Appeal of the area office’s size determination is denied, where the appellant was given clear notice the area office was considering whether it was affiliated with other firms through the owner’s family relationships and common investments, and yet failed to make any rebuttal. OHA also noted the appellant offered no rebuttal evidence during the appeal and found it difficult to see how the appellant could offer a rebuttal, given the clear ownership and business connections among the firms found to be affiliated.
Tesecon Inc. appealed the area office’s determination that it is not an eligible small business for the procurement at issue.
The U.S. Army Corps of Engineers issued a solicitation for construction services as a small business set-aside under NAICS code 236220, with a $36.5 million annual receipts size standard. After Tesecon was identified as the apparent awardee, Hollon Contracting filed a size protests alleging that Tesecon is affiliated with multiple other firms, due to shared ownership and offices. The protest specifically mentioned Richard Miller’s ownership of these companies.
In response to the protest, Tesecon identified its alleged affiliates. During the course of the size determination, the area office learned that Richard Miller, Tesecon’s owner, was involved with other businesses with his brothers, and investigated the relationships of these businesses.
The area office concluded that Tesecon, by itself, is a small business. However, the area office found that Richard Miller is a fifty percent owner in the company that is Tesecon’s landlord, which is also the former landlord of a company owned by Miller’s brother. Richard Miller and another individual each own fifty percent of another firm. The brothers are also involved in three related companies as owners and officers. Further, Tesecon has contractual relationships with some of these firms.
The area office concluded the brothers share an identity of interest based on their family relationship and may be treated as one party, with their interests aggregated. The area office found the brothers had the ability to control several of their shared businesses and that there are financial relationships among the businesses. The area office gave Tesecon the opportunity to rebut these assumptions, which it declined to do.
Because the combined average annual receipts of Tesecon and its affiliates, less inter-affiliate transactions, exceeded the $36.5 million size standard, the area office determined the appellant is not an eligible small business for the procurement. This appeal followed.
First, Tesecon argued the area office failed to provide the opportunity to rebut the presumption of an identity of interest among the Millers due to their family relationship. While the area office inquired about their relationship, the appellant argued there is nothing in the record showing the area office presumed the Millers were affiliated based upon a shared identity of interest.
Tesecon also complained the area office found it was affiliated with three other firms based on common management, but without actually finding that the officers in question could control the firms. According to Tesecon, the area office is obligated to determine if the officers can actually control the company before making a finding of affiliation. However, the area office did not examine whether Richard Miller had the power to control any of the other firms.
Tesecon also challenged the area office’s calculation of the companies’ receipts, arguing that it failed to deduct intercompany transactions and failed to deduct amounts collected by one firm on behalf of other entities.
However, OHA found it clear that the Miller brothers were involved in businesses together and hold common investments. Given their common involvement in several interests, OHA found it clear that they would act in concert in pursuit of their investments. Thus, they were properly treated as one party, with their interests aggregated, under the identity of interest rule, on two grounds— familial relationships and common investments.
OHA found the area office had informed Tesecon that its size had been challenged and that it was alleged to be affiliated with other companies. OHA found it clear from the area office’s inquiries about the relationship between the brothers, their investments, and the intercompany transactions, that it was inquiring about affiliation. Because Tesecon had counsel, OHA found those issues were clearly communicated.
Further, the connections between the brothers and their business interests is so clear, OHA found it difficult to see what rebuttal could have been made. OHA also noted Tesecon did not offer any evidence that could be used to rebut the presumption. Finally, OHA found the area office did account for intercompany transactions and payments collected for other entities when calculating the combined companies’ receipts.
Tesecon Inc. is represented by Megan C. Connor, Julia Di Vito, and Meghan F. Leemon of PilieroMazza PLLC.
