Navigating the U.S. Small Business Administration (SBA) regulations can sometimes feel like navigating through a room filled with laser tripwires. One wrong decision or misstep could result in the company’s disqualification. A company might make a decision relying on its understanding of one SBA regulation, unaware of the application of an entirely different SBA regulation. While a miscalculation in complying with the regulations doesn’t trigger the same disasters shown in an action-packed spy movie, the effects can still be costly.
In Primary Health Care, LLC d/b/a Anglin Distinctive Health Care JV, LLC, SBA No. SIZ-6370 (2025), a joint venture’s misapplication of SBA’s timing rules for size determination standards resulted in the company’s ineligibility for award.
The Defense Health Agency (Agency) issued a solicitation that was a 100% small business set-aside with a size standard of $14 million in annual receipts. Primary Health Care, LLC d/b/a Anglin Distinctive Health Care JV, LLC (Appellant) was a joint venture selected as one of the awardees.
One of the other offerors, Compass Arora JV, LLC (CAJV) filed a size protest with SBA’s Area Office, claiming Appellant did not have an active mentor-protégé agreement (MPA) in effect at the time final proposal revisions were due.
Why does it matter whether Appellant had an active MPA?
When two companies have an SBA-approved MPA in place, the regulations allow the mentor and protégé to “joint venture as a small business for any Federal government prime contract or subcontract, provided the protégé qualifies as small for the standard corresponding to the NAICS code assigned to the procurement.” 13 C.F.R. § 121.103(h)(2)(ii).
The MPA is often referred to as a “shield” from affiliation, permitting small business concerns to form a joint venture with a mentor without being deemed affiliated, which you can read more about here.
While Appellant had an active MPA as of the date initial proposals were due (October 27, 2023), the MPA had voluntary been terminated prior to the date of the submissions for final proposal revisions (May 5, 2025). The parties disagreed as to when Appellant’s size was determined – when the MPA was still active or after the MPA’s termination at the time of final proposal revisions.
CAJV argued the joint venture’s size was determined at the time of final proposal revisions after the MPA was terminated, removing the joint venture partners’ shield from affiliation and ability to form a joint venture. No longer shielded from affiliation, the receipts of the two companies combined exceeded the applicable small business size standard, making Appellant ineligible for award.
The Area Office agreed with CAJV, determining Appellant’s size exceeded the small business size standard on the date of final proposal revisions. A joint venture, the Area Office noted, must be small as of the date of the initial offer and as of the date of final proposal revisions.
Appellant filed an appeal, claiming the Area Office erred as a matter of law by using the date of final proposal revisions as the determining date instead of the date of the initial offer. SBA’s general size status regulation states,
“A concern, including its affiliates, must qualify as small under the NAICS code assigned to a contract as of the date the concern submits a written self-certification that it is small to the procuring activity as part of its initial offer or response which includes price.” Once awarded a contract as a small business, a firm is generally considered to be a small business throughout the life of that contract. 13 C.F.R. § 121.404(a) (emphasis added).
When Appellant submitted the initial offer, the MPA was in effect. Thus, Appellant argued that the Area Office ignored the standard size regulation. Additionally, Appellant noted that it never submitted a final proposal revision, so the information submitted on the date of the initial offer remained the same.
The Area Office acknowledged Appellant’s active MPA as of the date of initial proposals, deeming Appellant small as part of its initial offer, as required under SBA’s standard size regulation. But the Area Office also noted that while this is the general standard, there is always the possibility of an exception applying. And here, an exception for joint ventures did in fact apply.
Two firms approved by SBA to be a mentor and protégé under § 125.9 of this chapter may joint venture as a small business for any Federal government prime contract or subcontract, provided the protégé qualifies as small for the size standard corresponding to the NAICS code assigned to the procurement, and the joint venture must meet the requirements of § 124.513(c) and (d), § 125.8(b) and (c), § 125.18(b)(2) and (3), § 126.616(c) and (d), or § 127.506(c) and (d) of this chapter, as appropriate, as of the date of the final proposal revision for negotiated acquisitions and final bid for sealed bidding. 13 C.F.R. § 121.103(h)(2)(ii).
The Area Office determined SBA’s regulations specifically note, that joint venture compliance is required as of the date of the final proposal revisions.
On appeal, the main point of contention was whether the Area Office erred in not applying the general SBA rule that size status of a concern is determined, as of the date it submits self-certification.
OHA recognized SBA’s general size standard and that generally size is determined “as part of its initial offer or response.” 13 C.F.R. § 121.404(a).
But, OHA noted, the regulations also state,
Compliance with the . . . joint venture agreement requirements in §§ 124.513(c) and (d), §§ 126.616(c) and (d), §§ 127.506(c) and (d), and §§ 125.8(b) and (c) of this chapter, as appropriate, is determined as of the date of the final proposal revision for negotiated acquisitions. . . . 13 C.F.R. § 121.404(f) (emphasis added).
OHA held that “the date of final proposal revisions is the relevant date for determining whether a joint venture meets the size standard for solicitations set aside for small businesses and is compliant with 13 C.F.R. § 121.404(f) […]. This is true even if the challenged concern did not actually submit final proposal revisions on that date. The regulation sets this date as the time to determine size; it does not require that any final proposal revisions actually be submitted.”
Ultimately, OHA found the Area Office correct in determining Appellant’s size status as of the date for final proposal revisions. SBA regulations state that “a joint venture formed under an SBA-approved mentor/protégé relationship must comply with the requirements of 13 C.F.R. § 125.8 (b) and (c) as of the date of the final proposal revisions, as stated in 13 C.F.R. § 121.103(h)(2)(ii).”
The termination of Appellant’s MPA prior to final proposal revisions deemed Appellant noncompliant with the small business requirements: “Appellant cannot comply with 13 C.F.R. § 125.8(b) and (c) because neither partner is properly a “protégé” or “mentor” due to the termination of the MPA. Appellant could not possibly satisfy any of the requirements in § 125.8(b) and (c) as of that date without an authorized MPA in existence.”
Appellant was no longer compliant with 13 C.F.R. § 121.103(h)(2)(ii) as of the date of final proposal revisions. As such, the mentor protégé “shield” from affiliation did not apply and the joint venture’s size exceeded the procurement’s size standard.
It is critical for companies to understand SBA’s regulations and maintain compliance continuously while participating in SBA’s socioeconomic programs. As highlighted in this decision, a misapplication of one of the rules can result in the company’s future ineligibility.
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