On November 15, 2024, the Small Business Administration’s (SBA) Office of Hearings and Appeals (OHA) affirmed the Area Office’s finding that a tribal-owned company was small due to the affiliation exceptions for tribal-owned entities[1] (the Tribal Affiliation Exception). However, the case was remanded back to the Area Office for a failure to investigate whether the tribal-owned company violated the ostensible subcontractor rule, which is not fully protected by the Tribal Affiliation Exceptions. Tribal entities and their partners should pay close attention to this development, as it affects their ability to operate and compete in federal contracting with greater flexibility.
The Facts
In March of 2024, the U.S. Army Corps of Engineers (USACE) issued a small business set-aside request for proposals for a maintenance contract at Fort Campbell, KY. Tiya Support Services, LLC (Tiya Support) submitted a timely proposal, and on August 26, 2024, USACE announced Tiya Support as the awardee. AHNTECH, Inc. (Ahntech) promptly protested, challenging Tiya Support’s size. Ahntech alleged Tiya Support is affiliated with its parent company, Keta Group, LLC (Keta), and with sister companies, particularly Tiya Services, LLC (Tiya Services), based on (1) common management, (2) identity of interest, (3) the newly organized concern rule, (4) the ostensible subcontractor rule, and/or (5) the totality of circumstances. Keta is a holding company owned by the Chitimacha Tribe of Louisiana and wholly owns eight (8) subsidiaries, including Tiya Support and Tiya Services. Importantly, for the ostensible subcontract argument, Ahntech identified that Tiya Support has no revenue and only one employee and has not independently performed any contract within the last five years, such that Tiya Support likely must rely upon a subcontractor to perform the contract, in contravention of the ostensible subcontractor rule.
On September 11, 2024, the Area Office dismissed Ahntech’s protest, finding that Tiya Support is small. The Area Office concluded that Tiya Support is owned and controlled by an Indian tribe, the Chitimacha Tribe of Louisiana, such that it falls within the Tribal Affiliation Exception in the SBA’s regulations.[2] The Tribal Affiliation Exception authorizes an exception to affiliation for concerns owned and controlled by Indian tribes, so Tiya Support could not be considered affiliated with Keta, Tiya Services, or any of Keta’s other subsidiaries. Ahntech timely appealed to OHA.
Tiya Support responded to the appeal requesting that OHA affirm the size determination. In support of its position, Tiya Support cited OHA’s decision in Size Appeal of Roundhouse PBN, LLC,[3] where OHA rejected a totality of circumstances argument. Despite the companies operating as if they were interchangeable, there was no evidence—beyond that excluded by the Tribal Affiliation Exception—showing control. Tiya Support further emphasized the Tribal Affiliation Exceptions for common management, identity of interest, and the newly organized concern rule.[4]
OHA’s Holding
At the outset, OHA agreed with the Area Office’s decision to dismiss the bulk of Ahntech’s protest. Specifically, OHA agreed with Tiya Support’s Tribal Affiliation Exception arguments, restating that “a concern owned by an Indian tribe is not considered an affiliate of that tribe and is not affiliated with other business entities owned by the tribe because of common ownership, common management, or the performance of common administrative services (as long as the services are paid for).”[5] As such, OHA affirmed the Area Office’s decision to dismiss the common management. Similarly, OHA found no basis to overrule the Area Office’s findings regarding identity of interest and newly organized concern rules.
Finally, concerning the ostensible subcontractor rule, OHA found that Ahntech’s protest contained supporting evidence that Tiya Support will rely heavily on a subcontractor in the performance of the contract. OHA explained that violation of the ostensible subcontractor rule may exist when the prime contractor is a concern owned and controlled by an Indian tribe, even if the alleged ostensible subcontractor is also owned and controlled by the same Indian tribe. Because of this, the Area Office erred when it failed to investigate whether Tiya Support would self-perform the primary and vital requirements of the contract and whether Tiya Support would be unduly reliant upon a subcontractor. Therefore, OHA remanded the case back to the Area Office for further review into the ostensible subcontractor issue.
Takeaways
- OHA’s decision reiterates the importance of the Tribal Affiliation Exception and confirms its application in size-determinations. However, this decision did not find that Tiya Support violated the ostensible subcontractor rule, just that the Area Office failed to meaningfully consider the arguments presented by Ahntech.
- It is important to note that although violation of the ostensible subcontractor rule may exist when the prime contractor is a concern owned and controlled by an Indian tribe, even if the alleged ostensible subcontractor also is owned and controlled by the same Indian tribe, OHA has similarly found that tribally-owned companies shifting personnel among other tribally owned subsidiaries does not violate the ostensible subcontractor rule.
Government contractors owned by tribal entities—and their partners—should closely monitor this development to fully leverage the benefits of the Tribal Affiliation Exception. For more information, please contact Cy Alba or another member of PilieroMazza’s Native American Law & Tribal Advocacy or Government Contracts practice groups. Special thanks to Krissy Cralle for her assistance with this blog.
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[1] 13 C.F.R. § 121.103(b)(2)
[2] 13 C.F.R. § 121.103(b)(2)(ii).
[3] SBA No. SIZ-5383 (2012). PilieroMazza represented the awardee in this case.
[4] 13 C.F.R. § 121.103(g).
[5] Size Appeal of Cherokee Nation Healthcare Servs., Inc., SBA No. SIZ-5343, at 3 (2012).
