Ostensible subcontractor affiliation can arise for many reasons–but a small business may be in grave danger of affiliation with its subcontractor when four specific factors are present.
In a recent size appeal decision, the SBA Office of Hearings and Appeals held that a small prime contractor was unusually reliant on its large subcontractor where “four key factors” indicated that the small prime contractor was bringing little to the table but its small business status.
A contractor’s “frantically busy” employee, who was listed as the firm’s contact in SAM, skimmed through an email from the SBA containing a size protest, and took no action to respond.
In a recent size appeal decision, the SBA Office of Hearings and Appeals held that the SBA had properly issued an adverse size determination against the contractor in question after receiving no reply to the size protest–and the fact that the employee who received it was “frantically busy” was no excuse.
A SBA size determination, in which the SBA found a contractor to be an eligible small business for purposes of a particular procurement, was irrelevant to the question of whether the same contractor would violate the limitation on subcontracting under a different solicitation.
In a recent bid protest decision, the GAO (correctly) rejected the procuring agency’s argument that a recent SBA size determination was evidence that a contractor would comply with the subcontracting limitation.
Assembling components into a commercial item does not make a contractor a “kit assembler” for the purposes of the non-manufacturer rule, according to the SBA Office of Hearings and Appeals.
A recent size appeal required OHA to delve in to what is meant by “kit.” In B GSE Group, LLC, SBA No. SIZ-5679 (Sept. 17, 2015), OHA stated that a kit is not a commercial item that has been purchased in parts and assembled, rather, it is a collection of manufactured items packaged together, like a tool kit.
Under the SBA’s small business affiliation regulations, an otherwise small business can be deemed affiliated with a larger business when the firms share “substantially identical business or other interests.” Under this rule, affiliation will be typically be found, as a matter of law, when a small business concern derives 70% or more of its revenue from another firm.
Because most new businesses don’t start up with numerous clients or contracts, a mechanical application of the 70% rule could be disastrous for a new small business faced with an SBA size determination. Thus, the “start-up” exception to the SBA’s affiliation rules—which applies to relatively new businesses whose revenues from its alleged affiliate are insufficient to sustain business operations—can be the saving grace for a small business trying to earn business from the government.
So it was in a recent case decided by the SBA Office of Hearings and Appeals.
Government contractors are expected to be aware of appeal deadlines even if an agency does not mention those deadlines in its decision notifications.
As one contractor recently discovered, a size appeal with the SBA Office of Hearings and Appeals must be filed within the regulatory time frame–and no extension will be granted if the SBA does not notify the potential appellant of the deadline.
Under the SBA’s affiliation rules, the so-called “inter-affiliate transactions” exception applies only where the companies in question would be eligible to file a consolidated tax return.
In a recent size appeal decision, the SBA Office of Hearings and Appeals held that the inter-affiliate transactions exception does not apply when affiliated companies are ineligible to file a consolidated tax return–a result that seems to authorize “double counting” of affiliated companies’ revenues in the context of SBA size determinations.