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Ostensible subcontractor rule: SBA OHA confirms ‘four key factors’ to avoid

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In determining whether a prime contractor and subcontractor are affiliated under the ostensible subcontractor rule, the SBA is supposed to consider the totality of the relationship between the parties.  But when it comes to determining whether the ostensible subcontractor rule has been violated, not all components of the prime/subcontractor relationship are created equal.

In a recent decision, the SBA Office of Hearings and Appeals confirmed that there are “four key factors” that are strongly suggestive of ostensible subcontractor affiliation–especially if the subcontractor will perform a large percentage of the overall contract work.

OHA’s decision in Size Appeal of Charitar Realty, SBA No. SIZ-5806 (2017) involved a GSA solicitation for custodial, landscaping and grounds maintenance at two federal courthouses.  The solicitation was issued as an 8(a) set-aside under NAICS code 561720 (Janitorial Services), with a corresponding $18 million size standard.  The solicitation required, among other things, that offerors provide at least three past performance references, completed over the last three years, for similar work.

Keep reading this article at: http://smallgovcon.com/sbaohadecisions/ostensible-subcontractor-rule-oha-confirms-four-key-factors-to-avoid/

4 factors can trigger ostensible subcontractor determination

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SBA logo smallOstensible 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.

OHA’s decision in Size Appeal of Modus Operandi, Inc., SBA No. SIZ-5716 (2016) involved an Air Force solicitation for research, studies, engineering, and related services.  The solicitation was issued as a small business set-aside under NAICS code 541690 (Other Scientific and Technical Consulting Services), with a corresponding $15 million size standard.

The solicitation was a follow-on to a procurement for similar services, known as the Sustainment Systems Engineering & Acquisition Management Services contract.  BAE Systems Technology Solutions & Services, Inc., a large business, was the incumbent under the SSEAMS contract.

After reviewing competitive proposals, the Air Force awarded the contract to Modus Operandi, Inc.  An unsuccessful competitor subsequently filed an SBA size protest.  The competitor alleged that Modus Operandi had proposed to use BAE as its subcontractor, and that Modus Operandi was affiliated with BAE under the ostensible subcontractor rule.

Keep reading this article at: http://smallgovcon.com/sbaohadecisions/ostensible-subcontractor-affiliation-beware-these-four-key-factors-says-sba-oha/

Ostensible subcontractor rule: Management alone wasn’t enough

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Ostensible Subcontracting RuleThe prime contractor’s management of a contract wasn’t enough to avoid ostensible subcontractor affiliation where the subcontractor would provide the labor, equipment, and facilities for performing the work.

In a recent size appeal decision, the SBA Office of Hearings and Appeals confirmed that, where the subcontractor will provide the goods or services that the agency “actually seeks to acquire,” the subcontractor may be deemed an ostensible subcontractor under the SBA’s affiliation rules.

OHA’s decision in Size Appeal of Hamilton Alliance, Inc., SBA No. 5698 (2015) involved a NAVFAC solicitation seeking a contractor to provide refuse collection and processing, as well as the collection, processing and sale of recyclable waste.  Under the solicitation’s Performance Work Statement, the contractor was to be responsible for providing all labor, supplies, materials, equipment, transportation, facilities, supervision and management necessary to collect and process refuse and recyclable waste.  The solicitation was a SDVOSB set-aside under NAICS code 562119 (Other Waste Collection), with a corresponding $38.5 million size standard.

Keep reading this article at: http://smallgovcon.com/sbaohadecisions/ostensible-subcontractor-rule-management-alone-wasnt-enough/

Sorry, subcontractor: No SBA size appeal for you

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When the SBA found a subcontractor to be affiliated with its prime contractor under the ostensible subcontractor rule, the subcontractor could not appeal the SBA’s finding to the SBA Office of Hearings and Appeals.

SBA sealIn a recent size appeal decision, OHA held that a subcontractor lacks the ability to file a size appeal because the subcontractor is not directly affected by the size determination.

OHA’s decision in Size Appeal of Doss Aviation, Inc., SBA No. SIZ-5648 (2015) involved a Department of Defense set-aside solicitation.  After award was made to Hughes Group LLC, the SBA Area Office conducted a size determination.  The SBA Area Office determined that Hughes Group was not an eligible small business due to affiliation with a large subcontractor, Doss Aviation, Inc., under the ostensible subcontractor affiliation rule.

Doss Aviation filed a size appeal.  OHA responded by asking Doss to explain why, as a subcontractor, it had standing to file a size appeal.  OHA directed Doss to previous OHA size decisions, in which OHA held that an alleged affiliate, whose own size was not at issue in the size determination, has no “direct stake” in the outcome of a size appeal, and thus lacks standing to initiate a size appeal.

Keep reading this article at: http://smallgovcon.com/sbaohadecisions/sorry-subcontractor-no-size-appeal-for-you/

Learn more about “affiliation” and the “ostensible subcontractor” rule at: https://www.sba.gov/sites/default/files/affiliation_ver_03.pdf

 

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