SBA OHA: Inactive Employees Count for SBA Size Purposes

Back in my undergraduate days at Duke, I attended almost all of the home basketball games.  Occasionally, sometime in the second half, with the Blue Devils up 20 points or more, an opposing player would execute an impressive dunk, and proceed to do a little celebration.  I, along with my fellow Cameron Crazies, would immediately begin chanting, “scoreboard, scoreboard,” while pointing at the device in question.  Our message was, “that’s nice, but it just doesn’t matter.”  (Actually, we Crazies sometimes chanted “just doesn’t matter,” too).

“That’s nice, but it just doesn’t matter” is what the SBA’s Office of Hearings and Appeals had to say in a recent size appeal decision involving the question of whether employees who are sick, on vacation, or even comatose count toward a company’s employee-based SBA size standard.  SBA OHA’s answer: if they’re on the payroll, they count.  Period.

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Subcontractors, NAICS Codes and Small Business Status: The Prime Decides

George W. Bush famously declared himself to be “the decider.”  Although some comedians had fun with the phrase, it’s hard to argue with Bush’s underlying assessment; as head of the government, the President has a lot of decisions to make.  But when it comes to whether you qualify as “small” for purposes of a federal subcontract, it may surprise you to learn that the government isn’t the decider at all.

For a subcontract, the prime contractor—not the government—decides what NAICS code (and corresponding size standard) applies.  The NAICS code the prime contractor selects for your subcontract need not be the same NAICS code assigned to the prime contract as a whole, and you may have the opportunity to lobby the prime contractor to change the NAICS code to one you believe is better-suited for the procurement–and your small business eligibility.

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