SBA OHA Confirms Broad Affiliation Exception for Tribal Companies

The SBA Office of Hearings and Appeals has held that the SBA Area Office did not err by refusing to find affiliation between a tribally-owned company and its sister companies.

SBA OHA’s recent decision in Size Appeal of Bosco Contractors, Inc., SBA No. SIZ-5412 (2012), follows on the heels of Size Appeal of Roundhouse PBN, LLC, SBA No. SIZ-5383 (2012), in which SBA OHA found that the SBA had erred by adopting a too-narrow view of the tribal exception from affiliation.

The Bosco Contractors, Inc. SBA size appeal decision was a challenge to the size of Roundhouse PBN, LLC, a wholly owned subsidiary of Tepa, LLC, which is in turn owned by the Paskenta Band of Nomlaki Indians.  In March 2012, the Army announced that Roundhouse had been awarded a small business set-aside contract for construction.

As described in the Roundhouse PBN size appeal decision, the Army’s award led to a size protest against Roundhouse, and the SBA Area Office issued a size determination finding Roundhouse affiliated with Tepa and three of Roundhouse’s sister companies.  However, on appeal, SBA OHA reversed the decision and held that Roundhouse, as a tribally-owned entity, was entitled to a broad exception from affiliation with other tribally-owned entities.

The Bosco Contractors case picks up the story where the Roundhouse decision left off.  After SBA OHA issued its decision, the Army notified offerors that it would still award the contract to Roundhouse.  A disappointed competitor, Bosco Contractors, Inc., filed a SBA size protest, alleging that Roundhouse was affiliated with its sister companies by virtue of common ownership and management, as well as shared offices and telephone numbers.

This time, the SBA Area Office ruled in Roundhouse’s favor.  It held that under 13 C.F.R. § 121.103(b)(2), tribally-owned companies are exempt from affiliation by virtue of common ownership or management.  The SBA Area Office noted that Roundhouse denied sharing office space or telephones with its sister companies, but held that even if such sharing occurred, “that is not a basis for finding affiliation among tribally owned entities.”

Bosco filed a size appeal with SBA OHA, making a number of arguments.  For instance, Bosco alleged that SBA OHA’s decision in Roundhouse PBN “effectively eliminated any size restrictions for Indian tribes.”  Bosco also claimed that Roundhouse was a newly organized concern and had violated the ostensible subcontractor rule.

SBA OHA made short work of Bosco’s arguments.  It held that 13 C.F.R. § 121.103(b)(2) “clearly permits common ownership and management among tribally owned concerns.”  SBA OHA refused to consider Bosco’s contentions regarding newly organized concern affiliation and the ostensible subcontractor rule because Bosco “did not include these arguments in its protest.”  SBA OHA noted that “[b]esides, OHA already decided these issues in Roundhouse.”

Finally, SBA OHA wrote that to the extent Bosco disagreed with the exception from affiliation for tribally-owned companies, “this exception is rooted” in a section of the Small Business Act, 15 U.S.C. § 636(j)(10)(J)(ii)(II).  Accordingly, “OHA is not the proper forum for such arguments.”  Rather, SBA OHA implied, only Congress would have the authority to eliminate the exception.

SBA OHA’s decision in Bosco Contractors confirms SBA OHA’s position that tribally-owned companies are entitled to a broad exception from affiliation.  In fact, SBA OHA’s citation of the Small Business Act raises the question of whether SBA OHA believes that the exception from affiliation for tribally-owned companies extends beyond common ownership, management, and administrative services, as provided for in 13 C.F.R. § 121.103(b)(2).

As I wrote in my post on the Roundhouse case, the Small Business Act’s exception from affiliation does not limit itself to common ownership, management, and administrative services.  The only question is whether the broad statutory exception from affiliation applies only to the 8(a) program (as the SBA apparently believes), or to all small business programs generally.  By citing the statutory provision in the context of this small business set-aside, I cannot help but wonder if SBA OHA believes the latter.  If so, it would potentially make it almost  impossible for affiliation to exist among tribally-owned sister companies.

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