Small Business Wins SBA OHA Size Appeal–But Contract Not Reinstated

Posted on July 24, 2012 by Steven Koprince

A SBA size protest can be a matter of life and death for a small business, which may find it impossible to effectively compete if it is found “other than small.” If a protested contractor loses a size protest, it is not necessarily the end of the road: it has the option of filing a size appeal with the SBA Office of Hearings and Appeals.

Winning a SBA OHA size appeal often results in “small” status once again, but a SBA OHA victory may have its limits. As one contractor recently discovered, if the procuring agency terminates a contract award following an adverse SBA size protest decision, the agency is not required to reinstate the contract if the contractor subsequently prevails in its SBA OHA size appeal.

From 1,500 Employees To $25.5 Million: Successful NAICS Code Appeal Shakes Up Competition

Posted on July 23, 2012 by Steven Koprince

A successful NAICS code appeal can be a powerful competitive game changer. Case in point: the recent decision of the SBA Office of Hearings and Appeals in NAICS Appeal of Delphi Research, Inc., SBA No. NAICS-5377 (2012).

In the Delphi Research NAICS code appeal, a contractor questioned the procuring agency’s decision to assign a NAICS code carrying a 1,500-employee size standard. SBA OHA agreed with the appellant, rewriting the solicitation to exclude companies with more than $25.5 million in average annual receipts–in essence, a much lower size standard.

Agency Gets SBA Size Standard Wrong; SBA OHA Dismisses Late NAICS Code Appeal

Posted on July 20, 2012 by Steven Koprince

Know your SBA size standards. That’s the lesson to be drawn from the decision of the SBA Office of Hearings and Appeals in NAICS Appeal of Ash Stevens, Inc., SBA No. NAICS-5368 (July 12, 2012).

In the Ash Stevens NAICS code appeal, the solicitation erroneously stated that the SBA size standard associated with a particular NAICS code was much larger than is actually the case. By the time the agency corrected its mistake, SBA OHA held that it was too late for a contractor to challenge the NAICS code.

SBA Proposes Eliminating Megawatt Hours Size Standard

Posted on July 19, 2012 by Steven Koprince

Most government contractors determine their small business size based on average annual receipts or employee counts. But for companies working in six NAICS codes in NAICS Sector 22, the firm is considered small if: (1) the firm, including its affiliates, is primarily engaged in the generation, transmission, and/or distribution of electric energy for sale; and (2) its total electric output for the preceding fiscal year did not exceed 4 million megawatt hours. Today, the SBA proposed eliminating this megawatt hours size standard and replacing it with a 500 employee size standard.

In a proposed rule, the SBA stated that significant industry changes have occurred since the megawatt hour standard was adopted in 1974, that the “primarily engaged” requirement could result in some businesses being unfairly deemed large, and that an employee-based size standard is more in keeping with overall SBA size standard policy. Accordingly, the SBA proposed changing the size standards for all six affected NAICS codes–221111, 221112, 221113, 221199, 221121, and 221122–from 4 million megawatt hours to 500 employees.

In today’s proposed rule, the SBA also proposed three significant size standard increases. Under the SBA’s proposal, NAICS code 221310 (Water Supply and Irrigation Systems) would jump from $7 million to $25.5 million, NAICS code 221320 (Sewage Treatment Facilities) would increase from $7 million to $19 million and NAICS code 221330 (Steam and Air-Conditioning Supply) would increase from $12.5 million to $14 million.

Today’s proposed changes are part of the SBA’s ongoing review and overhaul of its size standards. The SBA is accepting comments on today’s rule by September 17.

Contractor Corrects “Weakness”, Loses Contact As A Result

Posted on July 19, 2012 by Steven Koprince

When, in discussions, a procuring agency tells a contractor that an aspect of the contractor’s proposal is a weakness, the natural response is to correct the problem. In one recent GAO bid protest decision, however, correcting a weakness may have cost a contractor a $30 million award.

In EMR, Inc., B-406625 (July 17, 2012), the procuring agency informed the contractor that certain labor rates appeared low in comparison to other offerors’ rates, and labeled the low rates a weakness. In response, the contractor raised the rates in question, thereby increasing its overall price–then narrowly lost out on a low-price, technically acceptable contract.

The GAO’s verdict? The agency did nothing wrong.

SBA: Most Construction Size Standards Should Remain As-Is

Posted on July 18, 2012 by Steven Koprince

The SBA has released its proposed size standard changes under NAICS Sector 23, which covers the construction industry. The bottom line: if you were hoping for a SBA size standard increase, chances are, you’ll have to hope that the SBA changes its mind between now and the issuance of the final rule.

The SBA proposed only two increases in Sector 23: NAICS code 237210 (Land Subdivision) would jump from a $7 million size standard to a $25.5 million size standard, and NAICS code 237990 (Dredging and Surface Cleanup Activities) would increase from $20 million to $30 million. The remaining NAICS codes under Sector 23 would retain their current size standards.

The SBA is accepting comments on the proposed Sector 23 size standard rule through September 17.

8(a) Sole Source Contracts: Little Explanation Necessary

Posted on July 18, 2012 by Steven Koprince

Agencies have broad discretion when it comes to issuing 8(a) sole source contract awards. Although a procuring agency must provide the SBA with some justification as to why it selected a particular 8(a) company for a sole source contract, that justification can be very brief. And, as the GAO held in a recent bid protest decision, an 8(a) sole source contract justification need not explain why the 8(a) awardee was superior to another 8(a) company interested in the same contract.