SBA SIZE PROTEST LAW: SBA Size Determination Protests & Appeals - Attorneys

Timing the Sale of Business

Posted on August 5th, 2015 by

The SBA Office of Hearings and Appeals (“OHA”) issued a decision earlier this year that illustrates considerations for timing the sale of a business. SIZE APPEAL OF: TESCOM, SBA No. SIZ-5641 (2015) The chronology is interesting:

  • In March 2014, the apparent successful bidder, Guisys, submitted an offer.
  • In April 2014, Guisys initiated discussion with a potential buyer for the company, Greenlee.
  • In August 2014, Greenlee acquired Guisys.
  • December 16, 2014, the CO announced that Guisys was the successful offerer.
  • The next day, on December 17, 2014, Tescom filed a size protest with SBA, alleging that Guisys was not a small business because Greenlee, a division of Textron, a large business, had acquired Guisys.

In general, employees and revenue of businesses are combined with affiliates for purposes of size determination.  Additionally, agreements to merge, even in principle, provide a company with power of control sufficient to find affiliation.  However, an agreement to discuss a possible merger or sale of stock is not an agreement in principle and does not affect control of a concern over another.

Here the date for the size determination was March 10, 2014 – the date of initial offers.  Because acquisition discussions did not commence until April, OHA found that Guisys was not affiliated with Greenlee.

Additionally, OHA noted that although a concern must recertify its size to the procuring agency after a merger or acquisition pursuant to 13 C.F.R. § 121.404(g)(2), after such a notice “the Navy can no longer count options or orders issued under this contract toward its small business goals,”  but that a “concern that qualifies as small at the time it receives a contract is small for the life of the contract.”  (citing The W.I.N.N. Group, Inc., SBA No. SIZ5360 (2012).

If handled properly these regulations allow a small business to capitalize on a prospective contract award if it times the negotiations and sale of its business judicially.

 

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