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Focus on Regulation

Small Business Contractors See Large Opportunities But Face Increasing Risks of a Size Protest

In July 2012, the Small Business Administration (“SBA”) announced that small businesses were awarded $91.5 billion in federal contracts in fiscal year 2011, representing 21.7% of all prime contract dollars. Although various commentators have criticized the government for falling short of the statutory directive to award 23% of procurement dollars to small businesses, the $91.5 billion spend demonstrates that a company’s status as a “small” business provides significant opportunities in the federal market.

One way the government ensures that firms accurately represent their size and that large firms do not receive contracts intended for small businesses is by allowing bidders in federal procurements to challenge the supposed small business status of a firm selected for award of a contract by filing a size protest. Size protests are reviewed by SBA Area Offices across the country, and Area Office size determinations can be appealed to the SBA’s Office of Hearings and Appeals (“OHA”) in Washington DC.

This newly-published Briefing Paper, authored by Hogan Lovells attorney Daniel Greenspahn, explains how a firm’s size is determined under SBA’s regulations, as well as the requirements and procedures for filing a size protest. The Paper also aggregates data from several hundred size protests and appeals in recent years to provide previously unavailable information on the likely chances of success and length of time for a decision in these proceedings. Some of the Paper’s key findings are as follows:

Size Protests
▪ The number of size protests filed each year has increased 55% since 2005 to a total of 710 in 2011.
▪ Since 2005, 26% of size protests have been successful (i.e. finding the protested party “other than small”).
▪ Approximately 48% of size protests are decided within 1 month and 88% within 3 months.

Size Appeals
▪ In recent years, about 10% of size determinations have been appealed to OHA.
▪ The number of size appeals filed each year has increased 16% since 2008 to a total of 65 in 2011.
▪ Since 2008, 35% of size determinations appealed have been reversed, remanded, or vacated by OHA.
▪ Approximately 34% of size appeals are decided within 1 month and 91% within 3 months.

Government Contracts attorneys at Hogan Lovells counsel organizations of all sizes on SBA’s size regulations as well as on the rules and procedures for filing or defending against a size protest or appeal.