As frequent SmallGovCon readers know, the Small Business Administration’s ostensible subcontractor rule can be tricky to navigate. The rule requires contractors not to rely too heavily on a subcontractor in the performance of a contract set aside under an SBA socioeconomic program, but what constitutes relying too heavily can be confusing for small business contractors. Without a clear measure of how reliant is too reliant, businesses have to worry that they may be denied an award or even worse, lose one in a post-award protest. In a recent decision, Daniels Building Company, Inc. v. United States, 24-1787, 175 Fed. Cl. 767 (2025), the Court of Federal Claims (COFC) provided potentially helpful insight into what SBA’s Office of Hearings and Appeals (OHA) and the Court of Federal Claims will consider when determining whether a prime contractor is “unusually reliant” on its subcontractor.
Continue readingTag Archives: ostensible subcontractor
GovCon FAQs: Is There Still an Ostensible Subcontractor Rule?
We recently blogged about a decision that focused on the ostensible subcontractor rule and how the SBA’s Office of Hearings and Appeals (OHA) determines whether a subcontractor is an ostensible subcontractor or not. This and other similar cases have raised the question–how has SBA’s regulatory update affected the analysis of the ostensible subcontractor rule, and what remains of that rule. Below we will give a quick review of the decision from that case and look at a couple more principles of the ostensible subcontractor rule.
Continue readingOHA Says: Show me the Money! (in Ostensible Subcontracting Review)
Size and status protests, which are reviewed by the SBA’s Office of Hearings and Appeals (OHA), are far less common than GAO protests which protest an evaluation aspect of a solicitation or award. But when they are used they can be a powerful tool to keep contracting dollars intended for small businesses to stay with small businesses. In the case of Winergy, LLC, OHA takes a look at an award intended for SDVOSBs, to determine if the awardee is in compliance with the ostensible subcontractor rule or if it is subcontracting out the primary and vital parts of the contract. The lesson? If you want to keep an award, be sure that you, or a similarly situated subcontractor, will be performing the primary and vital parts of the contract and that you can support that assertion with evidence.
Continue readingSBA: Ostensible Subcontractor Affiliation Arises from Improper Limitations on Subcontracting in Proposal
The SBA ostensible subcontractor affiliation rule has long confused contractors and their attorneys alike because its standards were not very clear. It was based on whether, in a small business contract, a subcontractor performs the “primary and vital requirements of a contract” or the prime contractor was “unusually reliant” on the subcontractor. SBA’s Office of Hearings and Appeals filled in the gaps on these terms. But in 2023, SBA updated its definition for these rules, declaring that if a small business prime contractor (other than under a general construction contract) met the limitations on subcontracting, it basically was not violating the ostensible subcontractor rule. A recent case looked at a circumstance where a small business prime contractor was not meeting the limitations on subcontracting.
Continue readingOstensibly OK: SBA Decision on Ostensible Subcontractor Rule Gives Contractors Some Clear Guidelines
In a recent post, we looked at the implications of BA OHA’s reasoning in In & Out Valet Co., SBA No. VSBC033-P, 2024 (June 12, 2024) on the full-time devotion requirement. Today we look at the impact of that case on another of SBA’s rules that has implications for both small businesses and for companies in the 8(a) Program, Women-Owned Small Business Program (WOSB), and the Service-Disabled Veteran-Owned Small Business Program (SDVOSB)–the ostensible subcontractor rule. The rule requires contractors not to rely too heavily on a subcontractor in the performance of a contract set aside under an SBA socioeconomic program. In practice, this standard may be confusing to a lot of hopeful contractors. What, after all, constitutes “undue reliance?” How reliant is too reliant? OHA’s reasoning in this recent decision helps clarify their application of the regulations, with results that may have far-reaching implications.
Continue readingWebinar! Joint Venture and Teaming, July 9, 2024, 10:00-11:30am MDT
Please join John Holtz and me, for this informative webinar hosted by Texas El Paso APEX Accelerators as we discuss joint venture agreements and teaming. For large and small contractors alike, teaming agreements and joint venture agreements can be essential to winning and successfully performing federal government contracts. In this presentation, we will explain how to develop, negotiate and administer agreements that are both compliant and effective. The presentations will cover both the key rules (such as flow-downs and ostensible subcontractor affiliation) and best practices for agreements that go beyond the bare minimum legal requirements. Register here.
Event: Teaming Agreements & Subcontracts Workshop hosted by The Catalyst Center for Business & Entrepreneurship, November 16, 2023, 3:00-5:00pm CST
This workshop will focus on teaming agreements and subcontracts which can be essential to winning and successfully performing federal government contracts. Greg Weber and I will explain how to develop, negotiate and administer agreements that are both compliant and effective for both small and large contractors. The presentations will cover both the key rules (such as flow-downs and ostensible subcontractor affiliation) and best practices for agreements that go beyond the bare minimum legal requirements. Please join us! Register here.