Bid Protests Blog
Ostensible Contractor Rule
Government contractors find themselves defending against SBA size protest based on the affiliation and the Ostensible contractor rule. More often than not, the awardee of a government bid looses the contract because of oversight on the relationship of a subcontractor – usually a large business.
A successful protestor will make the argument that the awadee can not complete the contract by itself and unduly depends on the large business to get the contract. The result is devastating because the two contractors capabilities are joined (income or employees) and the NAICs size standard is blown out of the water. Hence, denial of the bid. Here the basic things the SBA looks for
SBA Definition:
Where one concern is dependent upon another concern for contracts and business to such a degree that its economic viability would be in jeopardy without such contracts/business.
13 CFR 121.103 (2008)
(a)(1) – power to control;
- (a)(2) – ownership, management, previous relationships with or ties to another concern, contractual relationships;
- (a)(3) – control can be affirmative or negative;
- (a)(4) – individual, concern, or entity exercises control indirectly through a third party;
- (a)(5) – totality of the circumstances;
- (c) – stock ownership (individual, concern, or other entity owns or has the power to control 50% or more of a concern’s voting
When you seek out subcontractors or teaming arrangements for purposes of obtaining a government contract you must be sure to not to use the other contractor’s employees and key personnel for the upcoming contract, ensure that you ( the prime) can prove that you have pursued the contract, ensure that you have total control and management of the contract and don’t use joint advertising, phones, equipment etc.
How you defend a size appeal based on the ostensible contractor rule? The simple answer is to retain counsel that understands governemnt contracts.
Goverment Contract Affiliation
Affiliation and ostensible contractor rules go hand in hand. Seek legal advice on how to best go about forming the relationship with a teaming partner or subcontractor. You must account for more than 51% of the work that includes key aspects.
Our office recieves tons of calls for this aspect of government contracts. Unforunately small businesses are not familiar with the SBA rules and the FAR and are faced with an uphill battle.
Government contract consulting is worth its weight in gold if you seek to form teaming arrangements, subcontractors or joint ventures. Get help immediately.
