The ostensible subcontractor rule says that, for a small business or socioeconomic set-aside such as 8(a), the small business prime contractor must perform the primary and vital parts of the contract and can’t be unduly reliant on a subcontractor. If the small business is found to violate the rule, the size of the small prime contractor and the large subcontractor are grouped for size purposes, which can result in loss of award. But the ostensible subcontractor rule is different from SBA’s joint venture rules, because SBA rules (and other federal law) distinguish between a prime-sub team and a joint venture. In a recent decision, OHA reversed a determination that a small business prime was affiliated with a subcontractor where the Area Office mixed up the analysis of the ostensible subcontractor rule and the joint venture rules.
Continue readingTag Archives: ostensible subcontractor affiliation
No Ostensible Subcontractor Rule for Manufactured Product Procurements, SBA OHA Confirms
The SBA’s ostensible subcontractor rule can be a minefield for small prime contractors, who must be careful to avoid risk factors for affiliation with their large subcontractors.
But not every small prime need worry about ostensible subcontractor affiliation. As a recent SBA Office of Hearings and Appeals decision confirms, the ostensible subcontractor rule does not apply to procurements for manufactured products.
Continue readingOHA and the Ostensible Subcontractor Rule: A Two-Prong Test You Can’t Fix After the Fact
In a recent decision, OHA ruled that the ostensible subcontractor rule requires a two-prong evaluation before SBA can find affiliation. The SBA Area Office took a look at only one prong, which resulted in a remand from OHA. Ultimately, OHA found affiliation, reversed the SBA Area Office and found the concern ineligible. As OHA made clear, entities can’t fix deficiencies after the fact.
Think of the ostensible subcontractor rule like the preferred go-to move (other than line dancing) at a Country/Western Dance Hall, it is the ostensible subcontractor two-step. Follow along as I lead you through the dance you need to get right to avoid stepping on the toes of your proposal.
Continue readingBack to Basics: SBA’s OHA Reminds SBA Area Offices How to Apply the Ostensible Subcontractor Rule
We’ve discussed the “ostensible subcontractor rule” quite a few times on the blog (including most recently here and here) because it is one of the most frequent grounds for size protests. It’s also frequently misunderstood. A recent SBA Office of Hearings and Appeals decision, Contego Environmental, LLC, SBA No. SIZ-6054 (May 19, 2020), demonstrates how even SBA Area Offices can misapply the rule and provides useful reminders to contractor looking to avoid violating it.
Continue readingToo Late for Take-Backs: Ostensible Subcontractor Analysis Won’t Consider Post-Proposal Changes
In Warrior Service Company, LLC, SBA No. SIZ-6046 (Jan. 24, 2020), the SBA reminded small business contractors that it determines whether a contractor has violated the ostensible subcontractor rule as of the date of bid submission; SBA won’t consider any changes that come later.
Continue readingSBA OHA: Contracting Officer’s Termination Decision Won’t Change Size Appeal Deadline
Following a size determination, any person adversely affected by that determination may file an appeal with the SBA’s Office of Hearings and Appeals. To be timely, the appeal has to be filed within 15 calendar days from the date the person receives the determination. If not timely-filed, the appeal will be dismissed.
This 15-day deadline is strict. The OHA doesn’t have the power to extend it, even if good reason exists to do so. In fact, the OHA’s recent decision in Sentient Digital, Inc. dba Entrust Government Solutions, SBA No. SIZ-5963 (2018) makes clear that this deadline applies even when an agency changes its decision to terminate a contract following an adverse size determination.
“Similarly Situated Entities” Exempt From Ostensible Subcontractor Affiliation, SBA OHA Confirms
A “similarly situated entity” cannot be an ostensible subcontractor under the SBA’s affiliation rules.
In a recent size appeal decision, the SBA Office of Hearings and Appeals confirmed that changes made to the SBA’s size regulations in 2016 exempt similarly situated entities from ostensible subcontractor affiliation.