SBA Affiliation Rules and Control: The Minority Owner Trap

Posted on March 2, 2012 by Steven Koprince

Does a person who owns a minority share of a company “control” the company under the SBA affiliation rules? Yes, if the company has no majority owner and the minority share owned by the individual in question is the largest, or is similar in size to, the largest other minority shares.

Get all that? An example may help. The decision of the SBA Office of Hearings and Appeals in Size Appeal of Advent Environmental, Inc., SBA No. SIZ-5325 (2012), demonstrates how this rule can be a trap for the unwary.

Mystery, Intrigue and OCIs: Anonymous Source Sinks Contractor’s Bid

Posted on February 8, 2012 by Steven Koprince

It sounds more like a scene from “All the President’s Men” than the factual background of a GAO bid protest. In McTech Corporation, B-406100, B-406100.2 (Feb. 8, 2012), an anonymous caller tipped off a procuring agency that McTech had an apparent organizational conflict of interest, leading to McTech’s exclusion from the competition. The resulting GAO bid protest didn’t bring down a presidential administration, but it does provide a cautionary tale on the intersection of SBA mentor-protégé agreements and OCIs.

SBA Affiliation Rules and the Present Effect Rule: When Does an Agreement Arise?

Posted on February 4, 2012 by Steven Koprince

Under the SBA affiliation rules, the SBA will apply the so-called “present effect rule” when it examines an agreement for a merger or acquisition, including an agreement in principle. Under the present effect rule, such an agreement is presently effective with respect to the question of control–which can present a big problem under the SBA affiliation rules.

For example, if Company A has agreed to purchase Company B, the SBA deems Company A to control Company B from the moment the agreement is reached, even if the deal does not close until months later. This makes Companies A and B affiliates from the date their agreement is reached for purposes of the SBA affiliation rules.

The present effect rule makes sense, but when does an “agreement” arise for purposes of the rule? The SBA Office of Hearings and Appeals examined this issue in Size Appeal of Nuclear Fuel Services, Inc., SBA No. SIZ-5324 (2012). If you are in discussions or negotiations for a merger or acquisition, and are worried about potential affiliation, SBA OHA’s decision will leave you breathing a sigh of relief.

Subcontractors, NAICS Codes and Small Business Status: The Prime Decides

Posted on February 2, 2012 by Steven Koprince

George W. Bush famously declared himself to be “the decider.” Although some comedians had fun with the phrase, it’s hard to argue with Bush’s underlying assessment; as head of the government, the President has a lot of decisions to make. But when it comes to whether you qualify as “small” for purposes of a federal subcontract, it may surprise you to learn that the government isn’t the decider at all.

For a subcontract, the prime contractor—not the government—decides what NAICS code (and corresponding size standard) applies. The NAICS code the prime contractor selects for your subcontract need not be the same NAICS code assigned to the prime contract as a whole, and you may have the opportunity to lobby the prime contractor to change the NAICS code to one you believe is better-suited for the procurement–and your small business eligibility.

SBA Size Protests and the Ostensible Subcontractor Rule: The Task Order Loophole

Posted on January 26, 2012 by Steven Koprince

The tax code is famous (or infamous) for perceived loopholes, but the IRS isn’t the only regulatory agency with a loophole in its regulations. The SBA’s affiliation rules contain—or at least used to contain (more on that later)—a gaping loophole when it comes to Multiple Award Task Order Contracts, or MATOCs, and the ostensible subcontractor rule.

GAO: HUBZone Price Preference Applies to GSA Lease Procurements

Posted on January 24, 2012 by Steven Koprince

Is the GAO the new best friend of small businesses? That might be going a bit too far, but in recent years, the GAO has sided with small businesses in several important bid protests regarding the scope of small business preferences and set-asides.

First, in Delex Systems, Inc., B-400403 (Oct. 8, 2008), the GAO held that the small business set-aside provisions of FAR 19.502-2(b)—the so-called “rule of two”—apply to competitions for task and delivery orders under multiple-award contracts. In Aldevra, B-405271, B-405524 (Oct. 11, 2011) and Kingdomware Technologies, B-405727 (Dec. 19, 2011), the GAO sided with service-disabled veteran-owned small businesses against the very federal agency created to support veterans, holding that the VA had improperly used the Federal Supply Schedule rather than set-asides for SDVOSBs. The decision in The Argos Group, LLC, B-406040 (Jan. 24, 2012), follows in this vein—and this time is a nice win for HUBZone small businesses.

GAO: Successful Reconsideration Request Does Not Save VA SDVOSB Contract

Posted on January 17, 2012 by Steven Koprince

Here’s a piece of music trivia: apparently, “Get It Right the First Time” is both a song by Billy Joel and a 1997 live album by Canadian punk band SNFU. Somehow, I’m guessing there aren’t too many people who own both The Stranger (the classic Joel album featuring the song), and the SNFU opus, which offers decidedly un-Joel like song titles, such as “Drunk on a Bike” and “Cannibal Café.”

Billy Joel and SNFU might not have much else in common, but “Get It Right the First Time” is a good mantra when it comes to service-disabled veteran-owned small businesses. When a service-disabled veteran-owned small business submits a verification application to the VA Center for Veterans Enterprise, it is important to get the application right from the start. As a recent GAO bid protest decision shows, even a successful second bite at the apple might mean lost contacts in the interim.