SBA Size Appeal and Determinations of Common Management and ControlIn the recent case of SBA Size Appeal of Medical Comfort Systems, Inc., and B&B Medical Services, Inc., SBA No. SIZ-5640 (2015), OHA found that the Area Office correctly determined that common management and past affiliation between firms had ended well before the date for determining size and that identity of interest analysis did not apply because there was no evidence of economic dependence or firms being owned by family members or common investors.

The size appeal arose from a size determination concluding that First Community Care, LLC (FCC) is a small business under the $30 million size standard associated with Request for Proposals (RFP) No. VA249-14-R-0173. B&B Medical Services, Inc. (B&B) and Medical Comfort Systems, Inc. (MCS), which had protested FCC’s size, maintain that the SBA’s size determination was flawed. They requested OHA to reverse the SBA’s decision or remanded. OHA disagreed with the appellants and affirmed the SBA’s size determination decision.

The thrust of the affiliation argument on appeal was that FCC was affiliated with another company, Finger Lakes Regional Health System, Inc. and that this affiliation ran through another company. Protestor argued that due to a previous joint venture between Finger Lakes and CCH, and Finger Lakes and FCC are affiliated based on common management of CCP and FCC. The common manager, in addition to being director of FCC, was also president, chairman, and partner of CCP.

The SBA Area Office found that FCC is a wholly-owned subsidiary of CCH, which is in turn owned by Home Health Investments, LLC (HHI). OHA then found that the Appellants did demonstrate clear error in the size determination, and have not established that FCC is affiliated with Finger Lakes or CCP and therefore denied the appeal.

OHA Analysis of SBA Size Appeal and Determinations of Common Management and Control

In its decision, OHA stated in previous rulings it decided that “[t]he mere fact that the Area Office did not specifically comment on [a] protest allegation does not establish that the Area Office committed any error.” Citing SBA Size Appeal of Real Estate Resource Services, SBA No. SIZ-5522, at 10; see also SBA Size Appeal of iGov Technologies, Inc., SBA No. SIZ-5359, at 13-14 (2012) (area office’s failure to comprehensively discuss all available documents did not constitute reversible error). Find out about certificate of competency rules.

What is Common Management Under SBA Affiliation Rules?

SBA small business regulations suggest that contractor firms are affiliated when one firm controls or has the power to control the other, or a third party controls or has the power to control both.  See 13 C.F.R. § 121.103(a)(1).  Many companies get these regulations confused and may ned up getting the contract award taken away. Getting the facts of your case analyze can be helpful even before submitting a bid. Learn about negative control.

Many SBA size protests occur and affiliation can arise when one or more corporate officers, directors, managing members, or partners who control the board of directors and/or management of one company also control the board of directors or management of one or more other concerns. 13 CFR 121.103(e).  These very fact-specific situations.  In order to prevail in a size protest based on common management, you would have to show both small business concerns are  controlled by the same person or persons. See Size Appeal of Bob Jones Realty Co., SBA No. SIZ-4059, at 5 (1995).

The decision also stated that under 13 CFR 121.103(a)(5), the SBA may find businesses affiliated where the interactions between them are so suggestive of reliance as to render the businesses affiliates.” OHA has repeatedly held, though, that “[a]s in all affiliation analysis, the touchstone issue is control. A connection between two concerns does not necessarily cause affiliation.” The SBA size appeal decision also highlighted the fact that there are various legal theories under which the SBA can determine actual or the ability to control. This includes the commonly-used “totality of the circumstances.”

The takeaway here is that affiliation and control in size determinations include complex legal analysis. Finding out that a small business’s relationship with other companies does not conclusively establish control. One has to first analyze the facts and look further into business relationships to conclude that there are affiliation and control.

Avoid Costly Mistakes in SBA Program Litigation. See What We Do to Help

For additional questions and concerns about SBA OHA size appeal decisions about common management and control, determinations or appeal, call our small business size protest lawyers at 1-866-601-5518.

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