The SBA Office of Hearings and Appeals lacks jurisdiction to consider whether an entity owned by an Indian tribe or Alaska Native Corporation has obtained a substantial Unfair Competitive Advantage within an industry.
In a recent size appeal case, OHA acknowledged that an Unfair Competitive advantage is an exception to the special affiliation rules that tribally-owned companies ordinarily enjoy–but held that only the SBA Administrator has the power to determine that an Indian tribe or ANC has obtained, or will obtain, such an unfair advantage.
OHA’s decision in Size Appeal of The Emergence Group, SBA No. SIZ-5766 (2016) involved a State Department solicitation for professional, administrative, and support services. The solicitation was issued as a small business set-aside under NAICS code 561990 (All Other Support Services), with a corresponding $11 million size standard.
After evaluating competitive proposals, the agency announced that Olgoonik Federal, LLC (“OF”) was the apparent successful offeror. The Emergence Group, an unsuccessful competitor, then filed an SBA size protest, alleging that OF was part of the Olgoonik family of companies, which received a combined $200 million in federal contract dollars in 2015.
The SBA Area Office found that OF’s highest-level owner was Olgoonik Corporation, an ANC. Because Olgoonik Corporation was an ANC, the SBA Area Office found that the firms owned by that ANC–including OF–were not affiliated based on common ownership or management. Because OF qualified as a small business as a stand-alone entity, the SBA Area Office issued a size determination denying the size protest.
Emergence appealed to OHA. Emergence argued that the exception from affiliation should not apply to OF because Olgoonik had gained (or would gain) an unfair Competitive Advantage through the use of the exception. Emergence cited the Small Business Act, which states, at 15 U.S.C. 636(j)(10)(J)(ii)(II):
In determining the size of a small business concern owned by a socially and economically disadvantaged Indian tribe (or a wholly owned business entity of such tribe), each firm’s size shall be independently determined without regard to its affiliation with the tribe, any entity of the tribal government, or any other business enterprise owned by the tribe, unless the [SBA] Administrator determines that one or more such tribally owned business concerns have obtained, or are likely to obtain, a substantial unfair competitive advantage within an industry category.
OHA wrote that the statute “explicitly states that the Administrator must determine whether an ANC has obtained an unfair competitive advantage,” and OHA “has no delegation from the Administrator to decide” whether an unfair competitive advantage exists. OHA held that it “lacks jurisdiction to determine whether the exception to affiliation creates an unfair competitive advantage in OF’s case.” OHA dismissed Emergence’s size appeal.
Entities owned by tribes and ANCs ordinarily enjoy broad exceptions from affiliation. As The Emergence Group demonstrates, those broad exceptions can be overcome by a finding of an unfair competitive advantage–but only the SBA Administrator has the power to make such a finding.
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