As a small business, you may be faced with a small business size protest. Having an experienced SBA size determination and affiliation attorney that also understands the legal disputes arising under NAICS code size standards, to litigate or defend appeal can make the difference between keeping or giving up the awarded contract. The following are direct quotes from the Code of Federal Regulations addressing some of the most FAQs.
What is the SBA Size Standards Table?
The SBA size standards table defines whether a business entity is small and, thus, eligible for Government programs and preferences reserved for “small business” concerns. The SBA Size standards table has been established for types of economic activity, or industry, generally under the North American Industry Classification System (NAICS).
(b) NAICS is described in the North American Industry Classification Manual-United States, which is available from the National Technical Information Service, 5285 Port Royal Road, Springfield, VA 22161; by calling 1(800) 553-6847 or 1(703) 605-6000; or via the Internet at http://www.ntis.gov/products/naics.aspx. The manual includes definitions for each industry, tables showing relationships between 1997 NAICS and 1987 SICs, and a comprehensive index. NAICS assigns codes to all economic activity within twenty broad sectors. Section 121.201 provides a full table of small business size standards matched to the U.S. NAICS industry codes. A fully matching small business size standard table with each NAICS Industry or U.S. Industry code is also published annually by SBA in the Federal Register.[65 FR 30840, May 15, 2000, as amended at 67 FR 52602, Aug. 13, 2002; 74 FR 46313, Sept. 9, 2009].
How does SBA establish small business size standards?
(a) SBA considers economic characteristics comprising the structure of an industry, including degree of competition, average firm size, start-up costs and entry barriers, and distribution of firms by size. It 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 size standard levels.
(b) As part of its review of a size standard, SBA will investigate if any concern at or below a particular standard would be dominant in the industry. SBA will 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. Size standards seek to ensure that a concern that meets a specific size standard is not dominant in its field of operation.
(c) As part of its review of size standards, 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 size standards.
(d) Please address any requests to change existing size standards or establish new ones for emerging industries to the Division Chief, Office of Size Standards, Small Business Administration, 409 3rd Street, SW., Washington, DC 20416.
What are the penalties for misrepresentation of size status?
In addition to the SBA Size Standards Table other laws which may be applicable, section 16(d) of the Small Business Act, 15 USC 645(d), provides severe criminal penalties for knowingly misrepresenting the small business size status of a concern in connection with procurement programs. Section 16(a) of the Act also provides, in part, for criminal penalties for knowingly making false statements or misrepresentations to SBA for the purpose of influencing in any way the actions of the Agency.
Do You need an SBA NAICS Code size standards lawyer to file or defend a size protest?
Generally, the answer is no. However, the risk can be high and the laws applicable to a size appeal bid protest can be confusing. One reason for hiring an experienced government contract attorney that understands NAICS code size standards is that you might want to preserve your rights for appeal. By simply representing yourself in an SBA size of small business protest, you might waive those rights by nit knowing how to preserve the. You can not introduce new evidence on appeal.
How does SBA determine affiliation under the Table of Size Standards?
(a) General Principles of Affiliation.
(1) Concerns and entities are affiliates of each other when one controls or has the power to control the other, or a third party or parties controls or has the power to control both. It does not matter whether control is exercised, so long as the power to control exists.
(2) SBA considers factors such as ownership, management, previous relationships with or ties to another concern, and contractual relationships, in determining whether affiliation exists.
(3) Control may be affirmative or negative. Negative control includes, but is not limited to, 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.
(4) Affiliation may be found where an individual, concern, or entity exercises control indirectly through a third party.
(5) In determining whether affiliation exists, SBA will consider the totality of the circumstances, and may find affiliation even though no single factor is sufficient to constitute affiliation.
(6) In determining the concern’s size, SBA counts the receipts, employees, or other measure of size of the concern whose size is at issue and all of its domestic and foreign affiliates, regardless of whether the affiliates are organized for profit.
(b) Exceptions to affiliation coverage.
(c) Affiliation based on stock ownership.
(d) Affiliation arising under stock options, convertible securities, and agreements to merge.
(e) Affiliation based on common management.
(f) Affiliation based on identity of interest.
What SBA size standards table is applicable to Federal Government Contracting small business programs?
(a) A concern must not exceed the NAICS size standards table for the code specified in the solicitation. The contracting officer must specify the size standard in effect on the date the solicitation is issued. If SBA amends the small business size standard and it becomes effective before the date initial offers (including price) are due, the contracting officer may amend the solicitation and use the new size standard.
(b) The procuring agency contracting officer, or authorized representative, designates the proper NAICS code size standards table and size standard in a solicitation, selecting the NAICS code which best describes the principal purpose of the product or service being acquired. Primary consideration is given to the industry descriptions in the NAICS United States Manual, the product or service description in the solicitation and any attachments to it, the relative value and importance of the components of the procurement making up the end item being procured, and the function of the goods or services being purchased. A procurement is usually classified according to the component which accounts for the greatest percentage of contract value.
Acquisitions for supplies must be classified under the appropriate manufacturing NAICS code size standards, not under a Wholesale Trade or Retail Trade NAICS code. Acquisitions for supplies must be classified under the appropriate manufacturing or supply NAICS code, not under a wholesale trade or retail trade NAICS code. A concern that submits an offer or quote for a contract where the NAICS code assigned to the contract is one for supplies, and furnishes a product it did not itself manufacture or produce, is categorized as a nonmanufacturer and deemed small if it meets the requirements set forth in 13 CFR 121.406(b).
Acquisitions for supplies must be classified under the appropriate manufacturing NAICS code size standards code, not under a Wholesale Trade or Retail Trade NAICS code. Acquisitions for supplies must be classified under the appropriate manufacturing or supply NAICS code, not under a wholesale trade or retail trade NAICS code. A concern that submits an offer or quote for a contract where the NAICS code assigned to the contract is one for supplies, and furnishes a product it did not itself manufacture or produce, is categorized as a nonmanufacturer and deemed small if it meets the requirements set forth in 13 CFR 121.406(b).
Acquisitions for supplies must be classified under the appropriate manufacturing NAICS size standards code, not under a Wholesale Trade or Retail Trade NAICS code. Acquisitions for supplies must be classified under the appropriate manufacturing or supply NAICS code, not under a wholesale trade or retail trade NAICS code. A concern that submits an offer or quote for a contract where the NAICS code assigned to the contract is one for supplies, and furnishes a product it did not itself manufacture or produce, is categorized as a nonmanufacturer and deemed small if it meets the requirements set forth in 13 CFR 121.406(b).
(c) The NAICS code assigned to a procurement and its corresponding small business size standard table is final unless timely appealed to SBA’s Office of Hearings and Appeals (OHA), or unless SBA assigns NAICS code size standards as provided in paragraph (d) of this section.
(d) An unclear, incomplete or missing NAICS code designation or size standard table in the solicitation may be clarified, completed or supplied by SBA in connection with a formal size determination or size appeal.
(e) Any offeror or other interested party adversely affected by a NAICS code designation or size standard designation may appeal the designations to OHA under part 134 of this chapter.
How must a NAICS Code Size protest be filed with the contracting officer?
A protest must be delivered to the contracting officer by hand, telegram, mail, facsimile, Federal Express or other overnight delivery service, e-mail, or telephone. If a protest is made by telephone, the contracting officer must later receive a confirming letter either within the 5-day period in 13 CFR 121.1004(a)(1) or postmarked no later than one day after the date of the telephone protest.
Must a small business size relate to a particular procurement and be specific?
(a) Particular procurement.A protest challenging the size of a concern which does not pertain to a particular procurement or sale will not be acted on by SBA.
(b) A protest must include specific facts.A protest must be sufficiently specific to provide reasonable notice as to the grounds upon which the protested concern’s size is questioned. Some basis for the belief or allegation stated in the protest must be given. A protest merely alleging that the protested concern is not small or is affiliated with unnamed other concerns does not specify adequate grounds for the protest. No particular form is prescribed for a protest. Where materials supporting the protest are available, they should be submitted with the protest.
(c) Non-specific protests will be dismissed.Protests which do not contain sufficient specificity will be dismissed by SBA. The following are examples of allegation specificity:
Are formal size determinations subject to appeal?
(a) Appeals from formal SBA size standards table determinations may be made to OHA. Unless an appeal is made to OHA, the size determination made by an SBA Government Contracting Area Office or Disaster Area Office is the final decision of the agency. The procedures for appealing a formal size determination to OHA are set forth in part 134 of this chapter. The OHA appeal is an administrative remedy that must be exhausted before judicial review of a formal size determination may be sought in a court.
(b) OHA will review all timely appeals of size determinations.
I have filed my 8(a) BD suspension appeal. Now what happens?
The ALJ assigned to the appeal will issue one or more orders addressing any discovery, presentation of documentary evidence, disposition of any motions, scheduling of any oral hearing, or submission of post-hearing briefs. The ALJ decides the appeal based on the documentary evidence and on testimony presented in an oral hearing, if the ALJ decides that it is necessary based on a request. 13 CFR 124.305(c), 134.222(a)(2)).
The ALJ will decide the appeal in a written decision or order setting out the pertinent issues, findings of fact (based on the evidence presented), and conclusions of law (based on statute, regulation, and case law). The ALJ will rule on any motions either in the decision or in one or more separate orders.
What happens after the ALJ issues the decision?
Within 20 days after service of the written decision, the ALJ may reconsider it. 13 CFR 134.409(c). Barring such reconsideration, the decision is the final decision of SBA.
For additional information or to retain a small business bid protest lawyer to assist you in an SBA Size Standards Table (NAICS Size Protest), contact the attorneys at Watson & Associates, LLC for a free initial consultation. Call toll free 1-866-601-5518.