This case, the Size Standard Protest Appeal of Teracore, Inc., SBA No. SIZ-5830, 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.
On June 10, 2014, the U.S. Department of Homeland Security (DHS) submitted a two-part request that included “Program Management, Administrative, Operations (Clerical), and Technical Services (PACTS II).” The Contracting Officer (CO) reserved the PACTS II request for Service-Disabled Veteran-Owned Small Business Concerns (SDVO SBCs) and assigned NAICS code 541611. Code 541611 is categorized as “Administrative Management and General Management Consulting Services” and carries a size standard of $14 million.
Teracore, Inc. (Teracore) submitted a bid for the PACTS II request from DHS, certifying that they qualified as an SDVO SBC. In February 2017, Teracore received notice that they won the bid.
But the CO received two challenges concerning the size of Teracore. Both challenges were forwarded to the SBA Office of Government Contracting for Area III (Area III Office) for review.
On March 22, 2017, the Area III Office delivered a formal size standard decision concerning Teracore. After examining Teracore’s tax returns from 2011, 2012 and 2013, the Area III Office determined that Teracore did not qualify as a small business.
On April 6, 2017, Teracore initiated a business size appeal for the Area III Office’s size standard decision. Teracore argued that it applied for the PACTS II request before filing its 2013 tax return. As a result, Teracore contended that the Area III Office should have considered tax returns from 2010, 2011 and 2012 only.
SBA regulations under 13 CFR 121.104 set the “period of measurement” for size standard determinations as the “most recently completed three fiscal years.” Concerning Teracore, they submitted a proposal for PACTS II in 2014. As a result, the Area III Office was required to examine Teracore’s financials for 2011, 2012 and 2013.
SBA regulations under 13 CFR 121.104 also address the absence of financial data as well. If the SBA is unable to obtain a tax return for a year that falls within the period of measurement, then the SBA is authorized to use “any other available information” to make a size standard determination. Stated otherwise, the SBA has a lot of leeway to ascertain the size of a company, even in the absence of a tax return.
The OHA decided that SBA regulations required the Area III Office to consider Teracore’s financial data from 2011, 2012 and 2013. While Teracore’s 2013 tax return was not available in 2014 during the proposal stage, it was available in 2017 during the size standard review. Consequently, the Area III Office was allowed to use Teracore’s 2013 tax return in disqualifying Teracore as a small business.
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