Small Business Subcontracting
At Centre Law & Consulting, we concentrate on the special needs of government contractors, while servicing a broad clientele across industries. We understand the needs of small businesses and have extensive experience in small business subcontracting issues. Our attorneys will help you successfully establish and retain eligibility for the small business programs, capture set-aside dollars, establish mentor-protégé relationships, review subcontracting plans and defend size protests.
Centre’s attorneys are intimately familiar with the various size standards and requirements applied by the Small Business Administration (“SBA”) in determining whether a business can be classified as small for purposes of government contract opportunities. Centre assists contractors in analyzing and gathering the information necessary to make decisions regarding small business size determinations, whether it be for a specific contract opportunity or for business planning and strategy purposes.
What is a “size protest?”
Size protests are actions brought by interested parties to challenges the size status of a set-aside contract awardee. The SBA Area Office to which the protest is assigned takes evidence and issues a “Size Determination.” From this determination the losing party can appeal to SBA’s Office of Hearings and Appeals. While legal action is often a last resort, the increased frequency and complexity of small business set-asides has led size protests to become a weapon of choice for many contractors.
What is Affiliation?
Under the SBA rules affiliation exists when an entity controls or has the power to control the small business. Control may arise through ownership, management or other relationships between the parties. When such control exists, SBA will view the entities as “affiliated”. Depending on the NAICS code being used, SBA will aggregate either the two businesses’ receipts or their number of employees; if those aggregate values exceed the relevant size standard, each affiliated firm becomes ineligible for a small business set-aside prime contract.
Why are Affiliation Rules Important?
If a competitor files a “size protest” again based on your alleged affiliation with another business, you may be found ineligible for contract award. Alarmingly, a finding of affiliation may disqualify you from the award of future set-aside contracts as well.
Can I protest another company’s set-aside contract award because they are affiliated with another company?
Yes, if you are an interested party and have reason to believe that the awardee is affiliated in a way that makes it large, you can protest the awardee’s size status before SBA. But don’t delay; there are strict time requirements to follow or else your protest will be dismissed.
SBA’s 8(a) mentor/protégé program allows newly formed small businesses to team with successful large companies under a structured program that provides small businesses with the knowledge and resources necessary to succeed in their chosen industry. The key benefit for small protégés is teaming with large mentors to bid on contracts with broader scopes of work or stringent past performance requirements for which the protégé alone would not be qualified. The principal benefit for large mentors is access to set-aside contracts for which they would otherwise be too large. When a mentor teams with its protégé, under certain circumstances, SBA allows the two firms to work together without triggering SBA affiliation rules.
Centre Law & Consulting’s team is keenly aware of the responsibilities of both the mentor and protégé under these arrangements, and has assisted both small companies and large companies take advantage of their benefits.
The non-manufacturer rule applies only to small business prime contractors who offer to the government products manufactured by other entities. The complete rule has four requirements for these prime contractors — the “non-manufacturer”:
- Does not exceed 500 employees;
- Is primarily engaged in the retail or wholesale trade and normally sells the type of item being supplied;
- Takes ownership or possession of the item(s) with its personnel, equipment or facilities in a manner consistent with industry practice; and
- Will supply the end item of a small business manufacturer, processor or produced made in the United States, or obtains a waiver of such requirement pursuant to paragraph (b)(5) of this section.
The non-manufacturer rule is intended to prevent small business prime contractors from being mere “pass throughs” in the supply chain. By far the most common pitfall is the fourth (iv) requirement — that the small business prime must provide US-made goods from a small business manufacturer or else obtain a waiver of this requirement. Waivers are granted by SBA when there are no small business manufacturers of the product being supplied, but it should be kept in mind that even where a non-manufacturer rule waiver is obtained, it does not waive the other three requirements of the rule, nor any applicable domestic preference rules such as the Buy American Act.