What is a Small Business Administration (SBA) Size Protest? By Nicole Wolfe
If you reasonably believe the awardee of a small business set-aside is really a large business, then you can file a Small Business Administration (“SBA”) size protest. The federal government reserves a portion of its procurement dollars for purchasing products or services from small businesses. These set-asides help small businesses compete for federal government contracts. Not surprisingly, however, some businesses who are initially awarded these contracts are actually large businesses posing as small business concerns. A size protest presents a quick and economical option to challenge the award to such a large business.
If a small business suspects the size of an awardee of a government contract set aside for small business is too large, an unsuccessful bidder can challenge the agency’s decision to award the contract to that business by filing an SBA size protest.
Small Business Administration Decides Size Protests
SBA sets size standards to define whether a business entity is small, and thus eligible for government programs and projects reserved for small business concerns. The size standards for the type of economic activity or industry are set forth by the North American Industry Classification System (“NAICS”). Size is based on employee calculation, annual receipts (total income plus the cost of goods sold), and/or affiliates. SBA therefore has the power to decide size protests.
Protests are filed with the Contracting Officer, not SBA
Any interested party (including unsuccessful bidders, contracting officers, or the SBA) may file a size protest with the Agency Contracting Officer responsible for the award. Like other protests, an SBA size protest is time sensitive. An unsuccessful bidder has just five business days after notification of the award to file a protest. The procedure for filing a size protest is governed by the Code of Federal Regulations, Title 13 Part 121.1001-1008.
There is no standard format required for a size protest. The evidence needed to trigger an SBA investigation is low – the only requirement is that the protesting concern provide “some basis for relief” that the protested concern is other-than-small.[1] Many forms of evidence can be used to support the SBA protest, including corporate filings, internet articles, business profiles, and previously awarded contracts.
Contracting Officer forwards protests to SBA for Size Determination
Once the Contracting Officer receives a size protest, they must forward it to the SBA Government Contracting Area office serving the area where the protested business’ headquarters is located. The protested awardee will be notified and will have to provide additional size information as requested by the SBA. The protested awardee has a limited time to respond and failing to adequately respond could be considered an admission that the company is not a small business. If the evidence shows that the gross annual receipts of the business (currently averaged over a business’s latest three complete fiscal years or five complete fiscal years) exceed the size standards for that particular type of activity as set forth by NAICS, that business may be stripped of the award by the SBA’s size determination.
Small business concerns may also be ineligible to receive the award if they are affiliated with other business entities. Under SBA regulations, affiliated companies must aggregate their gross annual revenue or number of employees with their affiliates to determine if it is considered small for a particular procurement.
Decision and Appeal Rights to SBA OHA
The entire process is relatively fast – the SBA area office will usually make a size determination within 15 business days of receiving the protest from the Agency Contracting Officer. An appeal of any SBA size determination must be timely filed with the SBA Office of Hearings and Appeals. The deadlines approach fast and the SBA size determination rules and rules for any appeal to OHA of a size determination can be tricky.
If you need help with an SBA size protest, or assistance in responding to an SBA inquiry where your small business size has been challenged in a protest, please reach out to the Small Business team at Oles Morrison.
Nicole Wolfe works with clients that spans across the firm’s construction, commercial litigation, business and real estate, and government contracts groups, where she has assisted clients with a variety of issues, including construction defect, insurance defense and recovery, contract review, in-depth legal research, and drafting and responding to discovery.
Contact Nicole at: wolfe@oles.com
[1] 13 CFR § 121.1007
