Tag Archives: size protests

Beyond Tax Returns: Federal District Court Says Contractors Must Include Information Outside Tax Returns in Calculating Size

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When it comes to calculating a company’s receipts for size purposes, the procedure for is (or at least was) pretty simple: Look at the company’s tax returns. Indeed, it has long been SBA’s position that they can only consider tax returns, as noted in Nordstrom Contracting & Consulting Corp., SBA No. SIZ-5891 (Mar. 7, 2018) (“[T]here is no authority for an area office to consider any evidence apart from tax returns…when calculating a firm’s average annual receipts.”) among other cases.  In other words, if something was not mentioned in a tax return, it couldn’t be considered by SBA. The only exception was if the tax returns were not filed, in which case SBA will review financial statements or similar information in lieu. 13 CFR § 121.104. Therefore, other than that exception, a contractor only needs to rely on the information in its tax return when making its size representation.

But the U.S. District Court of the District of Columbia (DDC) thinks otherwise. On May 18, 2023, it entered a decision on opposing motions for summary judgment in a size protest that had become a False Claims Act case. In this decision, it concluded the opposite: Contractors must in some cases consider information outside their tax returns. Let’s take a deeper dive.

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Adverse Inference, the Wrong Way to Lose a Size Protest

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An adverse inference is a penalty that the Small Business Administration (SBA) can enforce as part of a size protest. During a size protest determination, SBA will ask the protested company lots of questions. Sometimes, a protester will not answer those questions, either on purpose or due to oversight. Depending on the circumstances, SBA can apply an adverse inference if a protested company fails to respond to questions. If SBA applies an adverse inference, that means that the SBA Area Office will determine that the information that was not provided would prove that the company is not a small business. A recent decision reminds us about this penalty. If you are in a similar situation, reach out to a firm like ours to help think of a way to respond to SBA.

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FAR Updates: Size Protests for Orders, Rules for 8(a) Follow-On Contracts

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The FAR Council has released updates that will impact a couple aspects of small business contracting. One is that contractors can now file size and socioeconomic status protests for certain types of orders, under strict timelines. Second is that agencies must notify SBA when they seek to remove certain contracts from the 8(a) Program. While these rules were present in some form in SBA rules, they are now firmly ensconced in the Federal Acquisition Regulation as well. Below, I discuss the highlights of these rules as well as any differences from the SBA rules.

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Technically Unacceptable Offeror Cannot Protest Awardee’s Size, Says OHA

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In a recent size determination appeal, OHA confirmed that an offeror found technically unacceptable does not have standing to protest an awardee’s size under SBA’s regulations. As such, OHA denied the appeal and affirmed the Area Office’s size determination dismissing the size protest on such grounds.

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SBA Turns Spotlight on its Size and Status Protest Process

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The Small Business Administration’s (SBA) Office of Inspector General (OIG) recently took a look at SBA’s recent small business size and status protests to determine “whether the SBA had effective controls in place to (1) ensure protest decisions were properly enforced and to (2) monitor the protest process.” Overall, the OIG had positive things to say about the the protest process. What’s interesting for small business federal contractors are some of the numbers from this report, detailed below.

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Nonprofit Parent Companies do not Automatically Cause Affiliation for SBA Size Determinations

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The Office of Hearings and Appeals, more commonly referred to as OHA, is tasked with deciding size determination appeals that arise under the Small Business Act of 1958, as well as 13 C.F.R. parts 121 and 134. When an unsuccessful offeror raises a question, via a size protest, regarding an Awardee’s size under the North American Industry Classification System (NAICS) code on any given solicitation, the SBA Area Office will review the protest and issue a size determination. Then, a losing party can appeal the size determination to OHA.

Affiliation is a common topic that OHA addresses. In a recent decision, OHA looked at the question of how nonprofits fit into the affiliation rules. Since a small business has to be a for-profit entity, can a small business be affiliated with a nonprofit parent company?

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Back to Basics: Size Protests and Appeals

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When a business is poised to win a federal contract award set aside for small businesses, there is always the potential for a competitor to challenge that award on the basis that the proposed winner is not actually a small business based on SBA’s size and affiliation rules. Or, if your company just lost an award, you may consider challenging that the proposed winner is a small business. Either way, it pays to know the basics behind size protests and appeals. While you could read through my recent handbook on Procedures and Pitfalls of Size Protests and Appeals (it’s a good read!), here are some key things to keep in mind when considering size protests and appeals.

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