Busy Employee's Failure to Respond to SBA Size Protest Results In Issuance of Adverse Size Determination

On January 19, 2016, the SBA's Office of Hearings and Appeals (OHA) issued a decision in the Matter of:  Size Appeal of Oxyheal Medical Systems, Inc.  This appeal arose out of the SBA's size determination that Oxyheal was not a small business for the procurement at issue.  The subject procurement was set aside entirely for small businesses under NAICS Code 811219, Other Electronic and Precision Equipment Repair and Maintenance, with a corresponding size standard of $20.5 million.

This is an interesting case primarily because the primary issue considered by the OHA on appeal was not whether or not the company was in fact small but was more of a procedural issue (the resolution of the procedural issue would then dictate whether the SBA could then address the substantive merits of Oxyheal's argument, if any, that it is in fact a small business).

Background and Facts

The facts of this case are really very simple.

• September 1:  The Air Force issued an RFQ for hyperbaric chamber maintenance support services.  This RFQ was issued as a total small business set-aside under NAICS Code 811219.
• October 5:  After evaluating all proposals, the Air Force awarded the contract to Oxyheal.
• October 6:  An unsuccessful offeror filed a size protest challenging Oxyheal's small business size status.
• October 27:  The SBA then notified Oxyheal by email and next-day mail of the size protest and requested that Oxyheal provide the requested documents and information by November 2, 2015.  The communications from SBA were addressed to Employee 1, who was listed in the System for Award Management (SAM) as Oxyheal's primary point of contact.
• October 27 and 28:  SBA received notification that:  (1) Employee 1 had received and read the email; and (2) that the letter had been delivered to Oxyheal.
• November 2:  SBA received no response to the size protest.
• November 3:  SBA sent Employee 1 an email stating that no response had been received and that if SBA did not receive a response by 3:00 p.m., SBA would assume that Oxyheal was not going to respond to the size protest.  The email also noted that under the SBA's adverse inference rule, SBA could issue an adverse size determination if the protested company does not respond or fails to provide a complete response to a size protest.
• November 12:  SBA issued a size determination finding that Oxyheal was not a small business - it stated that under the adverse inference rule, SBA presumed Oxyheal's failure to respond meant that it was not small.
• November 12:  Upon receipt of the size determination, Oxyheal contacted the SBA in an effort to respond.  SBA refused to retract the size determination and Oxyheal then filed this appeal.

Oxyheal's Arguments on Appeal

​In its appeal, Oxyheal made a number of arguments:

1. That the apparent unsuccessful offeror's size protest was untimely.
2. Oxyheal had received notice from the Air Force that there was a concern regarding its size status but since the Air Force subsequently sent Oxyheal the contract, Oxyheal was under the impression that the issue had been resolved.
3. That Employee 1 was overwhelmed due to having to cover several different corporate functions (as a result of recent vacancies within Oxyheal) and was therefore only skimming emails and only taking action on those that were flagged as having "high importance."  
4. That the SBA Area Office should have taken additional steps to ensure that Oxyheal received the emails and was aware of the size protest.
5. That the Air Force Contracting Office, which was cc'd on the SBA's communications should have done more to communicate with Oxyheal regarding the size protest.
6. That Oxyheal, when its receipts are combined with those of its affiliates, does not exceed $20.5 million.

SBA OHA's Decision

The SBA stated very clearly that the only issue on appeal was whether or not the SBA office properly drew an adverse inference regarding Oxyheal's size.

SBA's regulations provide, in pertinent part:

"If a concern whose size status is at issue fails to submit a completed SBA Form 355, responses to the allegations of the protest, or other requested information within the time allowed by SBA, or if it submits incomplete information, SBA may presume that disclosure of the information required by the form or other missing information would demonstrate that the concern is other than a small business.  A concern whose size status is at issue must furnish information about its alleged affiliates to SBA, despite any third party claims of privacy or confidentiality, because SBA would not disclose information obtained in the course of a size determination except as permitted by Federal law."  13 CFR 121.1008(d).

"In the case of a refusal or failure to furnish requested information within a required time period, SBA may assume that disclosure would be contrary to the interests of the party failing to make disclosure." 13 CFR 121.1009(d).

In upholding the SBA's size determination (and utilization of the adverse inference), the OHA noted that SBA did not have an obligation nor should it be charged with contacting other officers or POCs (of Oxyheal) in the event that one does not respond.  In addition, OHA noted that the SBA Area Office cannot be presumed to be on notice of a company's internal structure or staffing difficulties.

In addition, in those cases where an adverse inference was reversed, the SBA noted that the concern's failure to respond was due to an error by the SBA Area Office and in  cases where the concern argued that it did not receive notice of the protest, the SBA Area Office was unable to provide evidence that the concern had in fact received notice.  In Oxyheal's case, there was no error on the SBA's part and there was documentation that Oxyheal and the individual to whom the communications were directed did in fact receive them.

The SBA also made the following points:  (1) Oxyheal's communications with the Air Force were irrelevant since it is the SBA that handles size protests, not the contracting agency; and (2) imposing additional obligations on the SBA Area Office to reach out to a concern that is the subject of a size protest is wrong from a policy perspective since the real error in this case was Oxyheal's "failure to properly monitor its communications."

Lessons Learned

The facts of this case and the OHA's decision highlights a few things:

• The importance of making sure that your SAM profile is kept up to date, particularly regarding points of contact and contact information (email addresses, office/mailing addresses, etc.); and 

• The importance of reviewing and properly responding to communications from the SBA.  The reality is that at times we all get overwhelmed with our emails and it becomes very easy to let things fall through the cracks and drop the ball.  However, when it comes to SBA communications and deadlines, it is always best to ensure that the information gets forwarded on internally as soon as possible so that if you yourself are too busy to respond, perhaps someone else in your organization can assist.