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I'd like to gather other's thoughts & opinions regarding the perception of the following scenario and whether or not the appearance of general affiliation exists and whether or not there are any ethical concerns?
 
Company A had an employee who left approximately 3 years ago to start his own company, Company B.
  • Company B is in the same line of work as Company A;
  • Company A & Company B employ two (2) of the same employees (both employees provide contract support to Company A, while both employees provide security administration support to Company B);
  • While Company A has been approved to be a Mentor, a Mentor-Protege arrangement between Company A & Company B has yet to be finalized by the Government;
  • Company B does receive approximately 70% of its income from Company A.

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Seeking advice about important topics like this from strangers and frogs on the Internet is dangerous. You might get what you ask for. Will you act on it?

Your scenario shows "the appearance of general affiliation." You listed several examples. However...

PepeTheFrog assumes you're asking about the type of affiliation that can ruin your status as a small business. Did you review the SBA regulations on affiliation? Check out 13 CFR 121.103. There are also SBA guides out there on the Internet, but PepeTheFrog doesn't know if they're up to date. As an example, this one is from March 2014:

https://www.sba.gov/sites/default/files/affiliation_ver_03.pdf

 

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Rae,

I am a stranger, but I am also someone who has worked as a PCR and size specialist for the SBA for more than 5 years. 

The fact that company B receives 70 percent of its work may indicate that it is affiliated with company A but that would be viewed by the size specialist under 13 CFR§ 121.103(g).  In this case I would look at the trend of other work and determine if the percentage going up, down or remaining stable. More than likely I would lean toward affiliation in this circumstance but could be dissuaded with more information.

The mutually employed individual might or might not add to that, depending upon his or her role in the company.  If the employee" was more than the usual employee for hire (described in the CFR: "officers, directors, principal stockholders, managing members, or key employees, and the one concern is furnishing or will furnish the new concern with contracts, financial or technical assistance, indemnification on bid or performance bonds, and/or other facilities, whether for a fee or otherwise "), and could control (positive or negative) both companies or could determine what business one or both companies could do, then that would be an added affiliation factor. 

The prospective Mentor Protégé agreement  would not protect the companies from being found to be affiliated, the MP program only protects companies from affiliation from the MP itself or any joint venture established by the MP partners.  A MP will not protect companies from affiliation outside of the MP relationship, which is described in this case.

I cannot say for certain that your scenario WILL be considered affiliation, only a full size determination could do that.  I have been responsible for about 6-10 determinations a year for the last 5 years so I have dealt with scenarios like this; and each case is unique so I would find an attorney who is familiar with the SBA regulations (or a friendly Procurement Technical Assistance Center), and have a complete analysis completed for your case.

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On 7/11/2018 at 5:14 PM, PepeTheFrog said:

Seeking advice about important topics like this from strangers and frogs on the Internet is dangerous. You might get what you ask for. Will you act on it?

Your scenario shows "the appearance of general affiliation." You listed several examples. However...

PepeTheFrog assumes you're asking about the type of affiliation that can ruin your status as a small business. Did you review the SBA regulations on affiliation? Check out 13 CFR 121.103. There are also SBA guides out there on the Internet, but PepeTheFrog doesn't know if they're up to date. As an example, this one is from March 2014:

https://www.sba.gov/sites/default/files/affiliation_ver_03.pdf

 

PepeTheFrog; Now wouldn't I be a foolish peasant to act upon the guidance of a frog? While I understand that every situation is different, and thoughts and opinions are subjective to interpretation, I like to read other's insights.

I greatly appreciate you taking the time to respond.

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15 hours ago, DWGerard1102 said:

DWGeral1102; I greatly appreciate your insight.

I have, as well, reached out to our Small Business Administration District Office to get their take.

Thank you. 😊

 

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2 hours ago, rae.story said:

PepeTheFrog; Now wouldn't I be a foolish peasant to act upon the guidance of a frog? While I understand that every situation is different, and thoughts and opinions are subjective to interpretation, I like to read other's insights.

I greatly appreciate you taking the time to respond.

You're most welcome. That sounds reasonable. PepeTheFrog just wants other frogs to take decisions like this seriously, because it can lead to the loss of small business status and eligibility for contracts. More info is usually good. Just remember, some frogs turn into princes. Frog lives matter. 

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