InfoTech Enterprises, No. 4346 (March 22, 1999)
Docket No. SIZ-98-12-01-48
              REDACTED COPY FOR PUBLIC RELEASE
                  UNITED STATES OF AMERICA
                SMALL BUSINESS ADMINISTRATION
               OFFICE OF HEARINGS AND APPEALS
                      WASHINGTON, D.C.
_______________________________
                               )
SIZE APPEAL OF:                )
                               )
InfoTech Enterprises, Inc.     )   Docket No. SIZ-98-12-01-48
                               )
     Appellant                 )   Decided:  March 22, 1999
                               )
Solicitation No.               )
M/OP-98-1114                   )
U.S. Agency for International  )
  Development                  )
Washington, DC                 )
_______________________________)
                         APPEARANCES
                        for Appellant
                  Barbara S. Kinosky, Esq.
                   Karen R. Harbaugh, Esq.
             Kinosky, Phillips & Lieberman, PLC
      For the U.S. Agency for International Development
                     John R. Power, Esq.
                  Office of General Counsel
                  for LTG Associates, Inc.
                     Paralee White, Esq.
                    Brian A. Darst, Esq.
                    Lisa K. Miller, Esq.
                    Gadsby & Hannah, LLP
                           DIGEST
An  appeal raising contract-specific issues is moot only  if
the  procuring  agency  has awarded  the  contract  and  the
awardee  is  performing the contract, so that the challenged
firm's size status no longer is a live issue.
The  question  of  whether a challenged  firm  is  unusually
reliant  on,  and thus is a joint venturer affiliated  with,
its  ostensible subcontractor, is determined by the totality
of the circumstances, and no one factor will be dispositive.
In  an appeal where the issue is whether the challenged firm
is affiliated with its ostensible subcontractor, the teaming
agreement between the two firms is important evidence.
In  an appeal where the issue is whether the challenged firm
is   affiliated  with  its  ostensible  subcontractor,   the
presence or absence of profit sharing between the challenged
firm and its ostensible contractor is not dispositive.
A  challenged  firm is unusually reliant  on,  and  is  thus
engaged   in   a   joint   venture  with,   its   ostensible
subcontractor  under the totality of the circumstances  when
the  primary  and vital purpose of the contract  is  in  the
ostensible  subcontractor's area of expertise, but  not  the
challenged   firm's;   the  ostensible   subcontractor   has
extensive  input  into the challenged firm's  proposal;  the
challenged firm's proposal allocates nearly as much  of  the
level  of  effort  labor costs to the  subcontractor  as  to
itself;   the  ostensible  subcontractor  is  the  incumbent
contractor; the challenged firm proposes that all of its key
employees, and most of its non-key employees, either will be
hired from or are employees of the ostensible subcontractor;
the  challenged firm's proposal fails to delineate  discrete
tasks   for   the   challenged  firm  and   its   ostensible
subcontractor  to  perform; and the challenged  firm  has  a
teaming agreement with its subcontractor which requires  the
subcontractor  to receive as close to 49% of the  contract's
level of effort as possible.
                          DECISION
HOLLEMAN, Administrative Judge:
                        Jurisdiction
     This appeal is decided under the Small Business Act  of
1958,  15  U.S.C. Sections 631 et seq., and 13 C.F.R.  Parts
121 and 134. [1]
                           Issues
     Whether  an appeal raising contract-specific issues  is
moot  if the procuring agency has awarded the contract,  but
the CO has issued a stop-work order suspending the awardee's
performance.
     Whether  the  question of a challenged  firm's  unusual
reliance  on, and thus joint venturer affiliation with,  its
ostensible  subcontractor, is determined by any one  factor,
or by the totality of the circumstances in each case.
     Whether,  in  an appeal where the issue is whether  the
challenged   firm   is   affiliated  with   its   ostensible
subcontractor, the teaming agreement between the  two  firms
is important evidence.
     Whether,  in  an appeal where the issue is whether  the
challenged   firm   is   affiliated  with   its   ostensible
subcontractor,  the presence or absence  of  profit  sharing
between the challenged firm and its ostensible contractor is
dispositive.
     Whether a challenged firm is unusually reliant on,  and
is  thus  engaged  in a joint venture with,  its  ostensible
subcontractor  under the totality of the circumstances  when
the  primary  and vital purpose of the contract  is  in  the
ostensible  subcontractor's area of expertise, but  not  the
challenged   firm's;   the  ostensible   subcontractor   has
extensive  input  into the challenged firm's  proposal;  the
challenged firm's proposal allocates nearly as much  of  the
level  of  effort  labor costs to the  subcontractor  as  to
itself;   the  ostensible  subcontractor  is  the  incumbent
contractor; the challenged firm proposes that all of its key
employees, and most of its non-key employees, either will be
hired from or are employees of the ostensible subcontractor;
the  challenged firm's proposal fails to delineate  discrete
tasks   for   the   challenged  firm  and   its   ostensible
subcontractor  to  perform; and the challenged  firm  has  a
teaming agreement with its subcontractor which requires  the
subcontractor  to receive as close to 49% of the  contract's
level of effort as possible.
                       I.  BACKGROUND
                 A.   Procedural Background
     On   July  22,  1998,  the  United  States  Agency  for
International   Developmnent  (AID)   issued   the   subject
competitive   solicitation  for  its  Population   Technical
Assistance Project (POPTECH).  The purpose of POPTECH is  to
provide  AID with flexible access to the technical expertise
needed to develop and evaluate program activities in support
of  its  strategic  mission  to stabilize  world  population
growth  and  protect human health.  The Contracting  Officer
(CO)  set  the  procurement aside totally for firms  in  the
Small  Business  Administration's (SBA)  8(a)  program,  and
assigned    to    the   procurement   Standard    Industrial
Classification   (SIC)  code  8742,  Management   Consulting
Services, with a corresponding average annual receipts  size
standard of $5 million.  Offers were due on August 25, 1998.
     On  August 12, 1998, the CO issued Amendment  1,  which
answered questions from potential offerors; revised  Section
K,  the representations and certifications of offerors;  and
added a clause on the Year 2000 computer problem.
     On   August  25,  1998,  AID  received  proposals  from
InfoTech    Enterprises,   Inc.   (Appellant),   with    BHM
International,  Inc. (BHM), the incumbent,  as  its  primary
subcontractor; and from LTG Associates, Inc. (LTG), with TvT
Associates,  Inc.  (TvT), as its primary subcontractor.   On
September   29,  1998,  the  CO  awarded  the  contract   to
Appellant.
     On  October  6, 1998, LTG timely filed a  size  protest
with  AID,  asserting  Appellant is affiliated  in  a  joint
venture  with  BHM, its ostensible subcontractor.   Also  on
October  6th,  LTG  filed a protest of the  award  with  the
General Accounting Office (GAO).
     On  October  8, 1998, AID issued a stop-work  order  to
Appellant,  under 48 C.F.R. Section 33.104(c)(1).   Also  on
October 8th, AID referred the size protest to SBA's Area  II
Office    of   Government   Contracting   in   Philadelphia,
Pennsylvania  (Area  Office) for a size  determination.   On
October 14, 1998, the Area Office informed Appellant of  the
protest and requested it to file an SBA Form 355 and certain
other information.  On October 20, 1998, Appellant filed the
requested information.
     On  November  10, 1998, the Area Office issued  a  size
determination.  The Area Office found Appellant is unusually
reliant upon BHM, its ostensible subcontractor and, thus, it
is  affiliated  with  BHM in a constructive  joint  venture.
Because  the  combined average annual receipts  of  the  two
firms exceeded the applicable size standard, the Area Office
concluded Appellant is other than small.  Appellant received
the size determination on November 16, 1998.
      On  December 1, 1998, Appellant -- through counsel  --
filed  the  instant appeal, together with a  request  for  a
protective  order.   On  December 7, 1998,  LTG  --  through
counsel  --  filed a Motion to Intervene.   On  December  8,
1998,  the  Administrative Judge issued a Protective  Order,
and  granted  LTG's Motion to Intervene.   On  December  10,
1998,  AID filed a Response to the appeal.  On December  18,
1998,  LTG  filed  a Motion to Dismiss the appeal,  together
with its Response.
      On  December  30, 1998, Appellant filed a  Motion  for
Leave  to  Respond  to LTG's Motion to  Dismiss,  which  the
Administrative Judge granted that same day.  On  January  7,
1999, Appellant responded to the Motion to Dismiss.  Also on
January 7th, AID filed a Motion to Intervene, together  with
an  Opposition to the Motion to Dismiss, a Motion for  Leave
to  Reply  to LTG's Response; and the Reply.  On January  8,
1999, LTG filed a Motion to Strike AID's entire January  7th
pleading.   On  January 15th, Appellant filed a  Motion  for
Leave  to  Respond to LTG's Motion to Strike, together  with
its Response.
                 B.   The Statement of Work
     The  solicitation's  Statement  of  Work  (SOW)  states
POPTECH's   overall   objective  is  to  provide   technical
assistance  to  AID's  Office of Population  and  its  field
Missions in project evaluation, monitoring, program  design,
and  in  conducting  special workshops  and  meetings.   The
contractor's  primary  role  is to  provide  consultants  to
evaluate  AID's  family  planning  and  reproductive  health
programs.
     For   each   of  approximately  160  assignments,   the
contractor  will identify and recruit qualified consultants,
and  provide  them with orientation and logistical  support.
The  contractor will evaluate the consultants, and edit  and
publish  their  reports.   The  contractor  also  will  work
closely  with AID to refine the statements of work  for  the
consultants' assignments, and to design strategic objectives
and  results packages, and to document lessons learned.  The
contractor will maintain and update the consultant database,
and  will develop and conduct an annual seminar/workshop for
consultants who demonstrate the leadership skills  necessary
to lead POPTECH teams.
     The  SOW  requires the contractor to provide  five  key
personnel with certain specific qualifications.  The Project
Director   must   have   an  international   public   health
background,   experience  in  project   administration   and
management; and is responsible for the technical supervision
of  all  aspects of POPTECH, including final review  of  all
reports.   The  Deputy  Director  must  have  experience  in
designing  and  evaluating international population  control
and  reproductive  health programs,  in  order  to  organize
consultants'   assignments,  oversee  report  writing,   and
conduct briefings.  The Evaluation Specialist also must have
extensive  experience  in family planning  and  reproductive
health  programs.   The Project Administrator  must  have  a
background in financial management and contract negotiation;
and  the  Senior  Copy  Editor must  have  a  background  in
writing,  and knowledge of the public health and  population
field, in order to edit the consultants' reports.
                 C.   The Size Determination
     The  Area  Office found that, based on the totality  of
the circumstances, Appellant and BHM are affiliated as joint
venturers   and,   therefore,  are   affiliated   for   this
procurement.
     Specifically, the Area Office found Appellant failed to
provide  any  evidence  it has the in-house  management  and
employees  to  perform  the  contract's  primary  and  vital
purpose.   In  fact, Appellant is totally reliant  on  BHM's
experience  and expertise, vital personnel, facilities,  and
consultant  database  to  perform  the  contract.    XXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
  XXXXXXXXXXXXXXXXXXXXX. Because BHM employees performing on
the  current  contract will occupy all but one  of  the  key
positions, and most non-key positions, the Area Office found
misleading  Appellant's assertion that it  will  manage  the
project.   In addition, Appellant will assume BHM's lease of
POPTECH office space.
     The Area Office found no evidence that Appellant failed
to  locate the contract and initiate contact with BHM, or to
write the proposal itself.  However, the Area Office further
found  that although the Teaming Agreement between Appellant
and  BHM  stated  Appellant would  have  responsibility  for
proposal  preparation,  BHM had  extensive  input  into  the
proposal.
     The   Area   Office  found  the  proposal  demonstrates
Appellant's  expertise is in computer  operations  services,
database  development,  and software services,  while  BHM's
expertise is in population control, strategic assessment and
management in rural areas of foreign countries, and  foreign
disaster  management.  BMH also has extensive experience  in
the management systems needed to locate, recruit, and manage
international technical assistance.
     In  addition,  neither  the proposal  nor  the  Teaming
Agreement   specifically   delineates   BHM's    areas    of
responsibility, or the discrete or segregable  functions  it
will  perform.   It  merely specifies that  BMH's  level  of
effort hours billed will not exceed, and will be as close as
possible to, 49% of the total project value.
     The    proposal    requires   the   Project    Director
XXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXX.   Moreover, while Appellant's proposal does not specify
who   will   fill   the  position  of  Assignment   Manager,
responsible for recruiting outside consultants, one of BHM's
proposed  employees  has  extensive experience  in  managing
consultant  teams.   BHM currently owns  and  maintains  the
consultant database, and the proposal states Appellant  will
manage  consultant  relations "much as  the  incumbent  does
now".
     The Area Office found Appellant will be responsible for
36%  of  POPTECH's labor costs; BHM for 37%; and consultants
for 27%.  Notwithstanding Appellant's assertion that it will
be  responsible for XX of the total contract value, the Area
Office  found  this figure erroneously included consultants,
travel, and other costs.
     The  Area Office concluded that, because Appellant  and
BHM  have combined efforts, skills, and knowledge to perform
the contract, they are affiliated as joint venturers.  Thus,
they  are  affiliated for the purposes of this  procurement.
Although  Appellant  submitted no financial  information  on
BHM,  the  Area Office found -- based on a Dun &  Bradstreet
report  --  that  BHM exceeds the applicable size  standard.
Accordingly,  based  on  Appellant's affiliation  with  BHM,
Appellant is other than small for this procurement.
                  D.    Arguments on Appeal
     Appellant  asserts the Area Office erred in  finding  a
joint  venture  between  itself and BHM,  because  the  Area
Office  failed to analyze the primary and vital  purpose  of
the   contract,  which  Appellant  actually  will   perform.
Appellant asserts its proposal did in fact enumerate its and
BHM's  tasks.   Appellant  asserts it  has  the  information
technology expertise and experience necessary to perform the
contract, because the contract's primary purpose is  program
management  support,  rather than specialized  international
services, as the Area Office found.
     In   addition,  Appellant  asserts  the  Area  Office's
findings,  that  BHM  had extensive input  into  Appellant's
proposal,  and that the consultant database belongs  to  BHM
rather  than AID, are unsupported by the record.   Appellant
further  asserts  it  will have management  control  of  the
project, because it will employ the key personnel.  Further,
Appellant's  Teaming Agreement with BHM specifies  Appellant
is  the  prime  contractor and will have responsibility  for
proposal preparation.
     Appellant  asserts the Area Office made two  arithmetic
errors in determining the percentage of work each firm would
perform.   First,  the  Area  Office  applied  general   and
administrative expenses to BHM's share of labor  costs,  but
not  to  Appellant's  share.  Second, because  the  contract
requires  the  use  of  consultants, Appellant  asserts  its
portion  of  the costs should include the costs attributable
to consultants.  Appellant asserts the correct percentage of
contract  performance actually is Appellant, XXXX; and  BHM,
XXXX.
     Finally, Appellant asserts the Area Office's finding of
a  joint  venture, was deficient in not considering  whether
the two firms shared profits.
     AID  asserts,  in  its December 10,  1998  Response  in
support of the instant appeal, that the principal purpose of
the  solicitation  is  to hire a "body shop"  contractor  to
identify,   recruit,  and  orient  consultants  to   perform
services.   Therefore, management services are  the  primary
and  vital  purpose of the contract.  Because Appellant  has
extensive  experience  in this area, it  has  the  necessary
expertise  to  manage  the  contract.   AID  asserts  it  is
permissible   for  a  follow-on  contractor   to   hire   an
incumbent's  employees without being found  unduly  reliant.
Further,  AID  asserts it owns the consultant database,  and
will make it available to the awardee.
     AID  relies on 13 C.F.R. Section 125.6(b)(7) to  assert
that  the  cost of consultants is appropriately  treated  as
part of the contract's "other direct costs", rather than  as
subcontracting costs, because the solicitation requires  the
awardee to use the consultants listed in the database  as  a
specific source of services. [2] Therefore, the Area  Office
did  not properly calculate Appellant's and BHM's shares  of
the  contract's labor cost (including direct labor,  fringe,
overhead,  general  and  administrative  expenses,  but  not
including  fees and consultant costs), which,  respectively,
are  XXXX  and XXXX.  Consequently, Appellant is  performing
the  majority  of  the contract costs,  and  is  not  unduly
reliant on BHM.
     LTG,  in  its December 18th Response, moves to  dismiss
the instant appeal as moot, because the only issue on appeal
is  contract-specific,  and AID has  awarded  the  contract,
citing Size Appeal of Lightcom International, Inc., No. 4118
(1995).
     As  to  the  merits,  LTG  asserts  Appellant  and  AID
mischaracterize   the   solicitation.    LTG   asserts   the
solicitation  states POPTECH's primary role  is  to  provide
technical  assistance  to evaluate  the  implementation  and
impact  of  AID's  family planning and  reproductive  health
programs.   Thus, the contract requires more than management
services;   it   requires  substantive  knowledge   of   and
experience  in  population, health,  and  nutrition  issues.
Because Appellant merely is a computer services provider, it
does  not  have the necessary skills to perform the contract
on its own.
     LTG    asserts    Appellant's   proposal   inextricably
intertwines Appellant's and BHM's experience, proposed work,
personnel,  resources, etc., so it is clear BHM collaborated
extensively  in  its preparation.  LTG further  asserts  the
proposal's  frequent references to the POPTECH  "team";  the
use of the terms "BHM" and "we" throughout its proposal; and
the  use  of BMH documents in Appellant's proposal,  further
support  the  Area  Office's finding that  BHM  participated
extensively in the proposal's preparation.
     LTG asserts Appellant's proposal demonstrates Appellant
and  BHM  will commingle resources to perform the  contract,
and  will  manage it jointly.  The proposal even  commingles
the  qualifications of the two firms' personnel, and  states
that  BHM  will  supervise  some  InfoTech  employees.    In
addition, BHM will perform a substantial amount of the work,
including  the more complex and costly functions.   Finally,
while  the  Area Office did not address profit sharing,  the
Teaming  Agreement  leaves open the  possibility  of  future
profit sharing.
     Appellant's  January 7, 1999 Reply to LTG's  Motion  to
Dismiss  asserts the instant appeal is not moot, because  of
the   stop-work  order.   Appellant  further  asserts  LTG's
argument  on the vital and primary tasks for the procurement
is   in  effect  an  untimely  SIC  code  appeal,  and   the
Administrative Judge should not consider it.
     In  its January 7, 1999 filing, AID also relies on  the
stop-work  order in opposing LTG's  Motion to Dismiss.   AID
requests leave to reply to LTG's substantive Response, which
addresses  AID's  December 10th pleading.  AID  asserts  LTG
misrepresents the solicitation and, as drafter, AID can best
interpret  its  own solicitation.  AID reiterates  that  the
contract's  primary  and vital purpose  is  the  hiring  and
management of consultants.  Further, AID asserts Appellant's
computer  and information technology capabilities  would  be
useful in performing the contract.  In addition, AID asserts
the  Appellant-BMH Teaming Agreement confirms that Appellant
is  the  prime  contractor and is responsible  for  proposal
preparation.   The  Teaming Agreement does  not  govern  the
interpretation of the cost proposal.
     LTG's  January  8, 1999 Motion to Strike asserts  AID's
January 7th filing is an unauthorized attempt to reopen  the
record.  LTG further asserts AID is attempting to place  new
evidence  not presented to the Area Office into the  record,
specifically,  portions of BHM's subcontract cost  proposal,
which is contrary to this Office's procedures.
     Appellant's  January  15,  1999  filing  opposes  LTG's
Motion to Strike, asserting AID had good cause to respond to
LTG's December 18th Response, after close of record, because
that pleading contained errors of fact.
                       II.  DISCUSSION
                    A.   Threshold Issues
      Appellant filed the instant appeal within 15  days  of
receiving  the  size determination, and it is  thus  timely.
13 C.F.R. Section 134.304(a)(1).
     The Administrative Judge first must resolve a number of
procedural issues.  He GRANTS AID's Motion to Intervene.  13
C.F.R.  Section 134.210(b).  The Administrative Judge notes,
however,  a  formal motion is unnecessary  because,  as  the
procuring agency, AID is a party in interest and has a right
to respond to the appeal.  13 C.F.R. Section 134.309(a).
     The   Administrative  Judge  DENIES  LTG's  Motion   to
Dismiss.   Although  the size issue on appeal  is  contract-
specific,  the  stop-work order stays the award  and  avoids
mootness.  This Office has found mootness in appeals raising
contract-specific  issues only if the procuring  agency  has
awarded  the  contract  and the awardee  is  performing  the
contract,  so  that  the challenged firm's  size  status  no
longer  is  a live issue.  If the CO were to lift the  stop-
work  order, the appeal would become moot.  Size  Appeal  of
Resource Applications, Inc., No. 4252 (1997).
     The  Administrative Judge GRANTS Appellant's Motion for
Leave  to  Respond to LTG's Motion to Strike,  as  Appellant
filed  it within the time limit to respond to a motion.   13
C.F.R. Section 134.211(b).
     The  Administrative Judge DENIES LTG's Motion to Strike
AID's January 7th  Reply to LTG's December 18th Response, as
to  that  portion  which replies to LTG's arguments  in  its
Response   concerning   the  solicitation.    However,   the
Administrative Judge GRANTS LTG's Motion as to AID's attempt
to  introduce  evidence  concerning BHM's  subcontract  cost
proposal  into the record, without satisfying the regulatory
requirement  to establish relevance or good  cause  for  the
late  submission.  Size Appeal of Frontier Applied Sciences,
Inc.,  No.  4316 at 12 (1998); 13 C.F.R. Section 134.308(a).
[3]
      A.   Appellant's Affiliation with its Ostensible
                        Subcontractor
      As  to  the  merits of the appeal, Appellant  has  the
burden  of proving, by a preponderance of the evidence,  all
the elements of its appeal.  Specifically, it must prove the
Area Office size determination is based on a clear error  of
fact  or  law.   13 C.F.R. Section 134.314; Size  Appeal  of
Rebmar, Inc., No. 4173 at 4 (1996).
            1. The Ostensible Subcontractor Rule
     Where  firms  bid as joint venturers on small  business
set-aside procurements, SBA's size regulations treat them as
affiliates.   13  C.F.R.  Section  121.103(f).    The   size
regulations  also treat as joint venturers a contractor  and
subcontractor, "if the ostensible subcontractor will perform
primary and vital requirements of a contract or if the prime
contractor   is   unusually  reliant  upon  the   ostensible
subcontractor."   13 C.F.R. Section 121.103(f)(4);  63  Fed.
Reg.  35726,  35738  (June 30, 1998)  (redesignating  former
Section  121.103(f)(3)).  This Office determines  whether  a
contractor is engaged in a joint venture with its ostensible
subcontractor, based upon the totality of the  circumstances
present in each case.  Size Appeal of Metroplex Corporation,
No. 4048 at 5 (1995).
       2. The Area Office Correctly Analyzed the SOW.
     The   Administrative  Judge  rejects  at   the   outset
Appellant's assertion that the Area Office failed to analyze
the primary and vital purpose of the contract.  In fact, the
size  determination  notes that the contract's  requirements
are  in  the field of international population control,  and
discusses the functions of the key personnel.  It also notes
this  is  BHM's area of expertise.  In contrast, Appellant's
expertise is in computer operations.
     The  Administrative Judge expressly rejects, as a  post
hoc   rationalization,  AID's  assertion  that  the  primary
purpose  of this solicitation merely is to operate  a  "body
shop".  The Administrative Judge notes that the language  of
the  SOW,  not the procuring agency's unsupported subsequent
characterization of the SOW, determines a contract's primary
purpose.  See SIC Appeal of Distributed Information Systems,
Inc.,  No.  4189 at 8-9 (1996).  Here, the SOW requires  the
contractor  to  perform a wide variety of substantive  work:
aid  in  preparing  the  consultants'  statements  of  work,
consultants'   orientation,  editing  and   publishing   the
consultants' reports, evaluating their work after each  task
is   completed,   and   conducting  seminars.    Thus,   the
contractor's key personnel must have extensive knowledge and
experience   in   international   population   control   and
reproductive  health;  Appellant's assertion  that  the  SOW
requires   its   expertise   and  experience   in   computer
technology,  as  an  aspect of program  management  support,
simply is without basis. [4]
     Thus,  based  on  his careful review of  the  SOW,  the
Administrative Judge finds the primary and vital purpose  of
this  procurement  is  to provide specialized  international
services, in the form of external technical assistance,  for
AID's Office of Population and its field Missions.
 3. The Area Office Correctly Found BHM Had Extensive Input
                     into the Proposal.
     The  Administrative  Judge affirms  the  Area  Office's
finding  that  BHM  had extensive input into  the  proposal,
because  the record repeatedly refers to Appellant  and  BHM
working   together  as  a  team  to  perform  the  contract.
Appellant's Proposal, pp. I-4, I-14, I-30, I-44, I-52, I-55,
III-1, III-4.  In addition, the Administrative Judge accepts
LTG's  assertion that Proposal Annexes VII and VIII are  BHM
documents.   He notes that BHM is the incumbent  contractor,
and  the  document headings identify them as current POPTECH
documents.   This  Office has held that  a  proposal,  which
constantly  refers to a challenged firm and  its  ostensible
subcontractor  as  a  team, is indicia that  the  ostensible
subcontractor  had  substantial  input  into  the  proposal.
Thus,  it  supports  a  finding of unusual  reliance.   Size
Appeal  of  Caliber  Associates, Inc.,  No.  3412  at  25-26
(1991). [5]
  4. The Area Office Correctly Analyzed the Cost Proposal.
     The  Administrative Judge rejects as  contrary  to  the
record Appellant's assertion that the Area Office failed  to
consider general and administrative expenses.  His review of
Appellant's  cost  proposal shows the Area  Office  accepted
Appellant's  XXXXX subtotal for labor, fringe and  overhead;
and  added  XXXXX,  or  XX, for general  and  administrative
expenses,  for  a  total  of XXXXXX.  [6]  The  Area  Office
accepted  XXXXXXX  in  costs  attributed  to  BHM,  also  in
Appellant's  proposal; and subtracted XXXXX for  travel  and
other  direct costs, for a total of XXXXX.  It also accepted
Appellant's  cost  proposal of XXXXX for  consultants.   The
Area Office then totaled all three costs, and calculated the
percentages  of  labor costs as 36% for Appellant;  27%  for
consultants; and 37% for BHM. [7]
     The   Administrative  Judge  also  rejects  Appellant's
assertion   that   the  Area  Office  erred   in   computing
Appellant's  and BHM's shares of the labor  costs  for  this
procurement.   Appellant  asserts  error  because  the  Area
Office applied general and administrative expenses to  BHM's
share   of  the  cost  incurred,  but  not  to  Appellant's.
However, Appellant fails to adduce any supporting evidence.
     In   addition,  the  solicitation  explicitly  required
offerors  to  list consultants as a line item separate  from
their  own  direct  costs,  and general  and  administrative
expenses.   Solicitation, Amendment  1,  p.  3.   Therefore,
Appellant  fails  to  support its assertion  that  the  Area
Office  erred  in  calculating  each  firm's  share  of  the
contract   labor   costs.   In  fact,  the   Area   Office's
calculation   revealed  that  Appellant's   share   of   the
contract's  labor  costs actually was less  than  BHM's,  an
indicia of Appellant's unusual reliance on BHM.  Size Appeal
of Hamre Associates, Inc., No. 4025 (1995).
     Even  if  this  Office were to accept  Appellant's  and
AID's  calculations of the share of labor costs as XXXX  for
Appellant,  and  XXXX  for BHM, Appellant's  argument  would
fail.   This  Office has held that subcontractor performance
of such a high proportion of a contracts costs is an indicia
of  unusual reliance, and thus of affiliation.  Size  Appeal
of  Business  Control Systems, Inc., No. 3959 at  7  (1994);
Caliber, supra at 32.
  5. Appellant's Hiring of BHM's Employees is an Indicia of
                        Affiliation.
     The  Administrative  Judge notes  that,  although  this
Office's precedent supports AID's assertion that a follow-on
contractor  may hire an incumbent's employees, (Size  Appeal
of  Ideal  Services,  Inc., No. 3317  at  16  (1990)),  that
argument  does  not  change  the result  here,  because  the
incumbent  also  is the ostensible subcontractor.   Further,
Appellant  does  not merely propose to hire  some  of  BHM's
employees.  All but one of its five key personnel  and  most
of  its non-key personnel are current BHM employees, and the
remaining  key employee will be a BHM employee.  Appellant's
Proposal, Section II.
     The  Area Office did not directly address the issue  of
whether    such   wholesale   hiring   of   the   ostensible
subcontractor's  employees  is an  indicia  of  affiliation.
However,  this  Office has held that, where  the  ostensible
subcontractor  is  the  incumbent and  the  challenged  firm
proposes  to  hire a substantial number of  the  incumbent's
employees, this constitutes a strong indicia of affiliation.
Business Control Systems, supra at 7-8; Caliber, supra at 27-
31.
     6. Appellant's Assignments of Error are Meritless.
     The Administrative Judge rejects, as unsupported by any
relevant authority, Appellant's and AID's assertion that the
Area  Office erred in excluding the consultants'  fees  from
Appellant's   portion   of  the  work,   because   providing
consultants   is   an  important  part  of   the   contract.
Specifically,  the  regulation  AID  relies  on  (13  C.F.R.
Section  125.6(b)(7)  See fn. 2), is inapposite  here.   The
Area  Office  did  not find Appellant in  violation  of  the
limitations on subcontracting rule, and therefore that issue
is not before this Office.
     The   Administrative  Judge  also  rejects  Appellant's
assertion  that it enumerated each firm's tasks,  to  permit
determination  of  which  firm  would  perform  the  complex
contract  functions.   As noted above, Appellant's  proposal
refers  to  the  two  firms working as team,  but  fails  to
identify  discrete  tasks.  Moreover,  Appellant's  evidence
does  not  refer  to the main portion of its  proposal  but,
rather, to its listing of past performance by Appellant  and
BHM.   This  is  yet another indicia of Appellant's  unusual
reliance  on  BHM.  Size Appeal of Fortier  and  Associates,
Inc., No. 4055 at 5 (1995); Size Appeal of Geo-Marine, Inc.,
et al., No. 3459 at 11 (1991).
     In  addition  to its failure to delineate prospectively
in   this   procurement  discrete  tasks  for   each   firm,
Appellant's  own submission on past performance  establishes
that BHM -- not Appellant -- has the relevant expertise  for
this procurement.  Specifically, it demonstrates Appellant's
past  performance  has  been in computer  operations,  while
BHM's is in international family planning.  Even Appellant's
experience  in editing and publishing reports  has  been  in
technological matters, not international population control.
This  also is an indicia of Appellant's unusual reliance  on
BHM.  Size Appeal of SONEX Enterprises, Inc., No. 3948 at  9
(1994).
     The  Administrative Judge rejects,  as  unsupported  by
this Office's precedent, Appellant's assertion that the Area
Office erred in not basing its determination on whether  the
Teaming  Agreement  required  profit  sharing.   While   the
Administrative Judge concedes this Office did  consider  the
issue  of  profit sharing in Size Appeal of Ideal  Services,
supra,  at 16 (1990), subsequent cases have not viewed  this
as dispositive.  Instead, like the seven factors test, which
is merely illustrative, not exclusive, (and does not address
the  issue  of profit sharing (SONEX, supra at  8)),  profit
sharing  merely  is  one  aspect  of  the  totality  of  the
circumstances  in  each case.  Size Appeal of  CardioMetrix,
Inc., No. 4051 (1995); Business Control Systems, supra at 8.
     The  Administrative Judge rejects AID's assertion  that
the  Area  Office  erred in using the Teaming  Agreement  to
analyze   Appellant's  proposal.   This  Office's  precedent
expressly  supports  use of teaming  agreements  to  analyze
whether  a  challenged  firm  is  unduly  reliant   on   its
ostensible  subcontractor.  Ideal Services,  supra,  at  16.
Here,  the Teaming Agreement provides that BHM will  receive
as close as possible to 49% of the level of effort.  Teaming
Agreement, Exhibit 8.  This language demonstrates  that  the
ostensible  subcontractor  has  an  indispensable  role   in
performing   the contract.  Business Control Systems,  supra
at 7-8; Caliber, supra at 27-32.
       7. The Area Office's Determination is Affirmed.
     The   Administrative  Judge  affirms  the  Area  Office
findings  that  BHM had extensive input into  the  proposal;
BHM's  labor  costs  would be nearly equal  to  Appellant's;
Appellant  failed to list which discrete tasks  it  and  BMH
will  perform; all of Appellant's key employees either  will
be  hired from BHM or will be BHM employees; and the Teaming
Agreement  requires BHM to receive as close as  possible  to
49%  of  the  level  of effort.  All of these  findings  are
strong  indicia  of  unusual reliance.   Further,  Appellant
failed to establish the Area Office erred in its computation
of  labor  costs and in its use of the Teaming Agreement  to
analyze the ostensible subcontractor relationship.
     Accordingly,  the Administrative Judge finds  Appellant
is  unusually  reliant on, and thus is engaged  in  a  joint
venture  with,  BHM,  its ostensible  subcontractor.   Thus,
Appellant  is  affiliated with BHM. [8]  The  Administrative
Judge therefore concludes Appellant is other than small  due
to its affiliation with an other than small firm.  13 C.F.R.
Section 121.103(f)(4).
     Therefore, the Administrative Judge concludes Appellant
has failed to meet its burden of establishing clear error in
the Area Office size determination.
                       III. CONCLUSION
     For the above reasons, the Administrative Judge AFFIRMS
the  Area  Office size determination and DENIES the  instant
appeal.
     This  is  the  final  decision of  the  Small  Business
Administration.  See 13 C.F.R. Section 134.316(b).
                              _____________________________
                              CHRISTOPHER HOLLEMAN
                              Administrative Judge
_________________________
       [1]  The  Small Business Administration  has  amended
certain of its size regulations.  63 Fed. Reg. 35726, 35738-
39   (June   30,  1998)  (to  be  codified  at   13   C.F.R.
Sections   121.103,   121.1001,  121.1103).    Because   the
Contracting  Officer issued the subject  solicitation  after
the  June  30,  1998 effective date of the new  regulations,
those regulations apply here.
       [2]  This  limitations  on subcontracting  regulation
(implementing 15 U.S.C. Section 644(o)(1)(A)) requires that,
when a prime contractor is directed by the government to use
a  specific source for services, the costs of those services
are part of the cost of materials, not subcontracting costs.
       [3]  The  Administrative  Judge  will  not  consider
Appellant's and AID's assertion that LTG is challenging  the
SIC   code   designation.   Even  assuming  LTG's  arguments
constitute  a  SIC  code appeal, such  an  appeal  would  be
untimely.  13 C.F.R. Section 134.304(a)(3).
       [4]   AID  doubtless  is  correct  that  Appellant's
expertise  and  experience in computer operations  would  be
helpful   in   performance  of  the   contract,   but   this
solicitation does not require such expertise.
       [5]  Conversely, the Area Office did err  in  finding
that  the consultant database was BHM's, rather than  AID's,
property.   However,  the size determination  mentions  this
only as one of  numerous factors considered.  Therefore, the
error  does not deprive the size determination of a  factual
basis,  and  constitutes harmless  error.   Size  Appeal  of
National Welders Supply Co., Inc., No. 4315 at 8 and  fn.  2
(1998).
      [6] Appellant's rates for labor fringes, overhead, and
general  and administrative expenses were set by the Defense
Contract  Audit Agency, in a August 17, 1998 letter included
in Appellant's cost proposal.
      [7]  While these percentages are not exact, the  Area
Office  clearly rounded the figures, and any  error  is,  at
worst, harmless.
      [8] The Administrative Judge notes that Appellant does
not contest on appeal the Area Office's finding that BHM  is
other  than small.  Therefore, it has abandoned this  issue.
Size  Appeal  of Infotec Development, Inc., No.  4197  at  7
(1996).
                                         Posted: April, 1999