Under SBA size appeal regulations, concerns are affiliated when one has the power to control the other, or when a third party has the power to control both. 13 CFR121.103(a)(1). If you own 50% or more of a concern, then there is strong chance that an SBA OHA Size appeal protest decision will be against you because you have the power to control that concern. See § 121.103(c)(1).
SBA Size Appeal – What You Need to Know
The SBA size determination will more than likely show that you are the majority owner of both companies. Therefore, you will be deemed affiliated.
Regardless of whether you challenge the SBA size determination on appeal by claiming that you have the businesses have no ties besides common ownership, your chances of winning a size appeal will be slim.
SBA OHA has always ruled that a person “owning 50% or more of a concern is deemed to control it,” See Size Appeal of VoCare Servs., Inc., SBA No. SIZ-5266, at 6-7 (2011); see also Size Appeal of Miltope Corp., SBA No. SIZ-5066, at 7 (2009).
The small business size regulation, 13 CFR 121.103(c)(1), states that 50% or more ownership is control.” The message is that you have to be extremely careful when you own majority shares in more than one company. Although you may have a legal right to do, the proper analysis is that under government contract law, you will be deemed ineligible for the pending contract if someone else files an SBA Size Appeal against you.
SBA Size Appeal Original Protest
A common defense in an SBA Size protest is that the SBA alleges other points not mentioned in the protest. Unfortunately, the SBA is allowed to do so under 13 CFR 121.1009(b). Here the rules generally favor the government. The only likelihood of this defense is when there is an 8(a) Termination and the SBA raises a different issue at the appellate level. This can be a due process violation. See case was litigated by Watson & Associates – Size Appeal of Magnum Opus Technologies, Inc., SBA No. SIZ-5372 (2012).
Final Thoughts On This Type of Size Appeal
As mentioned earlier, if you are starting another business with the hope of getting government contracts with both, you want to be well aware of the affiliation rules based upon common ownerships. You may want to get the legal advice from an experienced small business size protest attorney.