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: SBA affiliation rules; ostensible subcontractor affiliation
OHA 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.
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