Size and Affiliation First Wednesday Virtual Learning Series

Size and Affiliation First Wednesday Virtual Learning Series 2019

Hosts Christopher Eischen, Procurement Center Representative SBA Office of Government Contracting, Area IV, Kansas City, MO Gwen Davis, Procurement Center Representative SBA Office of Government Contracting, Area IV, Minneapolis, MN 3

Welcome to “SBA Virtual Learning 2019” 1. Questions answered during the final 10 minutes. 2. Technical problems: Contact the moderator with a note or call AT&T Support Desk at 1 -888 -796 -6118 3. Page numbers stated for those working off hard copies of the program. 4. We cover the “SBA Quick Reference” as time allows. 5. For more SBA training visit the SBA Learning Center website https: //www. sba. gov/tools/sba-learningcenter/search/training 4

Association of Procurement Technical Assistance Centers (APTAC) Procurement Technical Assistance Centers are a vital resource partner. • APTAC posts past “First Wednesday” programing at this link: http: //www. aptac-us. org/for-contracting-officers-sbawebinar-library/ • Contracting officer resources: “How PTACs partner with federal agencies”: http: //www. aptacus. org/federal-partners/ • Find your nearest Procurement Technical Assistance Center at http: //www. aptac-us. org 5

FIRST WEDNESDAY VIRTUAL LEARNING SERIES 2019 SCHEDULE 1: 00 to 2: 00 Central Time FY 2019 Date Topic 1 October 3, 2018 Understanding the Non-Manufacturer Rule 2 November 7, 2018 Size and Affiliation 3 December 5, 2018 Joint Ventures 4 January 9, 2019 Certificate of Competency (COC) Program 5 February 6, 2019 Market Research 6 March 6, 2019 Woman Owned Small Business (WOSB) Program 7 April 3, 2019 Historically Underutilized Business Zone (HUBZone) Program 8 May 1, 2019 8(a) Program 9 June 5, 2019 Service Disabled Veteran Owned (SDVOSB) Program 10 July 10, 2019 Regulation Updates 11 August 7, 2019 All Small Mentor Protégé Program The program schedule is for information only and is subject to change. 6

One Continuous Learning Point • Self-service: Using the Power. Point that was sent with your invitation for this training event, fill in your name on the certificate slide and save. Download the certificate and print for your records. You submit your request for training credit IAW your agency policy, i. e. FAITAS. • Phoning in only: If you listen in groups and you want all attendees to be included on the future mailing list, send email addresses of participants in an excel document to sbalearning@sba. gov. 7

“SBA 1 st Wednesday Virtual Learning 2019” This Certificate is awarded to Insert Your Name Here For completion of Size and Affiliation This training seminar may be credited towards “Continuous Learning Points” as described in OFPP Policy Letter 05 -01. Recommendation of One CLP. 11/07/2018 Pamela J. Beavers Director, Area IV SBA Office of Government Contracting DATE 8

Today’s Speaker Stephanie Lewis Area Size Specialist Office of Government Contracting Area V (AR, CO, LA, MT, ND, NM, OK, SD, TX, UT, WY) U. S. Small Business Administration 9

Topics Covered Size ◦ Size standards ◦ NAICS Codes ◦ Nonmanufacturer Rule (NMR) ◦ Limitations on subcontracting (not size issue) Affiliation ◦ Types of affiliation ◦ Joint Ventures – join December’s webinar! ◦ Mentor-Protégé programs Size Protests and Appeals 10

Why is size status important? 1. Federal Contracting: Set aside for small businesses must be awarded to legitimate small businesses to ensure an even playing field 2. Other situations: ◦ Programs of other agencies – patents and licensing ◦ Certifications – VIP, 8(a), WOSB, HUBZone ◦ Obtaining federal property 11

What is a Small Business? Organized for profit 2. Place of business in the U. S. § And operates primarily in the U. S. , or makes a significant contribution to the U. S. economy i. e. payment of taxes, use of American products, labor, or materials 3. Each NAICS has a receipts-based OR employeebased size standard § Each North American Industrial Classification System (NAICS) code has a small business size standard § NAICS are created by the Dept. of Census, not SBA § Wholesale and retail NAICS are not used in 1. 12

SBA Size Standards Commercial and Institutional Building Construction $36. 5 541310 Architectural Services $7. 5 541320 Landscape Architectural Services 541330 Engineering Services 236220 541330_a_Except Military and Aerospace Equipment and Military Weapons 332322 Sheet Metal Work Manufacturing 336112 Light Truck and Utility Vehicle Manufacturing $7. 5 $15. 0 $38. 5 500 employees 1, 500 employees It’s important to recognize that a firm can be small for some NAICS while at the same time be ‘other than small’ (large) for others. www. sba. gov/tools/size-standards-tool 13

How SBA sets Size Standards SBA has exclusive authority to set the small business size standard for each NAICS code 2017 NAICS/Size Standards Rolling reviews every five years Adjustments for inflation Changes apply to new solicitations posted after rule takes effect (or CO may modify them into an existing open solicitation at their discretion) 14

Average Annual Receipts (AAR) Use Federal Tax Returns q Cost of Goods Sold plus Total Income q Average of last three completed fiscal years q Number of Employees Count all individuals employed on a full-time, parttime, or other basis. q Numbers of employees for each of the pay periods for the preceding completed 12 calendar months (running average). q 15

Exclusions- - 13 CFR § 121. 104(a) 1. 2. 3. 4. 5. Inter-affiliate transfers net capital gains or losses taxes collected for and remitted to a taxing authority if included in gross or total income proceeds from transactions between a concern and its affiliates amounts collected for another by a travel agent, real estate agent, advertising agent, conference management service provider, freight forwarder or customs broker Inclusions q. Receipts or employees of an affiliate 16

Recognizing a small business General rule: Contracting Officer (CO) “shall” accept self-certification unless there is “a reason to question” the firm’s self-certification. SAM self-certification ◦ Must be updated every 12 months ◦ Effective at time of offer ◦ Can use date adjustment field to look up size for previous dates 17

Assigning NAICS codes Best describes the principal purpose of the product or service being acquired 13 CFR 121. 402(b) Subcontracts: ◦ NAICS determined by prime contractor ◦ Reflects product or service obtained in the subcontract NOT just to make sub small ◦ Nonmanufacturer Rule & Limitation on Subcontracting rules do not apply 18

As of What Moment is Size Determined? “…as of the date the concern submits a written selfcertification that it is small to the procuring activity as part of its initial offer (or other formal response to a solicitation) which includes price. ” 13 CFR § 121. 404(a) Multiple Award Contracts – “a business is small at the time of offer for the Multiple Award Contract, it is small for each order issued against the contract, unless a contracting officer requests a new size certification in connection with a specific order. ” 13 CFR 121. 404(a)(1) 19

As of What Moment is Size Determined? A small business which becomes large after written self -certification is still considered small for the life of that contract (including options) unless recertification is requested/required. 13 CFR § 121. 404(g) In recertification, size is determined as of the date the concern self-certifies to the order/contract. 13 CFR § 121. 404(g) 20

SIZE RECERTIFICATION GENERAL RULE: if the concern is small at the beginning, it is small for the life of the contract (including options). EXCEPTION: recertification of size is required if there is a: ü novation or ü merger or acquisition without a novation or ü “long-term contract” (over 5 years including options; includes MAS, MAC, and GWACS). For long-term contracts, contractors must recertify before the end of the fifth year and every time an option is exercised thereafter. 13 CFR § 121. 404(g)(1)-(3); FAR § 19. 301 -2 21

Limitations on Subcontracting Supplies: 50% of amount paid to it (excluding costs of materials) Services: 50% of the amount paid to it General Construction: 85% of the amount paid to it (excluding costs of materials) Specialty Construction: 75% of the amount paid to it (excluding costs of materials) Work performed by similarly situated entities (SSEs) does not count toward the percentage 13 CFR § 125. 6 22

Similarly Situated Entities (SSE) An SSE is a firm that meets the same size and status requirements as the prime for the subject procurement. I. e. , a women owned small business (WOSB) subcontractor for a contract that is set aside for womenowned small businesses (WOSB) Firms that are “similarly situated entities” (SSEs) will not be found to have an ostensible subcontracting relationship. 23

Manufacturing Contracts On a small business set-aside contract, the offeror must be the Manufacturer or meet the requirements of the Non. Manufacturer Rule Not applicable to small business set-asides between the MPT and the Simplified Acquisition Threshold (SAT) ◦ IS APPLICABLE TO SBSAs over the SAT ◦ IS APPLICABLE TO SOCIO-ECONOMIC SBSAs of any dollar level Applies to orders off GSA Schedule if they are set-aside for small business Has to be self-performed by the offeror themselves (not an affiliate) 13 CFR § 121. 406 24

Non-Manufacturer Rule (NMR) If a procurement is set-aside for small business and has been assigned a manufacturing or supply NAICS code, the small business offeror must: (i) have less than 500 employees; (ii) be primarily engaged in the retail or wholesale trade and normally sells the type of item being supplied; (iii) take ownership or possession of the item(s) with its personnel, equipment or facilities in a manner consistent with industry practice; and (iv) supply the end item of a small business manufacturer made in the United States OR obtain a waiver of such requirement… Waivers (waive subsection (iv) only) may be either class or individual and must be in place before receipt of offers. See procedures in 13 CFR § 121. 1204. Class waivers publicized on SBA’s website. Individual waivers must be announced in 25

AFFILIATION 26

Two Types of Affiliation General ◦ On-going basis For a Specific Procurement ◦ Joint venture ◦ Affiliated only for the contract at hand 27

AFFILIATION THE KEY TO SIZE IS AFFILIATION A concern’s size always includes the size of all of its domestic and foreign affiliates. 13 CFR § 121. 103(a)(6) Separate divisions, subsidiaries, locations, CAGE codes, NAICS codes, product lines, state of incorporation, payment of taxes have no bearing on whether affiliation exists. THE KEY TO AFFILIATION IS CONTROL “Concerns are affiliated…if one concern controls or has the power to control the other, or a third party has the power to control both. ” 13 CFR § 121. 103(a)(1); FAR § 19. 101 28

Affiliation Factors GENERAL �Common ownership �Common management �Identity of Interest (family members, pattern of common investments, dependence through contractual relationships) �Newly Organized Concern CONTRACT SPECIFIC �Joint Ventures/Teaming 29

For instance… • I own all of the following : ü 100% an ice cream parlor in Chicago ü 50% of a furniture manufacturing plant in Paraguay ü 75% of a machine shop in Algeria and • • None of them do any business with each other or have any connection with the others. But they are all affiliated because the same person controls all of them – regardless of type of business and location (domestic/foreign) 30

For instance… • I own all of the following : 75% of Company A 33. 3% of Company B My two children each also own 33. 3% 14% of Company C Other owns own 40%, 6% 10% of Company D There are 9 other shareholders each with 10% I am one Director on a 2 person Board of Directors My common control causes Company A, B & D to 31

Is a Teaming Agreement a Joint Venture or a Prime/Subcontractor Relationship? Can be either 32

Prime / Subcontractor Relationship A potential prime contractor agrees with one or more other companies to have them act as its subcontractors under a specified Government contract 33

Joint Ventures (JV) • JV must be in writing and registered in SAM • Organized for a specific and limited purpose • Each joint venture member must qualify as small for the NAICS code assigned to the procurement SB 1 ($7 million ) + SB 2 ($4 million) Size Standard $10 million 13 CFR § 121. 103(h) 34

8(a) Mentor–Protégé JVs A joint venture formed by an SBA-approved mentor and 8(a) protégé (per § 124. 520) may bid on a federal procurement as a small business concern if the protégé is small…. 13 CFR § 121. 103(h)(3)(iii) SBA must: ü approve both mentor-protégé and JV Agreements (on 8 a set-asides - 13 CFR 124. 513(c)). ü written SBA approval of M/P Agreement must be given before offer ü written SBA approval of JV Agreement must be given before award 35

“All Small” Mentor–Protégé JVs A joint venture submitted by an SBA-approved mentor and protégé may bid on a federal procurement as a SBC if the protégé is small…. 13 CFR § 121. 103(h)(3)(ii) SBA must: ü Approve the M/P agreement before offer While SBA does not review the JV Agreement, it must still meet the requirements of a Joint Venture Agreement and will be evaluated if there is a size protest. 13 CFR 125. 9(e) 36

Ostensible Subcontracting A subcontractor is an ostensible subcontractor if: The subcontractor performs the primary and vital requirements, or The prime contractor is unduly reliant upon the subcontractor. Treated as a Joint Venture 37

SIZE PROTESTS 38

Which Size Protests Must be Sent to SBA? ALL OF THEM Protests must be filed with CO, not SBA. COs must forward to SBA. COs/agencies do not have the legal authority to: ü decide a size protest; ü ignore a size protest; or ü advise the protester to modify, change, or resubmit the protest. 13 CFR § 121. 1006(a); FAR § 19. 302(c)(1) Size protests ALWAYS go to SBA Area Offices. Not to SBA District Offices, not SBA Regional Offices, and not SBA HQ. 39

Referral Procedure Notify unsuccessful offerors and then wait five days before making award. Pre-award notification is required for RFPs/RFQs and a great idea for IFBs. FAR § 15. 503(a)(2) Which Area Office? The one that has jurisdiction over state in which HQ of protested concern is located. 13 CFR § 121. 1003; FAR § 19. 302(c)(1) 40

Area of Jurisdiction If the headquarters of a protested concern is located in: Forward the protest to the SBA Office of Government Contracting: CT, ME, MA, NH, NJ, NY, RI, VT 10 Causeway Street, Room 265 Boston, MA 02222 -1093 Janette Fasano (617) 565 -5622 DE, DC, MD, PA, VA, WV 1150 First Avenue, Parkview Towers King of Prussia, PA 19406 Helen Goza (610) 382 -3190 helen. goza@sba. gov AL, FL, GA, KY, MS, NC, SC, TN 100 S. Biscayne Boulevard, 7 th floor Miami, FL 33131 Ivette Bascumbe (305) 536 -5521, x 182 Ivette. Bascumbe. mesa@sba. gov IL, IN, IA, KS, MI, MN, MO, NE, OH, WI 500 West Madison Street, Suite 1150 Chicago, IL 60661 David Gordon (312) 353 -7674 David. Gordon@sba. gov AR, CO, LA, UT, WY, NM, OK, TX, MT, ND, SD 4300 Amon Carter Boulevard, Suite 116 Fort Worth, TX 76155 Stephanie Lewis (817) 684 -5305 Stephanie. Lewis@sba. gov AK, AZ, CA, HI, ID, NV, OR, WA, Guam 455 Market Street, 6 th floor San Francisco, CA 94105 Esmeralda Sanchez (415) 744 -4242 Esmeralda. sanchez@sba. gov 41

Status of Award During Protest May not make award for at least 15 business days (until SBA issues its formal determination) unless CO “determines in writing that an award must be made to protect the public interest. ” 13 CFR § 121. 1009(a)(2); FAR § 19. 302(g)(1) CO can award after 15 days—even if SBA’s size determination is not finished—by making a formal finding “in writing that there is an immediate need to award the contract and that waiting…will be disadvantageous to the Government. ” 42 13 CFR § 121. 1009(a)(3); FAR § 19. 302(g)(2)

Advisory, Premature, “Particular” Contract Protests Size protests cannot be used to vet potential awardees Protests must be in connection with a “particular” (i. e. , pending) procurement There is no “secret” SBA database listing all 28 million small businesses; we use SAM Premature protests (i. e. , before notification of successful offeror) will be dismissed, even if made by CO 43 Inform SBA if there is also a GAO protest

Timeliness and Specificity CO must receive a written protest five business days after (i) notification to unsuccessful offerors (RFPs/RFQs) (ii) bid opening (IFBs) 13 CFR § 121. 1004; FAR § 19. 302(d) Date of debrief is irrelevant for protest purposes A protest must contain “specific, detailed evidence to support the allegation that the offeror is not small. ” FAR § 19. 302(c)(2); 13 CFR § 121. 1007 Protester must have standing to protest or will be 44

Processing a Size Protest If timely and specific, SBA (not CO) will notify the protested concern; firm has three business days to respond. SBA has 15 workings days to render its determination—assuming there is no extension. Copy of final determination will be sent to the protester, the protested concern, and the CO. 45

“Other than Small” Determinations Companies found “other than small”: ◦ Are prohibited from self-certifying as small on any procurement with the same or a lower size standard ◦ Must be recertified as small by SBA before selfcertifying as small again; ◦ Must notify contracting officers with pending procurements; and ◦ Must amend their size status in SAM and any other databases UNLESS determination was contract specific 46

Office of Hearings and Appeals (OHA) Any person adversely affected can appeal the size determination to OHA Contracting Officer can also appeal File within 15 calendar days after receipt of the size determination Judge shall issue a size appeal decision, insofar as practicable, within 60 calendar days after close of the record 47

TIPS • PICK THE CORRECT NAICS • It will affect your procurement (LOS, NMR, size standard) • Do not use Wholesale or Retail NAICS ON A MAC, DETERMINE IF YOU WANT TO HAVE OFFERORS RECERTIFY THEIR SIZE STATUS HAVE METHOD IN PLACE REQUIRING LONG-TERM CONTRACT HOLDERS TO RECERTIFY THEIR SIZE CONSIDER ADDING JOINT VENTURE LANGUAGE TO PROPOSAL • Request copy of Agreement FORWARD ALL SIZE PROTESTS TO SBA AS SOON AS YOU RECEIVE THEM INVOLVE YOUR PCR IF YOU HAVE ANY QUESTIONS DO NOT MAKE AWARD UNTIL AFTER 5 DAY PERIOD OR AFTER SIZE DETERMINATION IS ISSUED 48

QUESTIONS? 49