The SBA has changed its affiliation regulations to clarify when a presumption of affiliation exists due to family relationships or economic dependence.
In its major final rulemaking published today, the SBA clears up some longstanding confusion regarding affiliation based on a so-called “identity of interest.”
The SBA will broadly apply the so-called “interaffiliate transactions” exception under the SBA’s size rules, essentially overturning an SBA Office of Hearings and Appeals decision issued last year, in which OHA interpreted the exception very narrowly.
In a Policy Statement issued May 24, 2016, the SBA states that it will broadly apply the interaffiliate transactions exception “regardless of the type of relationship that resulted in the finding of affiliation.”
The WOSB Program, 8(a) Program, and SBA affiliation rules were all on the agenda during my interview today with government contracts guru Mark Amtower on his popular radio show, Amtower Off-Center.
If you weren’t able to catch the show live, just click here to listen or download the audio from Federal News Radio. And be sure to tune in every week as Mark talks government contracts with movers and shakers from industry and government alike.
As few as two common outside investments can result in a presumption of identity of interest, and therefore likely affiliation, according to a recent decision by the Small Business Administration Office of Hearings and Appeals.
OHA’s decision in W. Harris, Government Services Contractor, Inc., SBA No. SIZ-5717 (Mar. 7, 2016), lends some clarity to the SBA’s identity of interest affiliation rule, which provides that businesses or firms are affiliated when they have identical or substantially identical business interests. Although it brings the rule more into focus, the decision in W. Harris could prove troublesome to some small business owners, who may have assumed that a handful of common outside investments would not result in affiliation.
The prime contractor’s management of a contract wasn’t enough to avoid ostensible subcontractor affiliation where the subcontractor would provide the labor, equipment, and facilities for performing the work.
In a recent size appeal decision, the SBA Office of Hearings and Appeals confirmed that, where the subcontractor will provide the goods or services that the agency “actually seeks to acquire,” the subcontractor may be deemed an ostensible subcontractor under the SBA’s affiliation rules.
An 8(a) mentor-protégé agreement, which expired one year after its approval by the SBA, did not protect the 8(a) protégé and its mentor from affiliation–and meant that their 8(a) mentor-protégé joint venture was an ineligible large business.
A recent size appeal decision of the SBA Office of Hearings and Appeals is a cautionary tale for 8(a) protégé and their mentors, and highlights the importance of securing timely SBA reauthorization of 8(a) mentor-protégé agreements.
Individuals who had common investments in eight different companies were treated as a single person for purposes of the SBA’s affiliation rules–and the aggregation of those owners’ interests cost one company a small business set-aside award.
In a recent decision, the SBA Office of Hearings and Appeals explained how the little-understood common investments affiliation rule works, and in so doing, provided an important warning to business owners who may not realize that affiliation can result from common investments in multiple entities.