According to the SBA small business size protest requirements, filing a challenge against your competitor must be approached with caution.
If you file a legally defective small business size protest, the SBA will move to dismiss your case.
SBA Small Business Size Protest Filing Requirements
A small business size bid protest must be sufficiently specific to provide reasonable notice as to the grounds upon which the protested concern’s small business size standard is questioned.
Must show adequate grounds for a size protest: You, or your lawyer, must provide some basis for the belief or allegation stated in the protest. If your SBA small business size protest merely alleges that the protested concern is not small or is affiliated with unnamed other concerns, it will not pass the size protest requirements test because it does not specify adequate grounds for the protest. See 13 CFR 121.1007(b).
If a protest is found to be non-specific, the SBA must dismiss it for lack of compliance with small business size protest requirements. In the past, SBAOHA has stated that, in reviewing non-specific small business size protests, it will consider:
- Whether the protest was sufficiently specific to provide notice of the grounds upon which the protestor was contesting the challenged firm’s size; and
- Whether the bid protest included factual allegations as a basis for these grounds.
What is New With Small Business Size Standard Regulations
SBA increases monetary size standards to account for inflation since 2008
The U.S. Small Business Administration (SBA or Agency) has issued new rules that do the following:
- Adjusts monetary based industry small business size standards (i.e., receipts, assets, net worth, and net income) for inflation that has occurred since the last adjustment in 2008. These adjustments are in addition to the recent revisions that were part of the comprehensive review, as mandated by the Small Business Jobs Act of 2010 (Jobs Act).
- Adjusts program based SBA size standards, with the exception of the new alternative size standard for SBA’s 7(a) and 504 loan programs that was established under the Jobs Act. The new alternative size standard will remain in effect until SBA establishes a permanent alternative size standard for the 7(a) and 504 loan programs.
- Deletes references to Surety Bond Guarantee small business size standards for contracts awarded in the Presidentially declared disaster areas following Hurricanes Katrina, Rita, and Wilma in 2005.
- Deletes the determination date for eligibility under the Agency’s Economic Injury Disaster Loan (EIDL) Program in connection with Hurricanes Katrina, Rita, and Wilma.
How Does SBA Establish Small Business Size Standard Requirements?
When evaluating small business size standards, the SBA considers economic characteristics comprising the structure of an industry, including degree of competition, average firm size, startup costs and entry barriers, and distribution of firms by size.
- The SBA also considers technological changes, competition from other industries, growth trends, historical activity within an industry, unique factors occurring in the industry which may distinguish small firms from other firms, and the objectives of its programs and the impact on those programs of different SBA size standard levels.
- As part of its review, the SBA will investigate if any concern at or below a particular standard would be dominant in the industry. The SBA will also take into consideration market share of a concern and other appropriate factors which may allow a concern to exercise a major controlling influence on a national basis in which a number of business concerns are engaged.
- Regulations seek to ensure that a concern that meets a specific size standard is not dominant in its field of operation.
- As part of its review of each small business size standard, the SBA’s Office of Size Standards will examine the impact of inflation on monetary-based size standards (e.g., receipts, net income, assets) at least once every five years and submit a report to the Administrator or designee.
If SBA finds that inflation has significantly eroded the value of the monetary-based size standards, it will issue a proposed rule to increase small business size standards.
Specificity Required in SBA Size Standard Protest
When you appeal the SBA’s small business size standard protest dismissal decision, you simply cannot use terms such as “possible affiliation” or that another company may be a “possible affiliate.”
Instead, small business size protest requirements mandate that you must present a factual basis for the allegation such as postings on the company’s website, knowledge of a prime hiring incumbent employees where the incumbent could not have bid on the project.
SBA bid protest requirements require more than mere allegations. You have to specifically identify how your competition violates SBA’s affiliation rules.
This level of government contract law is very brutal. The importance of filing a sound SBA small business size protest cannot be overemphasized because you have to preserve your rights to appeal if necessary.
When the SBA makes an adverse size determination decision, you cannot introduce new evidence on appeal to SBA OHA to cure the mistake. See, for example, Appeal of EnviroServices & Training Center, LLC, SBA No. SIZ-5517 (2013) (finding a protest nonspecific when its statements regarding affiliation lacked explicitness.)
SBA Affiliation Size Standard Protest Information
The SBA has helpful information on its Website to further explain important small business size standard protest requirements and considerations.
What is an “affiliate”? The SBA determines whether an entity qualifies as a small business concern by counting its receipts, employees, or other measures including those of all its domestic and foreign affiliates, regardless of whether the affiliates are organized for profit. 13 CFR 121.103(a)(6).
SBA has a specific set of rules that explain when another person, business or entity is considered an affiliate for small business size purposes.
What are the general principles of affiliation for purposes of a small business size protest? Generally, affiliation exists when one business controls or has the power to control another or when a third party (or parties) controls or has the power to control both businesses.
Control may arise through ownership, management, or other relationships or interactions between the parties. See also information about SBA size protest timeliness requirements. See information about standing to file a size protest.
Types of Control Reviewed
According to the SBA, Control may be affirmative or negative. Negative control for purposes of small business size protest requirements includes instances where a minority shareholder has the ability, under the concern’s charter, by-laws, or shareholder’s agreement, to prevent a quorum or otherwise block action by the board of directors or shareholders.
Developing and filing an SBA size appeal can be complicated because requires factual allegations that apply a unique set of rules.
One set of facts alone may not win your small business size protest or appeal. The SBA makes will consider the totality of the circumstances when determining whether affiliation exists and may find affiliation based on the totality of the circumstances even though no single factor alone may be sufficient to constitute affiliation.
If SBA affiliation rules conclude that affiliation exists, and small business size protest requirements are met, then SBA will count the receipts, employees, or other measure of size for the concern whose size is at issue combined with the receipts, employees, or other measure of size for all of its domestic and foreign affiliates, regardless of whether the affiliates are organized for profit. See additional information about SBA Size Appeal and Determinations of Common Management and Control.
Call our Small Business Size Standard Protest Lawyers for Immediate Help.
For additional information about SBA small business size standard protest requirements or to get help either defending or filing an SBA size protest or appeal, call our SBA small business size protest lawyers at 1-866-601-5518.