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5 min read

SBA Upholds Size Determination for GC&V Construction, LLC in Appeal

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In February of 2023, GC&V Construction, LLC challenged a size determination that deemed the company ineligible as a small business. The basis for their appeal revolves around the claim that errors occurred during the Area Office's assessment of the company's receipts. In response, GC&V Construction, LLC filed an appeal with the Small Business Administration's Office of Hearings and Appeals, which was ultimately denied.

Background of the Dispute

The dispute revolves around a Request for Proposals (RFP) issued by the U.S. Department of Veterans Affairs (VA) for a construction project. The procurement was specifically reserved for Service-Disabled Veteran Owned Small Businesses (SDVOSBs) and had a size standard of $39.5 million average annual receipts. Initially, GC&V Construction, LLC was selected as the apparent awardee. However, RBVetCo, LLC filed a protest challenging GC&V's size.

RBVetCo alleged that GC&V was not a small business due to its affiliation with various other companies, including the "Creter Companies." According to RBVetCo, the Creter Companies had been actively pursuing VA cemetery construction projects that were designated for SDVOSBs. RBVetCo also claimed that the Office of Hearings and Appeals (OHA) had previously failed to adequately analyze the affiliation between GC&V and the Creter Companies in a previous decision.

Disputed Affiliation with Creter Companies

In response to the protest, GC&V Construction, LLC acknowledged its affiliation with GCFC and Creter & Griffith Investments, LLC (C&GI) through common ownership. However, GC&V denied any affiliation with other companies associated with minority owner Richard E. Creter or his family. GC&V argued that it was not broadly affiliated with the Creter Companies because Richard E. Creter was the only member of the Creter family involved in GC&V, and he did not hold any executive positions within the Creter Companies.

Furthermore, GC&V asserted that RBVetCo's claim of GCFC and/or the Creter Companies being ostensible subcontractors to GC&V was unfounded since GC&V did not have any subcontracts with any of the Creter Companies. GC&V argued that only GCFC's and C&GI's annual receipts should be added to GC&V's for determining its size, along with GCFC's proportionate share of joint venture receipts from MGC 1, MGC 2, SGC 1, and SGC 2. According to GC&V, the five-year average annual receipts for GC&V, GCFC, and C&GI were all below the $39.5 million size standard threshold.

Despite GC&V's arguments, the Area Office issued a size determination that concluded that GC&V was not a small business due to its affiliation with GCFC and C&GI. According to the determination, the combined average annual receipts exceeded the applicable size standard. As a result, GC&V Construction, LLC appealed the size determination to the Office of Hearings and Appeals (OHA).

The Small Business Administration (SBA) moved to remand the matter to the Area Office for further review, and OHA granted the motion. GC&V supplemented its response to the Area Office, arguing that the remand was necessary to present missing documentation.

Size Determination by the Area Office

GC&V affirmed their position that the combined average annual receipts of GC&V, GCFC, and C&GI were below the size standard. To support their claim, GC&V provided tax records for themselves, GCFC, C&GI, and four joint ventures in which GCFC had a minority interest.

The Area Office requested income statements from GC&V and C&GI for a specific period, and GC&V provided the requested information. However, a discrepancy was noted in the dates of the statements. To address this, GC&V agreed to allow the Area Office to use a statement from a later date. Eventually, the Area Office issued a size determination, reaffirming that GC&V did not qualify as a small business.

During the size determination process, the Area Office calculated the five-year average annual receipts of GC&V, GCFC, and C&GI, including GCFC's proportionate share of joint venture receipts. Inter-affiliate transactions resulted in a reduction of the receipts for the firm receiving the payment. Ultimately, the Area Office concluded that the combined average annual receipts exceeded the $39.5 million size standard, leading to the determination that GC&V was not a small business.

Size Determination Appeal and SBA's Response

GC&V Construction, LLC appealed the size determination to OHA, arguing that it was erroneous. They highlighted alleged errors made by the Area Office in calculating receipts, including double counting and improper inclusion of capital gains. GC&V claimed that the Area Office considered receipts outside the relevant measurement period and failed to inquire about all entities involved. They also contended that their private and proprietary information was inadequately protected. GC&V presented their own calculations, demonstrating that their average annual receipts, combined with their affiliates, were below the size standard.

In response, RBVetCo disputed GC&V's calculations, challenging their failure to account for non-"self-performed" work by the four joint ventures. RBVetCo provided alternative calculations, indicating that GC&V's average annual receipts exceeded the size standard. They supported the Area Office's exclusion of capital gains and use of the appropriate measurement period. RBVetCo denied any improper disclosure of GC&V's confidential information and proposed alternate grounds for affirming the size determination.

The Small Business Administration (SBA) supported the Area Office, refuting GC&V's arguments. SBA asserted that GC&V disregarded the non-self-performed work of the four joint ventures and their "proportionate share of joint venture receipts." They maintained that the Area Office used the correct measurement period for calculating GC&V's receipts, countering GC&V's position.

Conclusion

GC&V strongly disputed the interpretation of the regulation by the Area Office, describing their calculations as "incredibly confusing" and "clearly inconsistent." They argued that the double-counted joint venture receipts resulted in a significant discrepancy in the calculations. Additionally, GC&V claimed that the Area Office failed to exclude capital gains from their tax returns, in violation of SBA regulations. They also raised concerns about the inclusion of receipts outside the applicable measurement period. Despite these arguments, the Office of Hearings and Appeals (OHA) found no errors in the size determination made by the Area Office.

GC&V asserted that the SBA made multiple errors in calculating the size of their company. However, the OHA determined that the main issue revolved around the proper calculation of GCFC's proportionate share of joint venture receipts. The OHA clarified that the SBA correctly attributed 49% of the receipts from each of the four joint ventures to GCFC, consistent with SBA regulations and prior OHA precedents.

Contrary to GC&V's claims, the OHA concluded that there was no evidence to support the assertion that GCFC's proportionate share of joint venture receipts was already included in their tax returns. As a result, the OHA denied GC&V's appeal.

 


 

Learn More About Size and Status Protests in our Free eBook

​As the value of government contracts increases, so does the likelihood your company, as the winning bidder, will face a size and standard protest from a disappointed bidder.

Defending a size and standard protest is at best annoying and, at worst, truly concerning.  However, there are several things that can be done to protect your business well before a protest is filed, and few more in the unfortunate event you face a size and standard protest.​ 

We invite you to read our free eBook on Size Protests, "A Summary of Size and Status Protests," and learn more about:

  • Avoiding Small Business Association (SBA) Adverse Outcomes​
  • Small Business Association (SBA)​ Issues Proposed Rule Change​
  • Size Status Protest Dismissal Sustained by Office of Hearings and Appeals (​OHA)​
  • HUBZone Program Needs Policing​​
  • Changes Ahead for the Small Business Association (SBA)​ HUBZone Program​
  • Small Business Association (SBA) and The Federal Acquisition Regulatory (FAR) Council's Lack of Rule Making Confusing
  • Small Business Association (SBA)​ Protest Regarding Two Classes of Stock​
  • United States Court of Federal Claims (CoFC) Overturns Center for Verification and Evaluation's​ (CVE) Revocation of Service-Disabled Veteran-Owned Small Business​ (SDVOSB) Status​

 

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