Tag Archives: SBA affiliation rules

SBA OHA: 42%-49% Of Revenues Did Not Create Economic Dependence Affiliation

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A small business was not affiliated with its largest customer under the SBA’s economic dependence affiliation rule, even though the small business earned as much as 49% of its revenues from the alleged affiliate–and even though the small business’s SEC Annual Report stated that the small business was dependent on its customer.

SBA OHA’s decision indicates that receiving less than 70% of revenues from an alleged affiliate may not, absent other indicia of affiliation, establish affiliation under the economic dependence rule.

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SBA Affiliation Rules: Family Ties Plus Business Ties May Equal Affiliation

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The SBA affiliation rules are not always intuitive, and perhaps no SBA affiliation rule is as little understood as the so-called “identity of interest” rule under 13 C.F.R. 121.103(f).

Identity of interest affiliation can arise in several ways, including when close family members also have business ties.  As demonstrated in a recent SBA Office of Hearings and Appeals decision, a close family relationship between two business owners, plus significant business ties, may cause affiliation between the businesses.

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Newly Organized Concern Affiliation: “Key Employee” Must Influence Entire Company

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Newly organized concern affiliation under the SBA’s affiliation rules did not exist when the alleged former key employee of the affiliate did not exercise influence over the entire company.

In a recent decision, the SBA Office of Hearings and Appeals held that no matter the size of the alleged affiliate, a former “key employee” must have had the ability to influence the entire company in order for the newly organized concern affiliation rule to apply.

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SBA Affiliation Rules: Contractor Affiliated With Puerto Rico, Says SBA

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Now here’s one you don’t see every day.  In a recent size appeal decision, the SBA Office of Hearings and Appeals upheld the SBA’s determination that the contractor was affiliated with the government of Puerto Rico.

In Size Appeal of Industria Lechera de Puerto Rico, Inc., SBA No. SIZ-5533 (2014), SBA OHA held that the contractor’s relationship with the Puerto Rican government rendered the contractor, in essence, a quasi-governmental entity, not an independent small business.

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SBA OHA: 8(a) Mentor-Protege JV Affiliation Exception Applies To Non-8(a) Contracts

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The SBA 8(a) mentor-protege joint venture exception from affiliation applies to non-8(a) contracts, so long as the joint venture meets the 8(a) regulatory requirements.

In a recent size appeal decision, the SBA Office of Hearings and Appeals held that the SBA Area Office erred by deeming a mentor and its protege affiliated for purposes of a non-8(a) contract, without considering whether the joint venture qualified for the mentor-protege exception to the ordinary SBA affiliation rules.

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SBA OHA: Prime Contractor Not Economically Dependent On Subcontractor

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A prime contractor was not economically dependent on its subcontractor for purposes of the SBA affiliation rules because a prime contractor “has the power to choose whatever subcontractor it desires.”

In a recent size appeal decision, the SBA Office of Hearings and Appeals stopped short of holding that a prime contractor could never be economically dependent on a subcontractor, but SBA OHA’s decision indicates that if such dependence ever existed, it would be in an unusual case.

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The SBA’s “Common Investments” Affiliation Rule: A SBA OHA Primer

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“Common investments” affiliation under the SBA affiliation rules can occur when the SBA believes that two individuals’ common investments in multiple companies will cause the individuals in question to act with a common purpose.

A recent SBA OHA size appeal decision shows how the common investments rule can work in practice–in this case, resulting in the business in question being deemed affiliated with several other companies.

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