The Department of Veterans Affairs (“VA”) issued an SDVOSB set-aside procurement for oxygen tank services. Warrior Service Company, LLC (“Warrior”) was the apparent awardee. However, the Contracting Officer deemed Warrior non-responsible because it “has never performed home oxygen delivery services and does not have the necessary experienced, qualified personnel, equipment and capital to be able to perform the required service.”
The SBA Office of Hearings and Appeals (“SBA OHA”) evaluated the Contracting Officer’s position under the Ostensible Subcontract Rule:
The “ostensible subcontractor” rule provides that when a subcontractor is actually performing the primary and vital requirements of the contract, or when the prime contractor is unusually reliant upon the subcontractor, the two firms are affiliated for purposes of the procurement at issue. 13 C.F.R. § 121.103(h)(4). The rule “asks, in essence, whether a large subcontractor is performing or managing the contract in lieu of a small business [prime] contractor.” Size Appeal of Colamette Constr. Co., SBA No. SIZ-5151, at 7 (2010). To ascertain whether the relationship between a prime contractor and a subcontractor violates the ostensible subcontractor rule, an area office must examine all aspects of the relationship, including the terms of the proposal and any agreements between the firms
In short, the Ostensible Subcontractor rule is violated when a prime contractor will have no meaningful role in performing the contract’s primary and vital requirements. SBA OHA found that Warrior’s proposal violated this rule.
Warrior’s proposal indicated that the prime contractor would rely on a single subcontractor to provide equipment, facilities, vehicles, and financial assistance. Warrior would only manage the contract. SBA OHA found this violated the ostensible subcontractor rule:
OHA has long held that a prime contractor cannot comply with the ostensible subcontractor rule merely by supervising a subcontractor in its performance of the work. E.g., Size Appeal of Jacob’s Eye, Inc., SBA No. SIZ-5955, at 12 (2018); Size Appeal of Hamilton Alliance, Inc., SBA No. SIZ-5698, at 9 (2015); Size Appeal of Shoreline Servs., Inc., SBA No. SIZ-5466, at 10 (2013). Accordingly, based on Appellant’s proposal of August 2, 2018, the Area Office did not err in concluding that Appellant did not comply with the ostensible subcontractor rule, because [Subcontractor] would be performing all, or nearly all, of the primary and vital contract requirements.
During the size protest, Warrior tried explaining how it would meet the limitation on subcontracting requirement, but the SBA OHA would not consider such information because the size protest must be based on the proposal that was submitted, not additional information raised during the protest.
