Subcontractor’s Provision of Bonds OK with GAO—But Watch Out for Affiliation

Posted on November 14, 2011 by Steven Koprince

Small prime contractors often have difficulty securing necessary bid, performance and payment bonds for federal government contracts–especially in the construction industry, where payment and performance bonds are typically required. Not surprisingly, small primes often turn to their larger subs to secure the necessary bonding.

A small prime’s reliance on its subcontractor for bonding was recently put to the test in a GAO bid protest. Fortunately for small primes everywhere, in Shaka, Inc., B-405552 (Nov. 14, 2011), the GAO held that the subcontractor’s role in the bond process did not render the bond defective. But small primes and their large subcontractors shouldn’t pop the champagne for a celebration, because subcontractor bonding assistance can still increase the risk of ostensible subcontractor affiliation.

SBA OHA OK’s “Mystery Subcontractor” SBA Size Protests

Posted on November 3, 2011 by Steven Koprince

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.

OCIs and Former Government Employees: GAO Finds Agency Properly Excluded Contractor

Posted on October 26, 2011 by Steven Koprince

When it comes to hiring former government employees, criminal law prohibits certain conduct (like attempting to hire a contracting officer who is currently evaluating your proposal). But just because a hire meets the letter of the law does not mean that it won’t cause an organizational conflict of interest, or OCI.

That’s exactly what happened in the GAO’s decision in TeleCommunication Systems, Inc., B-404496.3 (Oct. 26, 2011)–and it cost a contractor an award.

GAO: For VA, SDVOSB Set-Asides Trump GSA Schedule Buys

Posted on October 12, 2011 by Steven Koprince

“Veterans First” really means “Veterans First,” even if the VA would prefer to conduct an unrestricted procurement under the General Services Administration’s Federal Supply Schedule rather than conducting market research to see if the procurement can be set-aside for service-disabled veteran-owned small businesses. So said that GAO in an important bid protest decision for SDVO small businesses, Aldevra, B-405271 (Oct. 11, 2011).

In Aldevra, the VA attempted to purchase certain supplies for a VA Medical center through the GSA Schedule on an unrestricted basis. Aldevra, a SDVOSB, filed a protest with the GAO, arguing that before using the GSA Schedule, the VA should have conducted market research to determine whether two or more offers would be received from eligible SDVOSBs, and if so, should have set-aside the competition for SDVOSBs.

The Non-Manufacturer Rule: More Than Employees

Posted on October 11, 2011 by Steven Koprince

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.

Asset Purchases and SBA Affiliation: Buyer Beware

Posted on September 26, 2011 by Steven Koprince

If your small business is thinking about acquiring all or most of another company by way of an asset purchase agreement, you may wonder what effect it will have on your small business size status. Yes, your company will be bigger now that it used to be, and will have to take that into account going forward. But you may not be aware that an asset purchase agreement could create an affiliation problem and affect your size status looking backward, too.

SBA Affiliation Rules and Spin-Offs: Beware ‘Newly Organized Concern’ Affiliation

Posted on September 2, 2011 by Steven Koprince

When a small business draws close to its size standard ceiling, it may consider forming a small business “spin-off” company as one way to keep itself in the small business set-aside game. Done right, a spin-off may be able to successfully compete for and win small business set-aside contracts.

But be careful: if the spin-off doesn’t pass muster with the SBA, the “newly organized concern” affiliation rule may cause the spin-off to be ineligible for small business set-aside contracts, as occurred in Size Appeal of eTouch Federal Systems, LLC, SBA No. SIZ-5280 (2011), a decision of the SBA’s Office of Hearings and Appeals.