# Presentation: 676329

## CIVIL SERVANT/CONTRACTOR PROCUREMENT ROUNDTABLE 

- CIVIL SERVANT/CONTRACTOR PROCUREMENT ROUNDTABLE
- INFORMATIONAL FORUM
- “SBA OSTENSIBLE SUBCONTRACTOR RULE”
-                      August 8, 2005
-                                                             Debra L. Johnson
-                                                                             Director, Office of Procurement							rev. 1 -11/04/05

- Normal practice to compete for federal contracts under teaming arrangements.  FAR 9.6 recognizes teaming
- Typically teaming arrangements structured to avoid joint ventures or ostensible subcontractor situations
- For purposes of SB size status, joint ventures can be deemed to be affiliated
- “Affiliated”  and “ostensible subcontractor” – team members considered as a single entity for size determination purposes
- Puts at risk ability to qualify as small under avg annual receipts size standards used in service acquisitions

##                            BACKGROUND

-                            BACKGROUND
- SBA definitions:
- “Affiliation”-generally arises where one concern is dependent upon another concern for contracts and business to such a degree that its economic viability would be in jeopardy without such contracts/business.
- “Ostensible subcontractor”-one that performs primary and vital requirements of the contract or is a subcontractor upon which the prime contractor is unusually reliant.
- 13 C.F.R 121.103(h)(4)(2005)
- The determination whether an entity is a joint venture is based upon facts of the business operation, regardless of how the business operation may be designated by the parties involved.  An arrangement to share profits/losses proportionate to each party’s contribution to the business operation is a significant factor in determining whether the business operation is a joint venture.

## BACKGROUND

- 13 C.F.R. 121.103(h)(4)(2005)
- An ostensible subcontractor which performs or is to perform primary or vital requirements of a contract may have such a controlling role that it must be considered a joint venturer affiliated on the contract with the prime contractor.  In determining whether subcontracting rises to the level of affiliation as a joint venture, SBA considers whether the prime contractor has unusual reliance on the subcontractor.
- Sorting out just what is affiliation and what is an ostensible subcontractor is a complex task.
- Contracting Officer, SBA Regional Office, SBA Office of Hearing and Appeals.

## BACKGROUND

- Factors that the SBA Office of Hearings and Appeals has considered to determine if an ostensible subcontract relationship exists:
- Seven factor Test:
- Who will manage contract
- Which party possesses background & expertise necessary for contract performance
- Which party pursued the contract
- The degree of collaboration in preparation & submission of competitive proposal
- Whether there are discreet tasks to be performed by each of teaming partners, or whether there is instead commingling of personnel and resources
- The relative amount of work to be performed by each teaming partner
- Which party will perform the more complex and costly contract functions

## BACKGROUND

- These factors are not weighed equally
- Not one of them is a conclusive test of reliance

## IMPACT 

- Will evaluate the amount of work to be performed by each party (reference FAR 52.219-14 Limitation on Subcontracting)
- Evaluate proposal for clearly defined separate roles for proposed prime and subcontractors
- Will evaluate using SBA’s Seven Factor Test
- Applies to current and future JSC procurements