Back to Basics: Eligibility and Affiliation€¦ · 2017-08-09 · and provides a collaborative model for the public and private sectors to advance the economic empowerment of women

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BUILDING A COMPLIANT TEAM, Part 1

Back to Basics:Eligibility and Affiliation

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MARIA L. PANICHELLI, ESQUIRE

AUGUST 9, 2017

BUILDING A COMPLIANT TEAM,

PART 1

BACK TO BASICS:

ELIGIBILITY AND AFFILIATION

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MARIA L. PANICHELLI, ESQUIRE

AUGUST 9, 2017

BUILDING A COMPLIANT TEAM,

PART 1

BACK TO BASICS:

ELIGIBILITY AND AFFILIATION

7

MEET THE PRESENTER

Maria L. Panichelli | Partner

Federal Contracting Attorney

Cohen Seglias Pallas Greenhall

& Furman PC

8

“Teaming” v. Joint Ventures

Joint Venturing: Two or more separate

companies coming together to compete as a

newly formed entity

Teaming: A special type of prime/subcontractor

relationship

Mentor Protégé?

TEAMING AND JOINT VENTURES:

A PRIMER

9

Why are eligibility and

size/affiliation so important in

the teaming/JV/MP context?

10

A Small Business Might be Wondering…

How can I compete with regard to these non-price factors?

How do I get into Federal Contracting if I have not done

Federal work before?

How do I, as a “small” business, get “big” (i.e. high dollar,

high complexity) contract experience?

Meanwhile, Large Businesses are Wondering…

How do I, as a “large” business concern, take advantage of

the increasing number of “small” business program set-

aside contracts?

WHY TEAM?

THE QUESTIONS

11

THE ANSWER: TEAMING

12

What is a “Small” Business?

13

SBA Size Standards:

Used by SBA to Determine the Size of a Concern

Represents the largest size that a business may be to

remain classified as “small”

Can Be Based on Annual Gross Receipts or Number

of Employees

Standards Vary By Industry – Based on North

American Industrial Classification Codes (“NAICS

Codes”)

WHAT IS “SMALL?”

14

North American Industry Classification System

(“NAICS”) Codes

Procurement/Solicitation Specific

Identifies Each Solicitation by Industry


15

Back to SBA Size Standards:

Once you know the applicable NAICS code, check the

corresponding SBA Size Standard on the SBA’s

Website


https://www.sba.gov/sites/default/files/files/Size_Standards_Table.pdf

16

“Small” Business Programs:

Basic Eligibility

Requirements

What is an 8(a) Business?

Small Business 51% unconditionally

owned and unconditionally controlled

by one or more:

‒ Socially disadvantaged AND

‒ Economically disadvantaged

individuals

‒ Who are of good character

‒ Citizens of and residing in the United

States

‒ Who demonstrate potential for

success

SMALL BUSINESS PROGRAMS: 8(a)

17

Who is Socially Disadvantaged?

Rebuttable Presumption of Social

Disadvantage:

‒ Black Americans

‒ Hispanic Americans

‒ Native Americans

‒ Asian Pacific Americans

‒ Subcontinent Asian Americans

‒ Members of other groups designated from

time to time by SBA

An individual must demonstrate that he or

she has held himself or herself out, and is

currently identified by others, as a member of

a designated group

The presumption of social disadvantage

may be overcome with credible evidence

to the contrary


18

Who is Socially Disadvantaged?

An individual not a member of one of the

groups before may establish individual

social disadvantage

Evidence of individual social disadvantage

must include the following elements:

‒ One objective distinguishing feature

(race, ethnic origin, gender, physical

handicap)

‒ Personal experiences of substantial and

chronic social disadvantage

‒ Negative impact on entry into or

advancement in the business world

because of the disadvantage. (Education,

employment and business history)


19

Who is Economically Disadvantaged?

Economically disadvantaged

individuals are socially disadvantaged

individuals whose ability to compete in

the free enterprise system has been

impaired due to diminished capital and

credit opportunities as compared to

others in the same or similar line of

business who are not socially

disadvantaged


20

Who is Economically Disadvantaged?

Net Worth (<$250,000/$750,000)

excluding the ownership interest in the

8(a) concern and the equity in the

primary personal residence

Personal income for the past three

years (<$250,000/$350,000 3-year

average), rebuttable presumption

Fair market value of all assets

(<$4mm/$6mm)


21

What is Potential for Success?

The applicant concern must possess

reasonable prospects for success in

competing in the private sector if

admitted to the 8(a) BD program. To

do so, it must be in business in its

primary industry classification for at

least two full years immediately prior

to the date of its 8(a) BD application,

unless a waiver for this requirement is

granted.


22

What is Good Character?

Case by Case, totality of

circumstances analysis:

‒ Criminal conduct

‒ Violations of any of SBA's

regulations

‒ Debarred or suspended

‒ Lacks Business Integrity

‒ Incarceration

‒ Dishonest behavior


23

What is a “HUBZone?”

HUBZone means a historically

underutilized business zone, which is

an area located within one or more:

1. Qualified census tracts

2. Qualified non-metropolitan counties

3. Lands within the external boundaries

of an Indian reservation

4. Qualified base closure area

5. Redesignated area

24

SMALL BUSINESS PROGRAMS: HUBZone SBCs

What is a “HUBZone” SBC?



by one or more by either:

‒ Indian Tribal Governments* (or

companies owned thereby) or

‒ US Citizens

Principal office located in a HUBZone

At least 35% of its employees reside

in a HUBZone / within any Indian

reservation

*Different rules for Indian Tribal Governments than other

citizens

25

SMALL BUSINESS PROGRAMS: HUBZone SBCs

26

Understand the Lingo:

Veteran Owned Small Business (“VOSB”)

Service-Disabled Veteran Owned Small

Business (“SDVOSB”)

SMALL BUSINESS PROGRAMS: VOSB/SDVOSB

27

Two Distinct Programs:

1. VA’s VOSB/SDVOSB Program (VA Contracts)

2. SBA’s SDVOSB Program (All other Agency

Contracts)

SMALL BUSINESS PROGRAMS: VOSB/SDVOSB

What is a SDVOSB (SDVO SBC)?



by one or more Service-Disabled

Veteran(s)

28

SMALL BUSINESS PROGRAMS: SBA SDVOSB PROGRAM (SDVO SBC)

What is a VOSB?




Veteran(s)

What is a SDVOSB?

Small business 51% unconditionally



Veteran(s)

29

SMALL BUSINESS PROGRAMS: VA VOSB/SDVOSB PROGRAM (“VETBIZ” AND “VIP)

What is a WOSB?

Small Business

51% unconditionally owned and

unconditionally controlled by one or

more women

What is an EDWOSB?

Small business

51% unconditionally owned and

unconditionally controlled by one or

more Economically Disadvantaged

Women

*NAICS Codes for Industries where Woman are

Historically Under-Represented 30

SMALL BUSINESS PROGRAMS: WOSB/EDWOSB

31

“Small” Business Programs:

Other Considerations

32

For each program, the key is:

“Unconditional Ownership”

“Unconditional Control”

OWNERSHIP AND CONTROL

33

Common Ownership Issues:

Are there any problematic corporate governance

provisions?

Transfer Restrictions

‒ Rights of First Refusal

Guidance from the VA cases?

‒ Transfer upon Incapacity

‒ Transfer upon Bankruptcy

‒ (Any Involuntary Divestment)

OWNERSHIP

34

Common Control Issues:

Remember: Two Components

1. Long-Term Decision Making

2. Day-to-Day Management and Administration of

Business Operations

Watch out for negative control issues

CONTROL

35

Common Control Issues:

Are there any problematic corporate governance

provisions?

Super Majority/Quorum Provisions

Positions of Authority Given to Others

Definitions/Number of “Managers” or “Members” –

Sharing is Not a Positive

CONTROL

36

Other Control Issues:

“Remote” Control

Full time Job(s)?

Economic Control, Financial Reliance, Duress*

*Control considerations are often closely related to affiliation

analysis

CONTROL

37

Affiliation:

Why does it matter and how does

it happen?

38

Why Does Affiliation Matter?

What impact does it have on a

company’s size?

39

General Principles of Affiliation

Concerns and entities are affiliates of each other when one

controls or has the power to control the other, or a third

party/parties controls or has the power to control both (It does not

matter whether control is exercised, so long as the power to control

exists)

Control may be affirmative or negative (Negative control includes,

but is not limited to, instances where a minority shareholder has

the ability, under the concern's charter, by-laws, or shareholder's

agreement, to prevent a quorum or otherwise block action by the

board of directors or shareholders)

Affiliation may be found where an individual, concern, or entity

exercises control indirectly through a third party

GENERAL PRINCIPLES OF

AFFILIATION

40


SBA considers factors such as ownership,

management, previous relationships with or ties to

another concern, and contractual relationships, in

determining whether affiliation exists

In determining whether affiliation exists, SBA will

consider the totality of the circumstances, and

may find affiliation even though no single factor is

sufficient to constitute affiliation


AFFILIATION

41


In effect, affiliation occurs where one business is

too closely related to, or intertwined with, another

business on a large scale or comprehensive basis


AFFILIATION

42

Common Affiliation Issues:

Ostensible Subcontractor:

‒ % of Work Requirements

‒ Control on site

General affiliation:

‒ Shared Space, Employees, Resources, Equipment

‒ Past Employee Relationship

‒ Familial Relationship

‒ Frequent Subcontracting

‒ Financial Reliance/Control

COMMON AFFILIATION ISSUES

43

Affiliation:

in Teaming and Joint Venture

Relationships

44


1. Individual Contract/Ostensible Subcontractor

‒ % of Work Requirements

‒ Control on site

‒ Other indicia of non-control

TEAMING AND AFFILIATION

45


2. General affiliation:

‒ Shared Space

‒ Shared Employees

‒ Past Employee Relationship

‒ Familial Relationship

‒ Frequent Subcontracting

‒ Financial Reliance

• Guarantor on LOC? Bonding?

TEAMING AND AFFILIATION

46

Concerns submitting offers on a particular

procurement or property sale as joint ventures are

affiliated with each other with regard to the

performance of that contract

JOINT VENTURES AND AFFILIATION

47

A joint venture generally may not be awarded more

than three contracts over a two year period, starting

from the date of the award of the first contract, without

the partners to the joint venture being deemed

affiliated for all purposes

However: An individual joint venture may be awarded more

than three contracts without the SBA finding general affiliation

between the joint venture partners where the joint venture has

received two or fewer contracts as of the date it submitted one

or more additional offers which thereafter result in one or more

additional contract awards


48

The same two (or more) entities may create additional

joint ventures, and each new joint venture entity may

be awarded up to three contracts

At some point, however, such a longstanding inter-

relationship or contractual dependence between the

same joint venture partners will lead to a finding of

general affiliation between and among them


49

A joint venture of two or more business concerns may

submit an offer as a “small” business for a Federal

procurement, subcontract or sale so long as each

concern is small under the size standard corresponding

to the NAICS code assigned to the contract.

Two firms approved by SBA to be a mentor and protégé

under 125.9 or 124.520 may joint venture as a small

business for any Federal government prime contract or

subcontract, provided the protégé qualifies as small for

the procurement at issue.

JOINT VENTURES AND AFFILIATION:EXCEPTIONS TO AFFILIATION FOR CERTAIN JVS

QUESTIONS?

50

51

CONTACT INFORMATION


Cohen Seglias Pallas Greenhall &

Furman PC

215.564.1700

[email protected]

@MariaPanichelli

www.linkedin.com/in/mariapanich

elli

mailto:[email protected]

https://twitter.com/MariaPanichelli

http://www.linkedin.com/in/mariapanichelli

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54

CONTACT INFORMATION


Cohen Seglias Pallas Greenhall &

Furman PC

215.564.1700

[email protected]

@MariaPanichelli

www.linkedin.com/in/mariapanich

elli


https://twitter.com/MariaPanichelli

http://www.linkedin.com/in/mariapanichelli

Documents

Back to Basics: Eligibility and Affiliation€¦ · 2017-08-09 · and provides a collaborative model for the public and private sectors to advance the economic empowerment of women