Question 1

What is the ostensible subcontractor rule?

Accepted Answer

The ostensible subcontractor rule deems a subcontractor to be an affiliate of the prime contractor if the subcontractor performs the primary and vital requirements of the contract and the prime is unusually reliant on the subcontractor. When this rule applies, the subcontractor's size is combined with the prime's to determine size standard compliance. This rule is frequently cited in size protests involving small prime/large sub arrangements.

Question 2

How does affiliation affect size standard calculations?

Accepted Answer

Affiliated businesses' revenues and employees are combined when determining size. Affiliation exists when one entity controls or has the power to control another, through common ownership, management, stock options, contractual relationships, or economic dependence. SBA's affiliation rules are complex — common triggers include family members owning related businesses, identical or near-identical owners, and the ostensible subcontractor rule for subcontracting relationships.

Question 3

What are the limitations on subcontracting for SDVOSB set-asides?

Accepted Answer

For SDVOSB set-aside contracts, the prime contractor must comply with limitations on subcontracting in FAR 52.219-14. For service contracts: the SDVOSB must perform at least 50% of the cost of personnel. For supply contracts: at least 50% of the cost of manufacturing. For construction: at least 15% of the cost of the contract. Similarly situated subcontractors (also SDVOSBs) count toward these requirements.

Question 4

What is a size protest and how does it work?

Accepted Answer

A size protest challenges whether the apparent awardee qualifies as a small business under the applicable size standard. Any interested party (usually a competing offeror) can file a size protest with the contracting officer within five business days of notification of the apparent award. The CO forwards the protest to the SBA Area Office, which investigates and issues a determination. If the firm is found to be other-than-small, it loses the award.

What is the ostensible subcontractor rule?

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