Government Contracts Legal Blog

The Ostensible Subcontractor Rule

Posted by Joseph Whitcomb on Sep 21, 2017 8:09:38 AM
Joseph Whitcomb

 

Size Appeal of Bridgeway Professionals, Inc.

SBA No. SIZ-5827 (2017)

 

This case concerns the Small Business Act of 1958. Recognizing the importance of free enterprise and competition, the Small Business Act requires the U.S. Government to assign a fair portion of contracts and purchases to small businesses. The Small Business Administration (SBA) and its Office of Hearings and Appeals (OHA) oversee the administration of the Small Business Act. The SBA uses size standards and the North American Industry Classification System (NAICS) to define what qualifies as a small business. 

A Brief Background on an Ostensible Subcontractor

On April 3, 2012, the U.S. Department of the Air Force (Air Force) submitted a request for a “contractor to provide courier services.” The Contracting Officer (CO) reserved this request for small businesses and classified as NAICS code 492110, under the category of “Couriers and Express Delivery Services” and carrying a size standard of 1,500 employees. 

The deadline to submit bids was December 30, 2016. Bridgeway Professionals, Inc. (Bridgeway) submitted a bid for this request. On January 25, 2017, the CO granted the request to Bridgeway. 

But January 31, 2017, the CO received a challenge from Crosstown Courier Service, Inc. (Crosstown) concerning the size of Bridgeway. The CO forwarded Crosstown’s size protest to the SBA Office of Government Contracting for Area II (Area II Office) for review. 

Government Contract Compliance - Ostensible Subcontractor SBA Size - Government Contract Bid Protest - Whitcomb Law PC

On March 31, 2017, the Area II Office delivered a formal size standard decision concerning Bridgeway. Due to the relationship with its “ostensible subcontractor,” Advanced Delivery Systems (ADS), the Area II Office determined that Bridgeway did not qualify as a small business. 

On April 11, 2017, as a result of the Area II Office’s size standard determination, the Air Force submitted an amendment that terminated this request. All contracts and awards tied to this request were also terminated. 

On April 17, 2017, Bridgeway appealed the Area II Office’s decision and requested review from the OHA. Bridgeway argues that the Area II Office committed an error, as the combined number of employees at Bridgeway and ADS is less than the 1,500 size standard. 

Legal Analysis of Ostensible Subcontractors and Bid Protests

Referencing its decisions in Size Appeal of Assessment and Training Solutions Consulting Corp., SBA No. SIZ-5421 (2012) and Size Appeal of HRCI-MPSC PASS, LLC, SBA No. SIZ-5500 (2013), the OHA dismissed this appeal. The reasoning is simple. The Air Force terminated this request before the OHA could consider whether the ostensible subcontractor rule was applicable to this situation. 

Essentially, this is a procedural matter. Once the Air Force terminated their request, the contracts and awards were also terminated. Without an active request or contract, there is nothing left for the OHA to review. As a result, the OHA must dismiss the Bridgeway appeal. 

The OHA also noted that the Area II Office’s decision in this case would not prevent Bridgeway from competing for future bids as a small business under NAICS code 492110. 

Do You Need Legal Advice from an Experienced

Government Contract Law Firm?

Navigating the Small Business Act and its application to government contracts can be a challenge. There are various legal regulations and considerations at play, which can make it difficult to understand the proper course of action. But a knowledgeable government attorney can make all of the difference, helping you avoid pitfalls and resolve any issues that might arise. 

If you are in need of assistance with government contracts or other related matters, please do not hesitate to contact Whitcomb, Selinsky, McAuliffe, PC immediately. Located in Denver, Colorado, you can reach the attorneys at Whitcomb, Selinsky, McAuliffe, PC by phone at (303) 534-1958 or online by completing a simple form. 

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