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 Affiliation Rules: SBA OHA Says Control is the Key

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The SBA affiliation regulation, 13 C.F.R. § 121.103, states that all affiliation is premised on the notion of control.  In other words, two companies are affiliated when the same person or entity controls or has the power to control both.

The size appeal decision of the SBA’s Office of Hearings and Appeals in Size Appeal of Manroy, USA, LLC, SBA No. SIZ-5244 (2011), explains that when there is no overlapping control, there is no affiliation, even if one or more of the indicia of affiliation described in the regulation might arguably be present.

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SBA OHA: Capital Contributions Not a Factor in Determining Affiliation

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A small government contractor needs to keep a close eye on its relationships with large businesses, as almost any type of interaction between the companies, such as contracts, bonding assistance, and overlaps in employees or officers may be considered evidence of SBA affiliation in a size appeal.  But, at least in one opinion issued by the SBA’s Office of Hearings and Appeals, the capital contributions of a large business member were irrelevant to an affiliation analysis.

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SBA Affiliation and Joint Ventures: SBA OHA Explains the Rules

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Is a small business affiliated with its joint venture partner?  Forgive the stereotypical lawyerly response, but the answer is “yes and no.”  A small business is affiliated with its joint venture partner on a procurement-specific basis, but typically is not affiliated with its joint venture partner on an ongoing basis.  The SBA’s Office of Hearings and Appeals succinctly explained the basic rules relating to joint ventures and affiliation in Size Appeal of Innovative Resources, SBA No. SIZ-5238 (2011).

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Quorum Provision Defeats SDVOSB Status

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If someone asked me to play a word association game with the phrase “quorum provision,” one of my first responses might be “boring.”  After all, who really cares about some arcane paragraph tucked away in a company’s governing documents, describing how many people must attend company meetings?

Well, SDVOSBs should care.  If your small business is pursuing service-disabled veteran-owned small business set-aside opportunities, you better make sure your governing documents are airtight.  As demonstrated in one recent SBA Office of Hearings and Appeals decision, even something as mundane and boring as a quorum provision can defeat SDVOSB status, if the provision does not allow service-disabled veterans to unconditionally control the company.

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Veteran Controls Both 8(a) Company and SDVOSB—By Working 95 Hours Per Week

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In the legal profession, some firms are known to encourage a workaholic culture.  I have heard tales of associates spending multiple nights sleeping (a couple hours) on office couches, being called away from the Thanksgiving dinner table to work, or awoken by the proverbial “3 a.m. phone call” by a partner demanding immediate attendance at the office.  The funny thing is that most of these stories come from the associates themselves—bragging about how much they work!

I work hard for my clients, but with a wonderful wife and daughter in my life, I am of the mind that some of the most important things are found outside the office.  However, one small business owner, who was the subject of a recent SBA Office of Hearings and Appeals decision, might feel right at home in one of those workaholic law firms.  This business owner was able to convince SBA OHA that he worked full time both for his 8(a) company and his separate service-disabled veteran-owned small business—by putting in a whopping 95 hours per week.
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SBA Affiliation Rules and Economic Dependence: SBA OHA Backs off “70% Rule” (A Little)

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When I was young, my parents gave me my first weekly allowance.  Grand total: twenty-five cents.  It doesn’t sound like much now (and it wasn’t then, either—I’m not that old!) but it was still 100% of my income.  I was economically dependent on my parents.

When it comes to the SBA affiliation rules, a small business need not receive 100% of its revenues from another company in order to be considered an affiliate by virtue of economic dependence.  For several years, the SBA followed a hard-and-fast rule: if a small business earned 70% or more of its revenues from another company, the two businesses were automatically affiliated.

But in Size Appeal of Argus & Black, Inc., SBA No. SIZ-5204 (2011), the SBA’s Office of Hearings and Appeals backed off the bright-line 70% rule, at least a little.  In a commonsense decision, SBA OHA held that in limited circumstances, applying the 70% rule would be unfair.

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Applying for 8(a) Certification? Address Potential SBA Affiliation Problems First

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Affiliation under the SBA’s rules typically becomes a problem when a small business submits an offer on a set-aside procurement, and a competitor files an SBA size protest, challenging eligibility.  But the SBA will examine affiliation issues in other contexts, including when a small business submits an application for the SBA’s 8(a) Business Development Program.

As one unfortunate contractor recently learned, if you do not solve any affiliation problems before you submit your 8(a) application, the SBA may not only reject your 8(a) Program application, but deem you a large business, ineligible to obtain small business set-aside contracts in your primary NAICS code.

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