When a business is poised to win a federal contract award set aside for small businesses, there is always the potential for a competitor to challenge that award on the basis that the proposed winner is not actually a small business based on SBA’s size and affiliation rules. Or, if your company just lost an award, you may consider challenging that the proposed winner is a small business. Either way, it pays to know the basics behind size protests and appeals. While you could read through my recent handbook on Procedures and Pitfalls of Size Protests and Appeals (it’s a good read!), here are some key things to keep in mind when considering size protests and appeals.
- What is a size protest?
As a refresher, an offeror has to be a small business under the NAICS code assigned to a solicitation set-aside for small businesses in order to qualify for the award.
At bottom, a size protest is a challenge to a proposed awardee’s size. In essence, a protester argues that the contract awardee should not have been awarded the contract because it’s not a small business. Sometimes, protesters argue that the awardee on its own is just too large a business. But more commonly, a size protest argues that an awardee is affiliated with one or more other companies and, together with its affiliates, the awardee exceeds the applicable size standard.
If the SBA determines that the awardee is not a small business, it can lose the award.
- Who can challenge a company’s size?
A size protest must relate to a specific procurement. In most instances, this means that a person can’t protest a company’s size just because that person thinks the company is a large business—the supposedly large business must first be named an awardee under a particular solicitation.
There are generally three different persons who might file a size protest against a particular company:
A disappointed offeror. If an offeror loses out on the award (for reasons unrelated to its own size), that company could challenge the awardee’s size. Protests by a disappointed offeror must be sent to the contracting officer within five business days from the date the disappointed offeror receives notice of the award. The contracting officer will then forward the protest to the SBA for a decision.
The contracting officer. If a contracting officer has reason to doubt the awardee’s size, she can ask the SBA for a size determination. Importantly, this request can be made at any time—meaning that, even a couple of years into performance, the SBA can ask for a size determination.
The SBA. Like a contracting officer, the SBA can initiate its own size determination, at any time, if it has reason to doubt a company’s size.
- How are size protests decided?
If a size protest is filed (and isn’t dismissed for untimeliness or some other reason), the SBA will immediately notify the awardee. The awardee must then submit a response to the size protest and provide a trove of documents with that response—including its articles of organization, bylaws, tax returns and financial statements for the preceding three fiscal years, and documents describing its relationship with any potential affiliates. This response (and supporting documentation) is usually due just a few days after the awardee is notified of the protest, although SBA will often grant a short extension.
After it receives this information, the SBA will evaluate it thoroughly. Most of the time, it will ask for a more detailed response or additional documents from the company being protested. Once all of the needed information is received, the SBA will evaluate it and make a size determination (either finding that the company is a small or large business under the applicable NAICS code) within a couple of weeks.
- Can I appeal an adverse size determination?
Yes. Any party that is adversely affected by a size determination can appeal it to the SBA’s Office of Hearings and Appeals. If your company is named the awardee and is subsequently found by the SBA to be an ineligible large business, you can appeal this determination to the OHA. Conversely, if your company loses a size protest against a different awardee, you can also appeal that determination.
While there is no statistical summary of OHA size appeal decisions, in our experience OHA appeals are oftentimes successful. Size determinations are intensely fact-specific, and the SBA’s regulations are quite nuanced. So, if you think that a determination might have been in error, it could be worth appealing that determination to the OHA.
- What else should I know about size protests and appeals?
Size protests are an important part of the procurement process, as they help make sure that small businesses get the benefit of set-asides. Used offensively, a protest might help take an award away from a competitor. But this cuts both ways: one of your competitors might try to take your award away, too.
Size protests must be taken seriously. Size protests and appeals oftentimes involve complicated factual and legal questions. And failing to adequately respond to a protest, in fact, could be considered an admission that your company is not a small business.
Questions about this post? Or need help with a government contracting legal issue? Email us or give us a call at 785-200-8919.