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
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
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.
Large Primes: Meet your Subcontracting Goals–Or Else
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.