Posted on 12/21/2011 9:59 AM

We've been asked the following hypothetical question:  if a business is realizing $30M in revenue for a logistics contract, does that business qualify as small if it bids on a professional services contract with a lower revenue threshold NAICS code (say $7M)?  In other words, can a business exclude revenue derived from a separate NAICS code category?  The answer is NO, it's total revenue, period.  Total revenue for all business.  (See 13 C.F.R. 104, and following sections, for the rules in black and white.)

If you have $30M in business and the NAICS code for the procurment you are bidding on has a $7M threshold, you are ineligible for award.  You are not a small business as defined for that procurement.  Your remedy is to protest the NAICS code designation.  The remedy for all other bidders is to protest your size status.  And, if you knowlingly certify yourself as small, you may be guilty of a crime and go to jail.

While we are on the subject, small business size protests are fairly commonplace these days.  If you are an interested party, you can protest another bidder's size.  If you did not submit a bid or if you are disqualified from receiving award, you have no standing to protest.  If you submitted a non responsive bid or if you are otherwise ineligible to receive the award for other reasons, you have no standing.  You have five (5) days in which to protest from the earliest date on which you receive notice of the identity of the prospective awardee on a negotiated procurement.  Timely protests suspend contract award until the SBA makes a size determination or ten (10) business days have passed since the SBA received the protest.  If you win the protest, the award is overturned since the bidder is ineligible to receive it.

A size protest is sent to the contracting officer, who sends it to the SBA.  As with any other protest, success lies in a complete statement of hard facts with reference to applicable legal authorities.  Nonspecific protests will be summarily dismissed.  Fortunately, the SBA Area Office will conduct an intensive investigation.  That office will place what many consider to be an onerous burden on the alleged inelgible bidder to substantiate its small business status.

We represent small businesses in prosecuting and defending size protests and appeals.  And, we do so at a fixed fee.

IMPORTANT NOTE:  This blog addresses the narrow issue of whether total revenue can be divided up by NAICS code for the purpose of qualifying under a lower threshold.  It does NOT address any other issues involving how to calculate total revenue, of which there are several.  We will address these other issues in subsequent discussions.



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