SBA Size Protests: Subcontracting Limits Off The Table

The SBA does not evaluate compliance with the limitations on subcontracting as part of the SBA size protest process.

In a recent decision, the SBA Office of Hearings and Appeals confirmed that subcontracting limits are the domain of the procuring agency, which is to consider compliance (or lack thereof) as part of its responsibility determination.

OHA’s decision in Size Appeal of ProSouth Construction Services, LLC, SBA No. SIZ-5708 (2016) involved a set-aside procurement for specialty trade construction.  The agency awarded the construction contract to Birmingham Industrial Construction, LLC.

An unsuccessful competitor, ProSouth Construction Services, LLC, filed a SBA size protest challenging the award to BIC.  In its protest, ProSouth questioned whether BIC would comply with the limitation on subcontracting for specialty trade construction (25% of the cost of the contract, less materials).

The SBA Area Office dismissed ProSouth’s size protest as insufficient.  In its decision, the SBA Area Office noted that “compliance with limitations on subcontracting is a matter of contractor responsibility to be assessed by the procuring agency.”

ProSouth filed a size appeal with OHA.  ProSouth alleged that the SBA Area Office had erred by dismissing ProSouth’s size protest.

OHA disagreed.  With respect to the portion of ProSouth’s size protest dealing with the subcontracting limits, OHA wrote that “[a]s the Area Office correctly observed . . . a contractor’s compliance with the limitations on subcontracting is an element of responsibility and not a component of size eligibility.”  OHA quoted 13 C.F.R. 125.6(e), an SBA regulation specifically stating that compliance with the limitations on subcontracting is not a component of size eligibility.  OHA upheld the SBA Area Office’s size determination and denied ProSouth’s appeal.

Small businesses often raise the limitations on subcontracting in size protests.  But as the ProSouth Construction Services case demonstrates, the SBA does not consider compliance with the subcontracting limits as part of the size protest process.  In fact, challenging an awardee’s compliance with the limitations on subcontracting can be difficult to raise in any protest forum; the GAO ordinarily will not review such challenges, either.  But unlike the SBA, the GAO’s rule is not absolute, and the GAO will consider such a challenge in the right circumstances.  For prospective protesters, then, the GAO may be the best of some not-so-great options.

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