Small businesses sometimes complain that large prime contractors are not always held accountable for failing to meet their small business subcontracting goals. If that complaint sounds familiar, you may be cheered by the GAO’s decision in a bid protest filed by one very well-known large prime contractor. In that case, the prime’s history of meeting (or perhaps, not always meeting) its small business subcontracting goals was a critical factor causing the large prime to lose out on a contract.
SBA OHA: Inter-Affiliate Transactions Exception Does Not Apply to a Division
SBA Office of Hearings and Appeals cases frequently involve contractors trying to argue that they are not affiliated with other entities. But in Size Appeal of The Associated Construction Co., SBA No. SIZ-5314 (2011), the contractor at issue attempted to argue the opposite—that it was affiliated with another entity, namely, a division of itself.
This strange case came about because the contractor hoped to take advantage of the so-called “inter-affiliate transaction exception” under 13 C.F.R. § 121.104(a), which allows contractors to deduct “proceeds between a concern and its domestic or foreign affiliates” from its average annual receipts for size purposes. Unfortunately for the contractor, SBA OHA held that a company cannot be affiliated with its own division—meaning that the exception did not apply.
Technically Unacceptable? No SBA Size Protest for You!
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!”
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.
GAO Confirms: VA SDVOSB Set-Asides Trump Schedule Buys
If this was a game of high-stakes poker, you might say the GAO has called the VA’s bluff.
Service-disabled veteran-owned small businesses rejoiced after the GAO held, in Aldevra, B-405271, B-405524 (Oct. 11, 2011) that federal law requires the VA to prioritize SDVOSB procurements over Federal Supply Schedule acquisitions. But, to the shock and outrage of the SDVOSB community, the VA has refused to follow the GAO’s interpretation of the law. Now, to mix card-game metaphors, the GAO has doubled down, issuing a second decision confirming its ruling in Aldevra.
SBA OHA, Not GAO, Decides NAICS Code Appeals
Appealing the NAICS code a procuring agency assigns to a set-aside solicitation can be a powerful tool: after all, if the NAICS code and corresponding size standard change, it can dramatically alter the competitive playing field. But if a company wants to file a NAICS code appeal, it must file with the SBA Office of Hearings and Appeals, not the GAO, which lacks jurisdiction to hear challenges to NAICS code designations—something the protester in BlueStar Energy Solutions, B-405690 (Dec. 12, 2011) learned too late.
GAO Protests and Bias Claims: Fuhgettaboutit
When small government contractors call me about potential GAO bid protests, they sometimes are convinced that the procuring agency was biased against them, or biased in favor of another offeor (in many cases, the incumbent). Fired up, these clients want to file scathing GAO protests, accusing the source selection officials of improprieties.
It’s my unpleasant job to tell these angry contractors, “unless you have ironclad evidence, I think you should save your money.” Although allegations of bias are relatively common in GAO protests, in my experience, the GAO almost never sustains a protest on this basis. In other words, as my friends from the Northeast might say, fuhgettaboutit.