PRIME MAY VIOLATE OSTENSIBLE SUBCONTRACTOR RULE EVEN IF IT PERFORMS PRIMARY AND VITAL REQUIREMENTS OF CONTRACT

The Small Business Administration (“SBA”) size regulations include an “ostensible subcontractor” rule. This rule provides that when a subcontractor is actually performing the primary and vital requirements of the contract, or when the prime contractor is “unusually reliant” upon its subcontractor, the two firms are affiliated (and frequently are “not small”) for purposes of the procurement. 13 CFR § 121.103(h)(4). This rule is designed to prevent “false fronts”—situations where large firms form relationships with small firms to evade SBA’s size requirements. To determine if a prime-sub relationship creates an ostensible subcontractor, all aspects of the relationship are examined. In a recent case, Charitar Realty, SBA No. SIZ-5806 (Jan. 25, 2017), the SBA found a violation of the ostensible subcontractor rule where a prime contractor was … Continue reading

WHO IS THE MANUFACTURER IN A SMALL BUSINESS SET-ASIDE?

When a manufacturing or supply contract is set aside for small businesses, the Small Business Administration (“SBA”) size regulations require that the prime contractor either be the manufacturer of the end item being procured (and the end item must be manufactured or produced in the United States); or must comply with certain nonmanufacturer exceptions. 13 CFR § 121.406. A recent Size Appeal at the SBA Office of Hearings and Appeals (“OHA”) considered what type of actions by a company qualifies it as a “manufacturer.” Size Appeal of MPC Containment Sys., LLC and GTA Containers, Inc., SBA No. SIZ-5802, Jan 11, 2017. The Defense Logistics Agency was procuring collapsible fuel tanks, and set aside the procurement for small businesses in a North American Industry Classification System … Continue reading

AFFIDAVITS ARE GENERALLY ACCEPTABLE IN SIZE APPEALS

The following saga of two appeals demonstrates the importance of sworn affidavits in size protests and size appeals. In the first appeal, CoSTAR Services, Inc., SBA No. SIZ-5745 (2016), the Small Business Administration (“SBA”) Office of Hearings and Appeals (“OHA”) considered two protests that Mark Dunning Industries, Inc. was not small because of affiliation with 24 different entities. The protesters (CoSTAR and Inuit) alleged that affiliation was based on family identity of interest, common investments, common ownership and common management. OHA held that there was no affiliation based on most of the allegations, but remanded the case to the Area Office to render a more complete analysis on whether there was affiliation between two individuals (Mr. Dunning and Mr. White) based on common investment. On … Continue reading

The PCI Network – Three Keys to a Winning Proposal

The next episode of The PCI Network is all about putting together a winning proposal. Lou Chiarella, Director and Faculty at PCI, shares three tips to help you craft a winning proposal. Mr. Chiarella is an attorney in the Washington, D.C. area with 20 years of experience specializing in all aspects of Government contracting.  In addition to his current position, his previous experiences include: Professor of Contract and Fiscal Law, U.S. Army Judge Advocate General’s School, Charlottesville, Virginia; Chief of Administrative and Civil Law, Fort Carson, Colorado; and Trial Attorney, U.S. Army Contract Appeals Division, Arlington, Virginia.

REMINDER: ALASKA NATIVE CORPORATIONS ARE EXEMPT FROM CERTAIN SIZE RULES

Before submitting a size protest, small businesses would be advised to consider that Alaska Native Corporations (“ANCs”) are exempted from a number of the Small Business Administration (“SBA”) size affiliation regulations. A recent protest urged the SBA Office of Hearings and Appeals to find that an ANC had a “substantial unfair competitive advantage,” but OHA dismissed the appeal because only the SBA Administrator could make such a finding. Size Appeal of The Emergence Group, SBA No. SIZ-5766, July 28, 2016. In Emergence Group, the protester asserted that Olgoonik Federal, LLC (“Olgoonik”), awardee in a total small business set-aside, was part of the Olgoonik family of “large” companies which, during 2015 received $200 million in federal contracting dollars. Even if the allegations were true, the SBA … Continue reading

The PCI Network – Ethics in Government Contracting

Understanding the difference between right and wrong isn’t always as easy as you may think. In the Federal Contracting industry, there are important ethical distinctions that can create confusion if you don’t know where to look. Join Fred Geldon, a PCI Director and Faculty, as he explains the importance of ethics in Government Contracting and how to minimize the confusion.

AFFILIATION BASED ON IDENTITY OF INTEREST: COMMON INVESTMENT OR ECONOMIC DEPENDENCE

Two recent cases at the Small Business Administration Office of Hearings and Appeals (“OHA”) address affiliation of companies based on “identity of interest” and discuss two different aspects—common investments and economic dependence.  They are instructive in the ways in which a business may find itself “not small” under the SBA rules.  Readers of this blog are well aware that in determining a company’s size, “SBA counts the receipts, employees, or other measure of size of the concern whose size is at issue and all of its domestic and foreign affiliates….”  13 CFR §121.103 (a)(6).  The SBA rules include affiliation based on “identity of interest” as follows: Affiliation based on identity of interest. Affiliation may arise among two or more persons with an identity of interest. Individuals or … Continue reading

IT’S EASY FOR A SMALL BUSINESS TO APPEAL A DENIED CLAIM

Most small (and even some large) businesses don’t realize how easy it is to appeal a denied claim to either the Armed Services Board of Contract Appeals (“ASBCA”) or the Civilian Board of Contract Appeals (“CBCA”), depending on the agency that awarded the contract.  You don’t even need an attorney to do it. The first thing you need is a written claim submitted to the contracting officer (“CO”), requesting a decision.  41 U.S.C. § 7103.  A claim is a written demand that the government pay you money as a matter of right, or adjust or interpret contract terms.  FAR 2.101.  The CO normally has 60 days to issue a final decision on your claim, but if the CO fails to issue a decision, the claim … Continue reading

THE OSTENSIBLE SUBCONTRACTOR RULE, THE “TEAM,” AND AVOIDING PROBLEMS

The Small Business Administration (“SBA”) adjudicates size protests, typically where one company protests that another company is not small on a procurement that is set-aside for small business only.  An important part of the SBA size regulations is the “ostensible subcontractor rule,” which states that: An ostensible subcontractor is a subcontractor that performs primary and vital requirements of a contract, or of an order under a multiple award schedule contract, or a subcontractor upon which the prime contractor is unusually reliant.  All aspects of the relationship between the prime and subcontractor are considered, including, but not limited to, the terms of the proposal (such as contract management, technical responsibilities, and the percentage of subcontracted work), agreements between the prime and subcontractor (such as bonding assistance … Continue reading

OSTENSIBLE SUBCONTRACTORS: HOW TO KNOW IF YOU ARE ONE

One of the fundamental principles in the Small Business Administration (“SBA”) size regulations is that in determining a company’s size, “SBA counts the receipts, employees, or other measure of size of the concern whose size is at issue and all of its domestic and foreign affiliates….”  13 CFR §121.103 (a)(6).  This issue is often important in the case of prime contractor/subcontractor relationships in a set-aside contract.  A subcontractor who is “not small” may have too much importance in contract execution and may become an “ostensible subcontractor.”  This will mean that it will be considered to be affiliated with, and cause the small business prime contractor to be “not small.”  A recent SBA case extensively explained the ostensible subcontractor rule.  Size Appeal of Modus Operandi, Inc., SBA … Continue reading