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Even a Small Business Can Lose a Small Business Size Protest

Tuesday, 25 August 2015 / Published in Government Contract Law

Even a Small Business Can Lose a Small Business Size Protest

Government contractors who want to successfully perform government contracts set-aside for small businesses must be prompt and responsive to size protests when they occur.  The size protest process employs tight timelines requiring participants to act swiftly if they choose to protest an awardee’s size.  The process also forces awardees to be quick in responding to size challenges.  Size protests are determined at the point of contract award and demand rapid action because a federal procurement hangs in the balance.  If a business, even one that would meet the definition of small for the procurement, fails to meet the protest response deadline, the business will be deemed other than small and ineligible for the set-aside.

After notice of award of a small business set-aside, a protestor–most often a competing offeror—has five days to protest the awardee’s size.  The size protest is submitted to the contracting officer (CO) who forwards the protest to the SBA.  SBA notifies the CO, the protested business, and the protestor that the size protest has been received.  The SBA then provides a copy of the protest to the awardee, as well as an SBA Form 355, and directs the awardee to complete the form, respond to the protest, and provide any additional requested information or supporting materials “within 3 working days from the date of receipt.” 13 C.F.R. § 121.1008(c).

Section 121.1008(d) provides:

(d) If a concern whose size status is at issue fails to submit a completed SBA Form 355, responses to the allegations of the protest, or other requested information within the time allowed by SBA, or if it submits incomplete information, SBA may presume that disclosure of the information required by the form or other missing information would demonstrate that the concern is other than a small business. A concern whose size status is at issue must furnish information about its alleged affiliates to SBA, despite any third party claims of privacy or confidentiality, because SBA will not disclose information obtained in the course of a size determination except as permitted by Federal law.

Section 121.1009(d) explains if a protested business refuses or fails to provide requested information within the time period, “SBA may assume that disclosure would be contrary to the interests of the party failing to make disclosure.”  These regulations are referred to as the adverse inference rule.

Application of the adverse inference rule uses a three-part test:

  1. the requested information must be relevant;
  2. there must be a level of connection between the protested concern and the concern about which the information is requested; and
  3. the request for information must be specific.

​If the three conditions of the adverse inference are met, the challenged awardee must produce the information requested by the Area Office or suffer the fate of an adverse inference.

The takeaway for small businesses is to be ready for a size protest following award.  Government contracting continues to become more competitive and, with little effort, a disappointed offeror can easily submit a specific size challenge to the CO.  To prepare, businesses should become familiar with SBA Form 355 and maybe even fill out a draft that can quickly be updated.  Businesses might want to discuss the size protest process with administrative staff so they are aware there may be time-sensitive communications post-award.  Small businesses should also know SBA has discretion to grant an extension to the three-day deadline.  If a business is on the receiving end of a protest and is unable to provide the required information within three days the business should share the circumstances with SBA and request an extension; SBA is reasonable in providing additional time.  Keep in mind there is often back and forth communication with SBA once a size protest is filed and it is beneficial to confirm with SBA they have received the requested information.

If you have any questions or comments about the discussed content, please contact General Counsel, P.C’s Government Contracts Practice Group.

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