A SBA size determination issued in 2007 was not binding on the question of whether the same company was still small in 2013.
According to a recent decision of the SBA Office of Hearings and Appeals, there is no rule providing that an SBA Area Office must follow its own prior size determination. Rather, an SBA Area Office is free to issue a size determination contradicting its own prior ruling.
SBA OHA’s decision in Size Appeal of Advanced Projects Research, Inc., SBA No. SIZ-5504 (2013) involved a solicitation for armor plate. The solicitation was set aside for small businesses under NAICS code 332999, with a corresponding 500-employee size standard.
After evaluating competitive proposals, the Air Force notified offerors that ArmorWorks Enterprises, LLC had been identified as the awardee. An unsuccessful competitor, Advanced Projects Research, Inc., filed a size protest with the SBA. APR noted that AWE is a limited liability company managed by William Perciballi and Anchor Management, LLC. APR contended that this circumstance rendered AWE affiliated with Insight Enterprises, Inc., a large business controlled by the same individual who controlled Anchor Management.
AWE defended the size protest, in part, by reference to a previous SBA size determination. In 2007, the SBA Area Office had considered the same issue and determined that no affiliation existed. In this instance, the Area Office again determined that AWE was not affiliated with Insight, and was an eligible small business.
APR filed a size appeal with SBA OHA. In filings defending against the size appeal, AWE apparently argued that the SBA Area Office was required to reach the same result as it had in 2007.
SBA OHA disagreed. Citing earlier size appeal decisions, it wrote that “a prior size determination is not binding on either an Area Office or OHA.” SBA OHA explained that size determinations are limited to the case at hand, and “are not controlling in any other case.” Based in part on its rejection of AWE’s defense (as well as its determination that other flaws existed in the Area Office’s size determination), SBA OHA granted the size appeal and remanded the case.
I have heard from many small business owners who, upon receiving a favorable size determination from an SBA Area Office, are confident that the size determination renders them bulletproof going forward. Not so. As the Advanced Projects Research size appeal case demonstrates, a SBA size determination is not binding precedent, and the SBA is entitled to reverse itself the next time it examines the same company.
One final note: if a contractor is found “other than small,” the Area Office’s size determination does have a type of binding effect. Under 13 C.F.R. 121.1009(g)(5), if a contractor receives an adverse size determination from an SBA Area Office, the contractor is ineligible for any set-aside procurement carrying the same size standard or a lower size standard, unless SBA OHA overturns the decision or the SBA Area Office recertifies the contractor as small.