If your company loses a competition for a federal small business set-aside contract, you may be able to file a size protest, asking the U.S. Small Business Administration (SBA) to investigate the awardee's small business status. If the SBA concludes that your competitor is not a legitimate small business under the size standard assigned to the contract, the procuring government agency will terminate the contract award -- potentially paving the way for your company to obtain the work. (To learn more about SBA set-aside contract size standards, read Nolo's article Federal Small Business Contract Eligibility: Is Your Business 'Small'?)
Understanding the unique requirements (and short deadlines) of the SBA size protest process can give your small business a competitive edge in the world of government contracts. Read on to learn how to prepare and file a size protest.
First, you should determine whether you have "standing" to file a size protest -- that is, whether your company is permitted to protest. Not just anyone can file a size protest. Rather, your small business must have submitted an offer as the prime contractor on the procurement in question and must not have been eliminated from the competition for reasons unrelated to size.
For example, assume your small business submits an offer, but finishes in third place in the agency's final rankings. You may file a size protest, even though your company is not next in line for award. In contrast, if the agency evaluates your proposal as technically unacceptable and eliminates your small business from the competition, you would not have standing to file a size protest.
In addition to ensuring that you are entitled to file a size protest, you must also make sure that your competitor is in a position to be protested. A size protest must be "particular," in that it must challenge the identified awardee of a particular federal contract. If your competitor finished in second place, or did not bid on the contract at all, the SBA will dismiss your size protest.
An SBA size protest must be "specific," that is, provide the SBA with detailed reasons why you believe your competitor does not qualify as a small business under the procurement's size standard.
Merely stating a general belief that the competitor is large, without providing supporting reasons, is not enough. However, if your size protest alleges, for example, that your competitor is not a small business because its Dun & Bradstreet profile shows revenues in excess of the size standard, your size protest will likely pass the specificity test.
Often, successful size protests are based on an allegation that the competitor, while small in its own right, is affiliated with one or more other businesses. The SBA treats affiliated businesses as one and the same for size purposes, meaning that if your competitor is affiliated with Wal-Mart, the SBA will deem the competitor a multibillion dollar company, even if the competitor only earned a few hundred thousand in revenues itself.
Affiliation, in the SBA's eyes, is not limited to formal parent-subsidiary or sister company relationships. Rather, companies may be affiliated if they share common owners or management or if other factors exist showing close ties between the firms (such as if the competitor earns a large percentage of its revenues from the potential affiliate, shares office space or telephone lines with the potential affiliate, and so on). In addition, a small business may be deemed affiliated with a proposed subcontractor under the so-called "ostensible subcontractor" affiliation doctrine if the subcontractor will perform the primary and vital portions of the contract or if the small business is otherwise reliant upon the subcontractor.
The SBA's size and affiliation rules can be complex, but studying and understanding the rules prior to preparing a size protest will maximize your chances of success. (Read Nolo's article Federal Small Business Contract Eligibility: Is Your Business 'Small'? to learn how to find the specific size standard rules that apply.)
Once you have confirmed that your small business has standing, and have identified the bases of protest, the next step is to prepare a written size protest explaining why the competitor is not a small business.
In your size protest, cite any specific SBA rules, regulations, or case law supporting your claims. In addition, whenever possible, you should include independent, third-party evidence. So, if you reference a Dun & Bradstreet profile, attach the document as an exhibit to your protest. The SBA may dismiss your size protest if you do not attach any third-party support for your allegations.
Even though the SBA decides size protests, you must file the size protest with the contracting officer for the procurement, who is required to forward the size protest to the SBA. Some small businesses have had their size protests dismissed because they filed directly with the SBA. Don't make the same mistake.
Do not file a size protest with the Government Accountability Office (GAO), even if you have reason to question the award decision for reasons other than your competitor's size status. Because the SBA has exclusive authority to decide size protests, the GAO will dismiss any size protests it receives. If you wish to challenge the procurement on both size and non-size reasons, you should prepare separate protests and file the size protest with the contracting officer for the procurement and the non-size bid protest to the GAO or other appropriate entity.
You may deliver the protest to the contracting officer by hand, or use U.S. mail, facsimile, email, or Federal Express (or similar delivery service). You may also file your size protest orally with the contracting officer by telephone but, if you do, you must provide a written protest within one day after the date of the telephone call or within the initial five-day period discussed below, whichever is later.
As a practical matter, the best practice is to file using a method that guarantees delivery by a certain date and provides third-party verification of timely receipt. You may wish to consider filing your size protest using two or more of the permitted methods -- there is no penalty for filing a size protest both by email and overnight delivery, for example.
Preparing and filing a size protest can't be a leisurely activity if you want to meet the deadlines. Size protests must be received by the contracting officer (not filed by your small business), within five days (excluding Saturdays, Sundays, and legal holidays) after a specific event occurs, depending on the type of bid:
What Counts As Notification? Notification may occur sooner than you think. If the agency posts its award decision electronically on the FedBizOpps website (www.fbo.gov), it counts as notification for size protest purposes, even if you do not receive a formal award letter until a few days later. If you are anticipating an award, you should regularly check FedBizOpps. Similarly, an email or telephone call from the contracting officer alerting you to the identity of the awardee may count as notification. When in doubt, it is best to assume that notification has occurred and act accordingly.
In addition, unlike for many GAO bid protests, you cannot extend the deadline to file a size protest by requesting a debriefing (a formal explanation of the agency's rationale for award) from the procuring agency. You can (and probably should) request a debriefing to determine if there is a basis for a bid protest, but the five-day size protest clock keeps on ticking.
What If You Miss the Filing Deadline? The SBA will dismiss your size protest as untimely, but all is not necessarily lost. Both the contracting officer and the SBA have the power to adopt an untimely size protest as their own.
The adoption of a size protest is at the discretion of the contracting officer and the SBA. Typically, contracting officers and the SBA only adopt particularly strong size protests so, if your size protest is untimely, you should take extra care to present your very best case as to why your competitor is not a legitimate small business.
After you file your size protest, your work is essentially done, at least for the time being. Assuming that your size protest meets the standing, timeliness, and specificity requirements, the SBA will launch an investigation into your competitor's size status.
Once the SBA reaches its decision, it will send you a copy of its written size determination. If the SBA concludes that your competitor is not a small business, the agency must either withhold the contract award (if the award has not yet been made) or terminate the ongoing contract, unless your competitor appeals the SBA's decision. In addition, if you prevail, your competitor will be required to immediately send notification declaring that it is no longer a small business to the officials responsible for any pending small business awards.
Whichever party comes out on the short end of an SBA size protest decision may appeal to the SBA's Office of Hearings and Appeals (OHA). OHA size appeals carry their own standing, timeliness, and content requirements, so if you lose in the size protest round, you should do your homework before filing an appeal.