Georgia Tech Procurement Assistance Center

SBA OHA: Ownership and control are not the same in the WOSB program

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A company learned the hard way that just because their business is majority-owned by a woman, it doesn’t mean they are a Women-Owned Small Business (WOSB) in the eyes of the SBA.  The question is one of both ownership and control.

The case is SBA No. WOSB-113.  In December 2016, Joint Information Network (JIN) submitted an offer for a contract to provide software engineering and database services in support of the U.S. Navy Naval Information Warfare Center (NIWC).  The contract was to be awarded directly to a WOSB on a sole-source basis.  The contracting officer (CO) awarded JIN the $30 million contract in January 2017.  The contract period for performance ended April 17, 2020, but, as of this decision, the contract was not closed.  When JIN submitted the offer, it was a partnership owned 60% by Ms. Jihong Jin and 40% by her father, Dr. Yahne Jin, per a partnership agreement from April 2016.  The partnership agreement also stated that no partner could enter into a contract for JIN without the approval of the other partner.  In other words, while Jihong was the majority owner, she and Yahne had to agree in order to have JIN sign any agreements.

Continue reading at:  SmallGovCon

OHA: Prime-subcontractor teams are different than Joint Ventures for size purposes

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The ostensible subcontractor rule says that, for a small business or socioeconomic set-aside such as 8(a), the small business prime contractor must perform the primary and vital parts of the contract and can’t be unduly reliant on a subcontractor.  If the small business is found to violate the rule, the size of the small prime contractor and the large subcontractor are grouped for size purposes, which can result in loss of award.  But the ostensible subcontractor rule is different from SBA’s joint venture rules because SBA rules (and other federal law) distinguish between a prime-sub team and a joint venture.  In a recent decision, OHA reversed a determination that a small business prime was affiliated with a subcontractor where the Area Office mixed up the analysis of the ostensible subcontractor rule and the joint venture rules.

Continue reading at:  SmallGovCon

In a size protest, respond to SBA’s requests or there could be an adverse inference

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The Small Business Administration (“SBA”) Office of Hearings and Appeals (“OHA”) has a very clear-cut set of guidelines for deciding appeals of contractor’s size protests in connection with set-asides or other size issues.  In response to a size protest, an Area Office of SBA requests the protested concern to submit an SBA Form 355 (detailed information on the protested concern) and other information, including a response to a protest.  Contractors are required to respond or are likely to suffer from their nonresponse.  Size Appeal of Apogee Engineering, LLC, SBA No. SIZ-6078, Nov. 5, 2020, is an excellent example of the fate of a protested concern that failed to respond and was unable to successfully defend against a size appeal because of an adverse inference.

Continue reading at:  Public Contracting Institute

SBA OHA decides 3-year receipts calculation period still applies

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Since being passed by Congress in late 2018, the Runway Extension Act has been the source of great confusion among small business contractors: would size under receipts-based NAICS codes be calculated under the 3-year calculation period set out in the SBA’s regulations, or under the new 5-year calculation period mandated by Congress?

In a decision just publicly released, the SBA Office of Hearings and Appeals has weighed in.  As of now, the SBA will still calculate size under the 3-year calculation period.

The applicability of the Runway Extension Act was debated in Cypher Analytics, Inc. dba Crown Point Systems, SBA No. SIZ-6022 (Aug. 27, 2019).  In that case, Cypher Analytics was found to be other than small under NAICS code 541611 after the SBA applied a 3-year calculation period.

Cypher Analytics appealed to the OHA, arguing that the SBA erred by not applying the 5-year calculation period required under the Runway Extension Act.  Despite several arguments raised on appeal, OHA was unpersuaded that the 5-year calculation period should apply.

To understand the reasoning behind OHA’s decision, visit:  SmallGovCon

A reminder regarding the importance of SDVOSB control rules

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The recent decision in CVE Appeal of Valor Construction, Inc, SBA No CVE-121-A (June 3, 2019) provides a useful reminder to contractors regarding the difference between unconditional ownership and unconditional control, and the importance of assessing both when analyzing service-disabled veteran owned small business (“SDVOSB”) eligibility.  Specifically, the decision in Valor – which was issued by the Small Business Administration’s (“SBA”) Office of Hearings and Appeals (“OHA”) – demonstrates that an individual’s majority ownership of a SDVOSB, alone, does not vest that individual with unconditional control over the SDVOSB.  The Valor decision further reflects how the revised control regulations may cause eligibility problems for contractors.  Avoiding these pitfalls requires some background knowledge regarding the dual SDVOSB programs and the revision of the applicable regulations, a thorough understanding of the revised regulations themselves, and an awareness of the most common eligibility problems that contractors can face under these regulations.

Continue reading at:  Obermayer

Uncertainty in how small business joint ventures must be managed

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U.S. Small Business Administration (“SBA”) regulations require that mentor-protégé and socioeconomic joint ventures designate the protégé or socioeconomic member as the “managing venturer” of the joint venture.  However, the regulations do not define “managing venturer” or state how much control such a “manager” must maintain over the joint venture.  In the context of typical small business operating entities (i.e., notjoint ventures), SBA’s Office of Hearings and Appeals (“OHA”) has offered detailed guidance on what it means to “control” such entities, but this case law has never been applied to joint ventures.  This leaves joint venturing firms without any direction on the subject — beyond the general requirement that they designate a “managing venturer.”

As discussed in more detail below, this is a “gap” in SBA regulations and case law that has led to uncertainty in the governance of small business joint ventures.  Given the increasing use of joint ventures by contractors pursuing small business set-aside procurements, this uncertainty is increasingly harmful to the business community.

This article surveys the available OHA case law in order to identify the specific limits of the aforementioned “gap,” and then offers predictions and recommendations for the way that SBA should define the term “managing venturer” in order to minimize business uncertainty and thereby promote small business development through joint venture participation.

Continue reading at:  Miles and Stockbridge

CVE verification pointer: remember to provide truthful information

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In government contracting—as in life—it’s important to be honest.  And in our experience, most government contractors are honest.  Where a contractor is dishonest or untruthful, it can face significant sanctions.

So it was in a recent SBA Office of Hearings and Appeals decision, in which the OHA considered the cancellation of an entity’s SDVOSB status.  In CVE Appeal of Afily8 Government Solutions, LLC, SBA No. CVE-125-A (2019), the OHA affirmed the cancellation of Afily8’s SDVOSB verification based on concerns that Afily8 did not provide truthful information to the VA’s Center for Verification and Evaluation.

Continue reading at:  SmallGovCon

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