O'Donnell Construction Company, No. 4125 (December 6, 1995)
Docket No. SIZ-95-10-25-98

                    UNITED STATES OF AMERICA

                  SMALL BUSINESS ADMINISTRATION

                 OFFICE OF HEARINGS AND APPEALS

                        WASHINGTON, D.C.

_______________________________
                               )
SIZE APPEAL OF:                )   
                               )
O'Donnell Construction Company )
                               )
     Appellant                 )
                               )                  
Re:  Prince Construction       )  Docket No. SIZ-95-10-25-98
     Company                   )
                               ) 
Solicitation No.               )
DADA15-95-B-0012               )
Department of the Army         )
Water Reed Army Medical Center )
Washington, D.C.               )                            
_______________________________)

                             DIGEST

Where the challenged firm has, on occasion, leased a large firm's
equipment, hired the latter's employees for special projects, and
stored its own equipment at the large firm's yard, but has
obtained contracts and subcontracts on its own for the work
required under the instant solicitation, has engaged in four
joint ventures with the large firm's affiliate, has subcontracted
with the large firm on less than a third of its total contract
revenues for the applicable period, and the challenged firm has
not received financial, bonding, or other assistance from the
large firm, the firms will not be considered affiliated under the
"common facilities" or "contractual relationship" tests for
affiliation at 13 C.F.R. Sections 121.401(i) or (k). 

                            DECISION

                        December 6, 1995

BLAZSIK, 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. Part 121.

                              Issue

     Whether the challenged firm is affiliated with a large firm
because it has leased some of the large firm's equipment and
used, on occasion, the latter's employees; was a joint venturer
on four contracts with the large firm's affiliate; and has been
the subcontractor with the large firm on less than a third of the
challenged firm's total contract revenues for the applicable
period. 

                              Facts

     On August 18, 1995, the Contracting Officer for the
Department of the Army, Walter Reed Army Medical Center,
Washington, D.C., issued this small business set-aside
solicitation for the replacement of the Stephen Sitter/Linden
Lane Intersection, and classified it under Standard Industrial
Classification code 1611 (Highway and Street Construction, Except
Elevated Highways), having a $17 million average annual receipts
size standard.  The Contracting Officer established September 19,
1995, for receipt of bids.  Two firms, O'Donnell Construction Co.
(O'Donnell or Appellant) and Prince Construction Company, Inc.
(Prince), submitted bids.  Prince was the apparent low bidder.

     On September 22, 1995, the Contracting Officer received a
timely protest from O'Donnell against Prince's small business
size status.  13 C.F.R. Section 121.1603(a)(1).  The protest
alleged that Prince is affiliated with Fort Myer Construction
Corporation (Myer), a large firm and, therefore, is not eligible
for award of the contract.  The protest further alleged that
Prince is reliant upon Myer for personnel, equipment, management
expertise, bonding, and financial assistance to such an extent
that the reliance constitutes affiliation.  The protest also
alleged that neither Prince nor its President, Mr. Alberto Gomez,
has experience in the heavy/highway field of work required by the
instant solicitation.  Finally, the protest alleged that Myer and
Prince are not competing in the same market.

     The Contracting Officer forwarded the protest to the Small
Business Administration (SBA), Office of Government Contracting,
Area 2 (Area Office) for a size determination.

                 The Area Office's Determination

     The Area Office's file contains Prince's SBA Form 355,
financial information, and Prince's specific response to the
protest's allegations.  The record shows that Alberto Gomez is
Prince's owner.  Mr. Gomez is not an officer, director, or
stockholder in any other firm and Prince has no affiliates.  The
SBA Form 355 shows that Prince's average annual receipts for the
applicable years are below the $17 million size standard.

     In its response to the protest, Prince stated that since its
establishment in 1988, it has performed as a prime contractor
for "many Federal and local government agencies, and as a
subcontractor to numerous other firms."  Prince also has
performed on numerous contracts for concrete curbs and gutters,
sidewalk and wall construction, repair and maintenance of bridge
decks, and other construction.  Prince stated that, since the
early 1990s, it has leased equipment on an "as-needed" basis to
complement its own fleet of equipment from various sources,
including Myer.  On occasion, Prince has used Myer employees on
special work for special projects.  Prince placed such Myer
employees on its payroll for the duration of the projects, a not
uncommon practice in the construction industry. 

     Additionally, Prince stated that it has been Myer's
subcontractor on several projects, which constitute approximately
22 percent of Prince's total revenues for the applicable
period.[1]  Prince also stated that it had engaged in four joint
ventures with a Myer affiliate, District Paving Corporation
(DPC).  These contracts have been fully performed.

     Further, Prince stated that it has temporarily housed some
of its equipment in Myer's secure facility, but that Myer has
provided this sort of accommodation to other firms as well.

     Finally, Prince stated that Myer has advised Prince on
technical matters, but the firms have separate insurance agents,
accountants, lawyers, and banks.  In fact, Mr. Gomez has
mortgaged his own home to enhance Prince's bonding capabilities
and Prince receives no bonding or financial assistance from Myer. 
     
     In its October 16, 1995 determination, the Area Office found
that Prince has demonstrated that it has been a subcontractor to
Myer for only 22 percent of its total revenues, and that it has
also served as a subcontractor to other firms.  The Area Office
further found that Prince has its own bonding capacity and that
any relationship between Prince and Myer has been at "arm's
length."  The Area Office finally stated:

     In the absence of supportive evidence showing that
     control or power to control exists, the mere fact that
     Prince has leased equipment on occasion from [Myer],
     has hired some individuals...or... has used [Myer's]
     secured facility...is not conclusive evidence of
     affiliation.

     Accordingly, the Area Office concluded that Prince is not
affiliated with Myer through contractual relationship (13 C.F.R.
Section 121.401(k)), and is a small business under the applicable
size standard.[2]

     O'Donnell received the determination on October 18, 1995,
and filed an appeal that was postmarked October 25, 1995.

                       Arguments on Appeal

     In its appeal, O'Donnell impliedly asserts that the Area
Office erred in relying only on the contractual relationship
regulation as the determining factor in finding no affiliation 
between Prince and Myer.  O'Donnell asserts that the Area Office
instead should have used 13 C.F.R. Section 121.401(i), which
states:

     Affiliation through common facilities.  Affiliation
     generally arises where one concern shares office space
     and/or employees and/or other facilities with another
     concern, particularly where such concerns are in the
     same or related industry or field of operations, or
     where such concerns were formerly affiliated.

     O'Donnell asserts that, by its own admission, Prince shared
employees with Myer; used Myer's yard for storing of equipment;
and leased equipment from Myer and other facilities.  Further,
Prince and a Myer affiliate were engaged in four joint ventures
which, O'Donnell asserts, demonstrates that Prince and Myer were
"formerly affiliated."  The two firms (Prince and Myer) also are
in the same industry.  Thus, O'Donnell argues, all the elements
of affiliation through common facilities have been satisfied.

     Finally, O'Donnell asserts that the Area Office failed to
draw an adverse inference from the fact that Prince and Myer do
not bid on the same contracts.

     In its reply, received November 9, 1995, Prince asserts that
its activities do not constitute affiliation through common
facilities.  While admittedly it and Myer shared some facilities,
these were minimal.  Prince asserts that it has leased some
equipment from Myer, but it has also leased equipment from other
firms.  Further, Prince asserts that the fact that Prince and DPC
were engaged in four joint ventures is not indicative of "former
affiliation."  In summary, Prince asserts that the record
demonstrates that it is an independent business; it has
capability to finance its operations; and it has its own
employees.  Thus, it is not affiliated with Myer under the
"common facilities" or the "contractual relationship"
regulations.

     Finally, Prince asserts that it bids primarily on jobs that
are classified as Disadvantaged Business Enterprise (DBE), which
are established in certain states, including the Washington
Metropolitan Transit Areas.  Myer, on the other hand, is not in
the DBE/small job market.  Thus, while the two firms do not
compete in the same market, no adverse inference against Prince
and Myer can be reasonably drawn from this fact.

     On November 13, 1995, Myer filed a motion to intervene and
submitted comments in support of Prince's reply.[3]  Myer asserts
that the record clearly supports a conclusion that Prince's
economic viability would not be in jeopardy without Myer's
business.  Myer emphasizes that all business contacts between the
two firms have been at "arm's length."  Finally, Myer asserts
that the totality of circumstances clearly demonstrates that the
two firms are totally independent of each other.  Myer's
submission was signed by Jose Rodriquez, its President, and
contained a certification that Mr. Rodriquez had read the
submission and certifies that it is factually true to the best of
his knowledge.

     On November 20, 1995, after close of record, Myer submitted
another certification by Mr. Rodriquez regarding the above timely
submission.  The certification contains nothing new, but is
merely in Affidavit form.   

     Also on November 20 and November 22, 1995, this Office
received identical submissions from O'Donnell, styled
"O'Donnell's Reply to Prince's Opposition."  
  
                           Discussion

     Since the appeal was postmarked within five-business days
from the date Appellant received the size determination, the
appeal applies to this solicitation.  13 C.F.R. Section
121.1705(a)(2).

     Myer's Motion to Intervene is Granted, and its comments are
accepted into the record.  Myer's late certification submitted on
November 20, 1995, is accepted also because the original
certification was timely.  By contrast, O'Donnell's submissions
of November 20 and 22, 1995, were filed after close of record and
will not be considered.  The Presiding Judge notes, in this
regard, that 13 C.F.R. Part 121 does not authorize a reply to a
reply.  
     
     The Presiding Judge rejects Appellant's argument that Prince
and Myer are affiliates based on common facilities under
13 C.F.R. Section 121.401(i).  While the record establishes that
both firms are in the same line of business and that Prince has
used, on occasion, Myer's employees and leased its equipment, the
record also establishes that all these transactions were at
"arm's length."  Prince also leased other firms' equipment, when
needed to supplement its own.  When Prince employed Myer's
employees, they were on Prince's payroll.

     Further, Prince's joint ventures on four contracts with DPC
does not demonstrate affiliation.  Each joint venture is a
separate contract and each has been fully performed.  SBA
regulations do not consider significant a specific joint venture
beyond that particular contract.  13 C.F.R. Section
121.401(l)(3).  Thus, Appellant failed to establish the elements
of "common facilities" between Prince and Myer.

     While Appellant does not explicitly contest the Area
Office's finding that the two firms are affiliated under the test
of "contractual relationship," it does so impliedly.  The
Presiding Judge, accordingly, concludes that the Area Office 
correctly found that Prince is not economically dependent upon
Myer so as to compromise its economic viability.  Thus, the two
firms are not affiliated under 13 C.F.R. Section 121.401(k),
which provides:

     Affiliation through contractual relationships. 
     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.  

     The record establishes that Prince has experience in the
work required by the instant solicitation; it has subcontracted
on projects with Myer that account for only about 22 percent of
Prince's total revenues for the relevant period; Myer has not
given financial or bonding assistance to Prince; and Prince has
bid and received numerous contracts on its own.  Finally, the
record fails to show that Prince is dependent upon Myer to such 
a degree that, in the words of the regulation (13 C.F.R. Section
121.401(k)), "its economic viability would be in jeopardy without
contracts/business" [from Myer].  See Size Appeal of Defense
Logistics Agency, No. 3974, at 7 (1995).  Thus, because the facts
do not satisfy the elements of the regulation, the Area Office
properly concluded that the firms are not affiliated through
contractual relationship.

     Finally, the Area Office did not err in failing to draw an
adverse inference from the fact that Prince and Myer do not
compete in the same market.  Since the record shows that Prince's
primary business is the so-called DBE small business projects,
and Myer is an acknowledged large firm that competes for larger
contracts, there is no factual or legal basis for drawing an
adverse inference.

     In view of the above, the Area Office was correct in its
conclusion that Prince and Myer are not affiliated.  Since Prince
is a small business under the applicable size standard, it is
eligible for receipt of this contract.

                           Conclusion

     In view of the above analysis, the Area Office's
determination is AFFIRMED, and the appeal is DENIED.

     This is the final decision of the Small Business
Administration.  See 13 C.F.R. Section 121.1720(b).

                              _______________________________
                              Gloria E. Blazsik 
                              Administrative Judge

____________________
 [1] Prince does not give the dates of the subcontracts.

 [2] The Area Office confined its analysis to this regulation; it
did not consider other regulatory tests of affiliation in finding
Prince a small business.

 [3] The record was scheduled to close on November 10, 1995,
which was a legal holiday.  Accordingly, close of record was on
Monday, November 13, 1995, the following business day.