Washington, D.C. – Jan. 11, 2018 – A Government Contracts & Projects team from global law firm Greenberg Traurig, LLP secured a critical win in a Size Appeal before the Small Business Administration’s Office of Hearings and Appeals (OHA) on behalf of client FEEA Childcare Service, Inc. (FCCS). OHA’s decision confirms precedent that a small, for-profit business, affiliated with a nonprofit parent entity, qualifies for designation as a small business concern under SBA’s affiliation rules, and can compete for contracts set aside for small businesses. Shareholder Richard Moorhouse, Of Counsel Ryan C. Bradel, and Associate Józef S. Przygrodzki represented FCCS.
FCCS was the awardee on a contract by the United States Department of Homeland Security, U.S. Secret Service, for management of the agency’s Child Care Subsidy Program. The procurement was set aside for small businesses, with a governing $15 million annual receipts size standard. As a general rule, to qualify as a small business concern, the business must be organized for profit.
The day after the award of the contract, First Financial Associates, Inc. (First Financial) filed a size protest with the SBA Area Office alleging that FCCS was not an eligible small business concern because FCCS is a wholly-owned subsidiary of the Federal Employee Education and Assistance Fund (FEEAF), a nonprofit organization, and therefore not an eligible small business concern. The SBA Area Office denied First Financial’s size protest, finding that FCCS and FEEAF were affiliated but that their combined receipts did not exceed the governing size standard. First Financial then appealed the decision to SBA’s Office of Hearings and Appeals (OHA). OHA rejected First Financial’s arguments. OHA held that while FEEAF is a nonprofit entity that is affiliated with FCCS, there is nothing prohibiting a qualified small business concern from being affiliated with a nonprofit entity. As OHA noted, in order to qualify as a small business concern, a business must be a “business entity organized for profit.” 13 C.F.R. § 121.105(a)(1). As affiliated entities, the receipts of the nonprofit entity must be combined with the receipts of the for-profit entity to determine if the business qualifies as small for its size standard.
However, as long as the entity seeking to qualify as small is for-profit, and the combined revenues of all affiliated entities, including the nonprofit entities, meet the required size standard, the for-profit entity can qualify as a small business concern. Therefore, as the combined receipts of FEEAF and FCCS were still below the $15 million in annual receipts size standard for its applicable NAICS code, OHA concluded that the SBA Area Office properly determined that FCCS still qualified as a small business.
In reaching its decision, OHA has eliminated any lingering question regarding the treatment of a small business affiliated with a nonprofit entity, and clearly established that affiliation with nonprofit entities will be treated in the same way as all other business affiliations.
Mr. Moorhouse has more than 30 years of experience litigating procurement award and contract disputes at the federal, state, and local levels. He has broadly prosecuted and defended complex bid protest and claim matters before the U.S. Court of Federal Claims, the U.S. Government Accountability Office (GAO), the District of Columbia Contract Appeals Board, and the Armed Services Board of Contract Appeals.
Mr. Bradel is an experienced government contracts lawyer. He focuses his practice on government contracts litigation matters and has successfully represented clients before the U.S. Court of Federal Claims, the Boards of Contract Appeal, the GAO, OHA, and state and federal courts.
Mr. Przygrodzki focuses his practice on government contracts litigation, counseling, and investigations. He advises clients on all aspects of government procurement, including ethics and compliance in procurement and administration of state and local government contracts.
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Greenberg Traurig, LLP (GTLaw) has more than 2,000 attorneys in 38 offices in the United States, Latin America, Europe, Asia and the Middle East and is celebrating its 50th anniversary. One firm worldwide, GTLaw has been recognized for its philanthropic giving, was named the largest firm in the U.S. by Law360 in 2017, and is among the Top 20 on the 2017 Am Law Global 100. Web: www.gtlaw.com Twitter: @GT_Law.