Tag Archives: SBA affiliation rules

SBA Affiliation Rules: President Controlled Company Despite Removal Provision

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A company’s President was deemed to control the company for purposes of the SBA affiliation rules, even though the company’s majority shareholder had the unilateral right to remove the President from office at any time.

In a recent size appeal decision, the SBA Office of Hearings and Appeals held that a company’s President exercised “critical influence” over the company, and that the President’s influence was not rendered illusory simply because the 100% owner could remove the President from office.

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Forming Eight JVs Did Not Create Affiliation Between JV Members

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An 8(a) protege and its mentor were not affiliated with one another, despite forming eight joint ventures over a four-year period–and winning 15 contracts with those joint ventures.

In a recent size appeal case, the SBA Office of Hearings and Appeals upheld the decision of the SBA Area Office, which found that the mentor and protege were not affiliated despite their substantial history of joint venturing.

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Family Relationship, Plus Revenues & Subcontracts, Caused Affiliation, Says SBA OHA

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A small business was affiliated with companies owned by the business owner’s father and siblings, based on the family relationship and the companies’ ongoing history of doing business together.

In a recent size appeal decision, the SBA Office of Hearings and Appeals held that the small business had not successfully rebutted the regulatory presumption that companies owned by close family members are affiliated, because the small business had earned substantial revenues from the alleged affiliates, and intended to issue a subcontract to both affiliates with respect to the procurement at issue.

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Ostensible Subcontractor Rule: Size Determined as of the Date of Final Proposal

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For the purposes of the ostensible subcontractor rule, a firm’s small business size is determined as of the date of final proposal revisions.

As demonstrated in a recent SBA Office of Hearings and Appeals decision, any changes to the relationship between the prime contractor and subcontractor made after the date of final proposal have little to no bearing in determining compliance with the ostensible subcontractor rule.

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SBA Proposed Rule Would Allow PTAC and SBDC Size Status Opinions

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Small Business Development Centers and Procurement Technical Assistance Centers would be permitted to issue advisory small business size status opinions under a proposed rule published last week by the SBA.

The proposed rule, which implements a section of the 2013 National Defense Advisory Act, establishes a “safe harbor” from fraudulent misrepresentation penalties for a small business that obtains an advisory size opinion from a SBDC or PTAC.  But the proposed rule acknowledges that SBDCs and PTACs are not required to provide such advisory opinions–and that new funding will not be awarded for this purpose.

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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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