Tag Archives: SBA size appeals

SBA OHA: Not The Place To “File” A SDVOSB Protest

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For small government contractors, SBA size and eligibility issues are of critical importance.  Recognizing this, the SBA provides an independent forum–the SBA Office of Hearings and Appeals–to review potential mistakes made by the SBA Area Offices, which decide SBA size protests.

Small government contractors must remember, however, that SBA OHA exists to evaluate the decisions made by SBA Area Offices, not to evaluate new allegations raised for the first time in the course of a SBA OHA appeal.  Case in point: SBA OHA’s recent decision in Size Appeal of In & Out Valet Co., SBA No. SIZ-5354 (2012), in which the protester apparently attempted to “file” a SDVOSB protest with SBA OHA during the course of its SBA size appeal.

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Small Business Violates Ostensible Subcontractor Rule, Wins Contract Anyway

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The SBA’s ostensible subcontractor rule has tripped up many small businesses over the years.  The rule states that a small prime contractor is affiliated with its subcontractor when the prime is unusually reliant upon the subcontractor and/or the subcontractor will perform the primary and vital portions of the contract work.

It is worth remembering, however, that the ostensible subcontractor rule only matters if affiliation between the prime contractor and subcontractor would cause a size standard problem.  If the sizes of the prime contractor and its ostensible subcontractor, added together, do not exceed the size standard, a violation of the ostensible subcontractor rule doesn’t matter.

That is what happened in one recent decision of the SBA Office of  Hearings and Appeals, in which a small prime contractor had an ostensible subcontractor–but was declared an eligible small business anyway.

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Joint Venture Between Small Business, Large Company Not “Small”

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Go on, go on.  Call me Captain Obvious for writing this post if you must, but the question actually comes up quite often: can a small business joint venture with a large business and qualify as “small” for purposes of a federal small business set-aside contract?

The answer, as confirmed in a recent SBA Office of Hearings and Appeals SBA size appeal decision, is “no,” unless the joint venturers are participants in the SBA’s 8(a) mentor-protege program.  Unfortunately for the joint venturers in Size Appeal of BY&R Contractors, LLC & West Coast Contractors of Nevada, Inc. JV, SBA No. SIZ-5349 (2012) not only were they not an 8(a) mentor and protege, but neither company was even an 8(a) participant.

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Small Business Wins SBA OHA Size Appeal–But Contract Not Reinstated

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A SBA size protest can be a matter of life and death for a small business, which may find it impossible to effectively compete if it is found “other than small.”  If a protested contractor loses a size protest, it is not necessarily the end of the road: it has the option of filing a size appeal with the SBA Office of Hearings and Appeals.

Winning a SBA OHA size appeal often results in “small” status once again, but a SBA OHA victory may have its limits.  As one contractor recently discovered, if the procuring agency terminates a contract award following an adverse SBA size protest decision, the agency is not required to reinstate the contract if the contractor subsequently prevails in its SBA OHA size appeal.

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SBA OHA: Contractors Must Be Permitted To Contest Affiliation

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If you have ever gotten a traffic ticket, you know the ticket typically presents you with two options: send in your fine (essentially admitting guilt), or appear in court and contest the ticket.  The second option is available because in our democracy, a citizen accused of wrongdoing–even a minor traffic infraction–has the right to contest the charges.

The same is true when it comes to SBA size protests.  According to a recent decision by the SBA Office of Hearings and Appeals, a contractor cannot be found affiliated with another company unless the contractor is given the opportunity to respond to the particular basis of affiliation at issue.

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SBA OHA: SBA Cannot Belatedly Oppose Size Appeal

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No matter your political persuasion, it’s hard to forget the image of Senator John Kerry windsurfing in the famous 2004 Bush-Cheney ad.  The ad attacked Kerry for supposedly changing his mind too often–“flip-flopping,” in political parlance.

It turns out that the dangers of flip-flopping are not limited to politics.  In a recent SBA size appeal decision of the SBA Office of Hearings and Appeals, SBA OHA held that if the SBA’s Office of Government Contracting, or OGC elects not to formally oppose a SBA size appeal, it cannot later change its mind and ask SBA OHA to revisit the size appeal decision.  Because the SBA OGC does not formally oppose most SBA size appeals, SBA OHA’s decision forces the SBA OGC to make up its mind quickly about whether it will play a role in the SBA size appeal process.

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The SBA Affiliation Rules, Trustees, and Negative Control: A Cautionary Tale

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Small government contractors ask me, with some frequency, whether placing a company’s stock in a trust will protect the company from affiliation under the SBA affiliation rules.

I typically answer this question with one of my own: “who will control the trust?”  I tell them that if the same people who currently control the company will continue to control it once the stock is placed in trust, the mere act of placing the company’s stock in the trust is unlikely to shield the company from affiliation with other companies controlled by those same people.

A recent size appeal decision of the SBA Office of Hearings and Appeals confirms that the ordinary SBA affiliation rules typically still apply when a company’s ownership is placed in trust.  In fact, in this size appeal decision, the company in question lost out on a contract because one of the trustees had so-called “negative control” over the company–essentially, the ability to veto the decisions of the other trustee.

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