Company Cannot Exclude Certain Inter-affiliate Transactions When Measuring Its Size
On October 27, 2017, the SBA Office of Hearings and Appeals ruled that Johnson Development is a large business due to affiliation with several other companies. Johnson Development was competing for a new VA Outpatient Clinic project in Tyler, Texas. A competitor, SMN, LLC, filed a size protest against Johnson Development. The SBA Area Office determined that Johnson Development was affiliated with 31 other companies. Based on this affiliation, the SBA Area Office determined that Johnson Development was not a small business.
Johnson Development appealed the SBA Area Office's determination to the SBA Office of Hearing and Appeals. Johnson Development argued, among other things, that the SBA should have excluded receipts between affiliates for size determination purposes. Johnson Development cited SBA Policy Statement No. 3 and 13 C.F.R. 121.104(a), which excludes receipts between "a concern and its domestic or foreign affiliates" when calculating size. SMN argued that this exclusion did not apply (i) to receipts between affiliates in which Johnson Development was not a party, and (ii) to receipts between affiliates where no double counting will occur if counted. The SBA Office of Hearing and Appeals agreed and affirmed the Area Office's determination that Johnson Development was not a small business.
SIZE APPEAL OF: Johnson Development, LLC, SBA No. SIZ-5863 (October 27, 2017)
