The SBA 8(a) mentor-protege affiliation “shield” does not prevent a mentor and protege from being affiliated under the so-called ostensible subcontractor rule, according to a recent decision of the SBA Office of Hearings and Appeals.
In Size Appeal of InGenesis, Inc., SBA No. SIZ-5436 (2013), SBA OHA held that the broad exception from affiliation for 8(a) proteges and their mentors does not prevent the SBA from deeming the companies affiliated under the ostensible subcontractor rule.
A director does not “control” a company under the SBA affiliation rules when that director can be removed at any time by the majority shareholder, according to a recent size appeal decision of the SBA Office of Hearings and Appeals.
In Size Appeal of Environmental Quality Management, Inc., SBA No. SIZ-5429 (2012), SBA OHA arrived at the commonsense conclusion that when a majority shareholder has unfettered discretion to fire a company’s directors, the majority shareholder–not the directors–control the company for purposes of the SBA affiliation rules.
Under the SBA affiliation rules, there is no broad exception from affiliation with a non-profit, according to a recent SBA Office of Hearings and Appeals decision.
In Size Appeal of Asklepion Pharmaceuticals, LLC, SBA No. SIZ-5410 (2012), SBA OHA held that the SBA Area Office properly found a company affiliated with several non-profits, causing the company to be ineligible as a small business.
Congress has authorized the SBA to create a mentor-protege program for all small businesses, not just socioeconomically disadvantaged companies.
This major change was included in the 2013 National Defense Authorization Act and signed into law by President Obama on January 3. The 2013 NDAA also addresses the recent proliferation of agency mentor-protege programs (and, by extension, the SBA’s refusal to acknowledge an exception from affiliation for participants in most other agencies’ mentor-protege programs) by requiring most procuring agencies to obtain SBA approval for their mentor-protege programs.
A minority owner with a mere 21.2% stake in a government contractor controlled that contractor for SBA size and affiliation purposes, according to a recent SBA Office of Hearings and Appeals decision.
SBA OHA’s decision in Size Appeal of Civitas Group, LLC, SBA No. SIZ-5424 (2012) is an important reminder that a contractor’s single largest minority shareholder may be deemed to control the company under the SBA size and affiliation rules–even if the contractor’s governing documents do not grant that shareholder actual legal control.
Two Kentucky-based government contractors and their owners have agreed to pay $6.25 million to settle HUBZone fraud claims, according to a U.S. Department of Justice press release.
The costly settlement puts an end to a saga involving DOJ claims of a vacant “principal” office, undisclosed affiliation, and fraudulent statements made to the SBA and and the U.S. Army.
Affiliation based on family relationships is perhaps one of the least understood SBA affiliation rules, and continues to trip up many small government contractors. Case in point: a recent SBA Office of Hearings and Appeals decision finding a small business affiliated with a company controlled by the mother of the small business’s owner, based on the family relationship and subcontracts between the companies.