SBA SIZE Protest: Size Appeal of Stripes Global, Inc., Non Manufacturer Rule

This appeal involved a protestor’s challenge to the awardee’s small business status under a procurement for manufactured items, where the issues centered on the nonmanufacturer rule, the ostensible subcontractor rule, and the Limitations on Subcontracting.

The protestor argued that the awardee did not qualify as a small business nonmanufacturer and was improperly reliant on another firm’s state licensing, creating affiliation and ineligibility. The procurement rules are very complex and confusing. When the stakes are high,, representing yourself is very risky.

SBA Area Office vs. Protestor

The SBA Area Office found that:

• The procurement was for the supply of manufactured products, so the nonmanufacturer rule applied.

• The ostensible subcontractor rule did not apply to procurements for manufactured items; it is directed to service and construction contracts, not pure supply buys.

• A class waiver of the nonmanufacturer rule for the NAICS code involved meant the usual Limitations on Subcontracting rule did not apply in the way the protestor alleged.

• The challenged firm met all four prongs of the nonmanufacturer rule, including being a small business, primarily engaged in the retail or wholesale trade, taking ownership or possession of the items, and supplying the product of a small business (or qualifying under the waiver).

The protestor took the position that the awardee could not meet the nonmanufacturer rule because it lacked a specific California license and therefore had to rely on another entity’s license, creating a prohibited reliance and affiliation.

OHA’s Ruling and Reasoning

OHA upheld the Area Office’s size determination. OHA upheld the SBA Area Office’s finding that  firm qualified as nonmanufacturer; ostensible subcontractor rule does not apply to procurements for manufactured items; class waiver for NAICS code involved in this solicitation means Limitations on Subcontracting rule does not apply to this procurement. The intervenor firm met s all four prongs of nonmanufacturer rule, specifically there is no requirement that intervenor firm be licensed by State of California for a specific procurement and these products, and, therefore, no validity to allegation that challenged firm is reliant on, and, therefore, affiliated with another firm for this licensing requirement) 

OHA agreed that:

• The ostensible subcontractor rule was simply not in play for a pure supply procurement.

• The class waiver for the NAICS code meant the procurement was not constrained by the typical nonmanufacturer “small business manufacturer” requirement or limitation on subcontracting arguments that the protestor tried to import.

• There was no requirement in the solicitation that the offeror hold the particular California license the protestor cited; because the license was not a condition of the prime’s eligibility or performance, the awardee’s supposed reliance on another firm’s license did not create affiliation for size purposes.theodorewatson

What the Protestor Could Have Done Differently

The protestor’s primary problem was a misalignment between its theory and the actual regulatory framework:

• It relied heavily on the ostensible subcontractor rule in a context (supply contract with a nonmanufacturer waiver) where that rule did not apply.

• It tried to turn a state‑licensing issue into an SBA size/affiliation issue without a clear solicitation or regulatory hook.

• It did not convincingly attack any of the four nonmanufacturer prongs as applied to the actual solicitation requirements.

A more effective approach would have:

• Focused on the exact solicitation terms and any explicit requirements applicable to the prime contractor (rather than general licensing concepts).

• Carefully aligned the protest with the nonmanufacturer rule as modified by the class waiver, identifying a specific prong the awardee actually failed.

• Avoided stretching the ostensible subcontractor rule or affiliation law into an area OHA has repeatedly said it does not control.

Takeaway for Contractors

For supply procurements, the nonmanufacturer rule, class waivers, and limitations on subcontracting interact in specific ways that do not mirror service/ostensible subcontractor analysis. Misreading that framework can doom a protest even if underlying concerns are legitimate. In cases like this, working with SBA size protest lawyers who understand the boundaries of the nonmanufacturer rule and the impact of waivers is critical.

Watson & Associates, LLC’s SBA size protest lawyers and size appeal attorneys provide nationwide help to small businesses and federal contractors in complex nonmanufacturer and supply‑chain size disputes. For immediate assistance, call 1.866.601.5518.