a minority owner, even if that minority owner, in practice, acts as a passive investor.
SBA OHA OK’s “Mystery Subcontractor” SBA Size Protests
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.
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.