SBA Size Appeals: Challenging a Size Determination

In SBA’s federal government contracting programs, the concept of size *ahem* looms large. It’s not just small business set asides, every SDVOSB, 8(a), WOSB, or HUBZone set aside requires a small business awardee.

That means there’s a lot riding on it, and when the SBA determines that a business isn’t small, well, that doesn’t necessarily end the fight. An appeal may be in order.

SBA’s methodology for calculating size is multi-faceted. It considers the relevant NAICS code (which establishes the measuring stick for size); it includes the non-intuitive calculation of a firm’s annual receipts averaged over 5 years (or alternatively, until early 2022, 3 years); and it also examines a firm’s affiliation with other companies (a subject that could itself consume dozens of blog posts). Needless to say, this swirling mass of issues can become quite complex.

So, it’s probably not surprising that SBA, when it determines a firm’s size, sometimes gets it wrong. That is, SBA will issue a size determination that finds a company small when, in fact, it’s large, or vice versa. When that happens what’s the recourse for a challenged concern or other interested party?

Fortunately, a disappointed party can file a size appeal at SBA’s Office of Hearings and Appeals. Put differently, a party can asked a legally-trained administrative judge, well-versed in the SBA’s size and affiliation regulations, to review SBA’s size determination for legal or factual error. This secondary review can literally save a business from a ruinous size decision. Indeed, OHA frequently reverses determinations or tells SBA to reconsider its analysis.

In terms of nuts and bolts, filing a size appeal is not that difficult a procedure, but there are some key requirements. For one, an appeal must be filed within 15 calendar days after SBA issues its size determination. This deadline is fixed and immovable. OHA will summarily dismiss any appeal that’s filed late. Also, the appeal petition must include certain required elements, but most importantly, it must detail clear and specific errors made by SBA–with supporting arguments. This usually requires a nuanced discussion of SBA’s size and affiliation regulations combined with application of analogous OHA case law. (After all, OHA’s judges are legally trained and are used to briefs drafted by attorneys.) Further, the appeal petition must be served on various SBA representatives.

After filing, SBA sends OHA the case file that it used to draft its size determination. SBA or an intervenor may then, based on an established schedule, respond to the appeal petition. After submission of both the case file and responses, OHA closes the record and considers the appeal’s merits. The regulations establish a loose 60-day timeline for OHA to issue its written decision, which may either affirm SBA’s decision, reverse the decision, or remand (i.e., return) the decision to SBA for further analysis.

In sum, size appeals play a critical role in SBA’s administration of its federal contracting programs. That said, size appeals aren’t easy; they require considerable know-how to present a compelling case.

Here, at Schoonover & Moriarty, we have considerable experience assisting clients with size appeals. If you have any questions about this post, give us a call at 913-354-2630 to discuss.