SBA No. SIZ-6294, 2024 (S.B.A.), 2024 WL 3468986
Background
On May 1, 2023, the Centers for Disease Control and Prevention (CDC) issued Request for Proposals (RFP) No. 75D301-23-R-72635, seeking a contractor to provide deidentified and interoperable national health data. The Contracting Officer (CO) set aside the procurement entirely for small businesses and assigned North American Industry Classification System (NAICS) code 513210, Software Publishers, with a corresponding size standard of $47 million average annual receipts. (RFP at 1.) Appellant submitted its initial proposal, including price, on May 31, 2023, self-certifying as a small business.
Discussion
On April 15, 2024, Appellant filed the instant appeal. Appellant contends that Size Determination No. 06-2024-024 is fundamentally flawed, because the Area Office found affiliation under the newly-organized concern rule even though “(i) a large firm (Microsoft) played no role in the formation of a small firm ([Appellant]); (ii) the large firm has no ability to control the small firm; and (iii) the [two firms] are involved in completely different unrelated lines of business.” (Appeal at 2.)
Appellant first highlights that the purpose of the newly organized concern rule is to “prevent circumvention of the size standards by the creation of ‘spin-off’ firms that appear to be small, independent firms but are, in actuality, affiliates or extensions of large firms.” (Id. at 6, quoting Size Appeal of J.W. Mills Mgmt., SBA No. SIZ-4909, at 4 (2008).) Appellant contends that, on this ground alone, the size determination is clearly erroneous, as Microsoft, among the world’s largest companies, did not create Appellant as a “spin-off” in an effort to compete for small business set-aside contracts. (Id.)
Next, Appellant maintains that the newly organized concern rule is inapplicable here because Appellant is not “newly organized”. (Id. at 6-7.) The Area Office itself expressed skepticism whether the rule should apply, given that Appellant already had been in operation for close to three years as of May 31, 2023. (Id. at 7.) OHA precedent similarly indicates that “[o]nce a firm has been an active concern for an extended period, it is not appropriate to apply the ‘newly organized concern’ rule without considering whether the challenged firm can still reasonably be considered a new business.” (Id. at 8, quoting Size Appeal of Coastal Mgmt. Sols., Inc., SBA No. SIZ-5281, at 5 (2011).) Even if the elements of the newly organized concern rule were otherwise met, affiliation cannot be found here because Appellant is not a nascent business …
Decision
On March 29, 2024, the U.S. Small Business Administration (SBA) Office of Government Contracting — Area VI (Area Office) issued Size Determination No. 06-2024-024, concluding that Truveta, Inc. (Appellant) is not a small business due to affiliation with Microsoft Corp. (Microsoft) under the newly-organized concern rule, 13 C.F.R. § 121.103(g). On appeal, Appellant maintains that the size determination is clearly erroneous, and requests that SBA’s Office of Hearings and Appeals (OHA) reverse. For the reasons discussed infra, the appeal is granted and the size determination is reversed.
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