SBA Size Determination Protest for Violation Ostensible Subcontractor Rule

SBA size determination protests and disputes about the Ostensible Subcontractor Rule are continuously litigated. Many companies are still unclear about how the SBA evaluates the various aspects of the relationship between participating firms.

Simply choosing to submit a teaming partner or subcontractor in your bid is not the end of the analysis. When there is an SBA size determination protest, the SBA digs deep into the relationships between the awardee and the alleged ostensible subcontractor.

Ostensible Subcontractor Rule Must Focus on the Specific Procurement at Issue

An Ostensible Subcontractor Rule analysis is extremely fact-specific and is undertaken on the basis of the solicitation and the specific proposal at issue. Size Appeals of CWU, Inc., et al., SBA No. SIZ-5118, at 14 (2010).

When litigating an SBA size determination protest for violation of the Ostensible Subcontractor Rule, the Area Office must base its determination on solely on the relationship between the parties at that time, which is best evidenced by Appellant’s proposal and anything submitted with the bid.

• Any assertions by a protestor in an SBA size determination that has nothing to do with the specific proposal are immaterial.
• Companies should be aware of the new “similarly situated” rule.

What Are Common SBA Size Determination Problems?

Oftentimes, small businesses do not assess the level of dependence on their subcontractors to actually perform the work.  When it comes to SBA Size determinations, most are familiar with the term primary and vital parts of the contract. However, courts also look at underlying mechanisms outside of the obvious. This includes:

• Quality assurance and surveillance
• Possessing the necessary equipment and facilities
• Over-reliance on subcontractor past performance
• Recruiting qualified employees

The government relies on the awardee small business to make sure that the contract is completed in accordance with the contract terms. Therefore, there is a risk under the Ostensible Subcontractor Rule that any key aspect of personnel, oversight and management could run the risk of affiliation.

If your proposal relies heavily on a teaming partner’s past performance because your company lacks the requisite experience, you run the risk of losing in an SBA size determination protest appeal. See Size Appeal of Dover Staffing, Inc., SBA No. SIZ-5300 (2011); Size Appeal of Sure-Way Systems, Inc., SBA No. SIZ-4972 (2008).

For immediate help with an SBA size determination protest involving the Ostensible Subcontractor Rule call our SBA size protest lawyers at 1-866-601-5518.