Totality of the Circumstances in SBA Size Protests: Lessons from Nisou Enterprises
If you handle federal set-aside work, the Nisou Enterprises decision is worth reading closely. In Size Appeal of Nisou Enterprises, Inc., SBA No. SIZ-6380 (2026), OHA did not say the challenged contractor was definitely small. What OHA did say is just as important: SBA’s Area Office made critical legal and factual mistakes when applying its own affiliation rules, vacated the size determination, and sent the matter back for a new review.
That matters for any company considering a size protest, defending one, or preparing a remand strategy before the Area Office. It also matters for firms and counsel looking at affiliation under the “totality of the circumstances” test.
The takeaway is not merely that SBA can be aggressive. The takeaway is that SBA can get the legal framework wrong, can confuse one affiliation theory with another, and can fail to give a contractor fair notice of the real issue under review.
What the case was about
The procurement was an Air Force solicitation for Comprehensive Construction & Engineering for Facilities Sustainment, Restoration, and Modernization Worldwide under NAICS code 236220, with a $45 million receipts-based size standard at the time of issuance. Nisou was selected for a government contract award in the small business set-aside pool, after which Butt Construction Company filed a size protest arguing Nisou was affiliated with LGC Global, a large business, through family relationships, control, and economic dependence.
The protest focused on two main theories. First, it alleged familial identity of interest based on the relationship between Nisou’s owner and her father, who held senior roles at LGC. Second, it alleged economic dependence, asserting that Nisou derived 70% or more of its receipts from LGC-related work.
The Area Office went further. It found Nisou affiliated not only with LGC but also with a second company tied to the same family, concluded that LGC was other than small, and determined that Nisou’s combined receipts exceeded the size standard. OHA later held that this analysis did not hold up.
What SBA got wrong
The most important error in SIZ-6380 was that the Area Office said it was deciding the case under familial identity of interest, but it actually relied on reasoning that sounded more like totality of the circumstances affiliation. OHA called out that problem directly, explaining that the size determination “confuses the requirements of familial identity of interest and affiliation under the totality of the circumstances.”
That distinction is critical. Under 13 C.F.R. § 121.103(f)(1), familial identity of interest requires more than a family relationship and business overlap. The allegedly affiliated concerns must be owned or controlled by the relevant family members, and the analysis must still center on whether one concern controls or has the power to control the other. OHA found that the Area Office’s “lynchpin” finding—that the father controlled LGC—was not supported by the record.
According to OHA, the record showed that LGC was owned by another entity, that a non-family CEO had full authority over LGC’s day-to-day and long-term decisions, and that the father’s roles as COO and later advisor did not give him authority to negotiate contracts, hire and fire employees, settle disputes, access bank accounts, form joint ventures, or otherwise control the firm. OHA emphasized that influence is not the same as control under SBA’s affiliation rules.
OHA also faulted the Area Office for discounting specific sworn declarations without adequate basis. SBA regulations require greater weight for specific, signed, factual evidence than for unsupported allegations, and OHA found the Area Office did not properly account for declarations describing the father’s limited authority at LGC. In short, the Area Office appeared to rely on suspicion and inference where the regulations required proof tied to actual control.
Why the “totality of the circumstances” issue mattered
The decision is especially important for contractors and any experienced SBA OHA size appeal attorney because OHA did not foreclose the possibility that some broader affiliation theory might still be explored on remand. Instead, OHA said that if SBA wants to rely on totality of the circumstances under 13 C.F.R. § 121.103(a)(5), it has to do the work correctly.
That means two things.
First, SBA must provide the contractor with notice and a fair opportunity to respond if the Area Office is going to investigate a theory beyond what the protest actually raised. In Nisou, OHA found that the protest was based on familial identity of interest and economic dependence, but the Area Office effectively repurposed the record into a broader totality-of-the-circumstances theory without giving Nisou adequate notice of the specific concerns that would ultimately drive the determination.
Second, OHA reiterated that an Area Office cannot simply list ties between companies and call that affiliation. To find affiliation under the totality of the circumstances, the Area Office must identify facts and explain how those facts show one concern controls or has the power to control the other. OHA cited prior precedent holding that ties alone are not enough; the explanation must connect those ties to actual power or control.
That is one of the most useful teachings from the case. A size protest lawyer defending a contractor should not accept a narrative made of hints, family history, old subcontracts, office overlap, or mentor-protégé interactions unless SBA actually explains how those facts amount to control under the regulations.
The notice problem was a major due-process issue
The decision is also a reminder that SBA must give a challenged concern notice of the real basis for affiliation. Nisou argued it never had a fair chance to address alleged affiliation with a second company because that entity was not identified in the original protest. OHA agreed the Area Office failed to provide proper notice and a fair opportunity to respond before relying on that issue.
That is not a technicality. It goes to the core of how a contractor defends itself in a size case. If the Area Office is free to shift theories late in the process without explaining its concerns, the challenged company cannot meaningfully submit declarations, corporate records, financial evidence, or legal argument tailored to the actual issue.
For contractors facing an allegation of affiliation, this part of SIZ-6380 is extremely valuable. It confirms that SBA can investigate beyond the protest’s precise wording, but it cannot do so in a way that deprives the challenged firm of a fair chance to answer the charge.
How mentor-protégé relationships fit into the case
Another important thread in the appeal was the effect of the SBA-approved mentor-protégé relationship. Nisou argued that much of the relationship between it and LGC was shielded by the mentor-protégé framework and that the Area Office improperly used protected activity under the MPA to support affiliation.
OHA did not fully resolve that issue in the final decision because it vacated on narrower grounds, but the appeal briefing highlighted a recurring problem in size protests: Area Offices sometimes treat mentor-protégé collaboration as suspicious without fully analyzing the regulatory shield for assistance provided under an approved MPA. That means both protesters and respondents need to be precise. Not every business connection involving a mentor and protégé proves affiliation, and not every shared resource falls outside the protection of the regulations.
What this means for companies bringing a size protest
If you are bringing a protest under the totality of the circumstances, SIZ-6380 is a reminder to be disciplined. A successful protest is not just a story about connections. It must identify a theory of control and support it with concrete facts: who owns the firms, who has authority, who controls finances, who can bind the company, and how the business relationships create actual leverage or power.
You should also be careful not to blur different affiliation doctrines. Familial identity of interest, economic dependence, and totality of the circumstances are related concepts, but they are not interchangeable. If your protest theory is totality of the circumstances, say so clearly and explain why the facts amount to control, not merely closeness or influence.
What this means for companies defending a size protest
If you are defending a protest, Nisou gives you a roadmap. First, force SBA to identify the exact affiliation theory it is using. Second, test whether the evidence shows actual control or only influence, assumption, or family connection. Third, use sworn declarations and documentary evidence to pin down authority, ownership, governance, banking access, signature rights, and decision-making power.
You should also object if the Area Office begins relying on theories or entities that were never properly disclosed during the investigation. SIZ-6380 confirms that notice matters, and that a contractor has the right to a fair opportunity to address the issues that will decide its size status.
For many firms, that is where an experienced size protest lawyer or SBA OHA size appeal attorney makes the difference. The challenge is not only proving the facts. It is making SBA apply the right regulation, the right precedent, and the right burden of explanation.
The real takeaway from SIZ-6380
The most important lesson from Nisou is simple: SBA does make mistakes when applying its own regulations. In this case, OHA held that the Area Office committed clear errors of law and fact, vacated the determination, and remanded for a new decision.
That should matter to both sides of any size fight. Protesters should understand that they need a clean, regulation-based theory of control. Challenged contractors should understand that an adverse size determination is not automatically the end of the road. When SBA confuses identity of interest with totality of the circumstances, substitutes influence for control, ignores sworn evidence, or denies fair notice, those are appealable errors.
For companies navigating these issues, the practical lesson is to build the record early. Whether you are preparing a protest, answering one, or positioning for an OHA appeal, the case should be framed around the actual control analysis required by 13 C.F.R. § 121.103—not by speculation, narrative, or guilt by association.
If you need immediate help filing or defending an SBA small business size appeal, call our government contract law attorneys at 1.866.601.5518.