This document summarizes information from the website of McMahon, Welch and Learned PLLC, a law firm that represents small federal contractors. It discusses affiliation rules and size standards that determine if a business qualifies as small. Teaming agreements can potentially create affiliation if they give one company power over another. The document outlines factors that make a subcontractor "ostensible" and advises including limitations in teaming agreements to avoid affiliation issues. It also summarizes the size protest process that allows challenging a company's small business status.
September 2011 - Business Law & Order - Douglas S. ParkerAnnArborSPARK
When forming a business one of the first decisions an entrepreneur will make is choice of entity. This session will cover the possible legal structures for your business activities, including the advantages and disadvantages of each type of entity in terms of limited liability, management of the business, employee compensation and tax matters. Learn the basics of Corporate Formation and understand the pros and cons of incorporating in Michigan and Delaware.
Revitalizing Rule 14a-8's ordinary business exclusion for shareholder proposalsStephen Bainbridge
Who decides what products a company should sell, what prices it should charge, and so on? Is it the board of directors, the top management team, or the shareholders? In large corporations, of course, the answer is the top management team operating under the supervision of the board. As for the shareholders, they traditionally have had no role in these sort of operational decisions. In recent years, however, shareholders have increasingly used SEC Exchange Act Rule 14a-8 (the so-called shareholder proposal rule), to not just manage but even micromanage corporate decisions.
The rule permits a qualifying shareholder of a public corporation registered with the SEC to force the company to include a resolution and supporting statement in the company’s proxy materials for its annual meeting. In theory, Rule 14a-8 contains limits on shareholder micro-management. The rule permits management to exclude proposals on a number of both technical and substantive bases, of which the exclusion in Rule 14a-8(i)(7) of proposals relating to ordinary business operations is the most pertinent for present purposes. Rule 14a-8(i)(7) is intended to permit exclusion of a proposal that “seeks to ‘micro-manage’ the company by probing too deeply into matters of a complex nature upon which shareholders, as a group, would not be in a position to make an informed judgment.”
Unfortunately, court decisions have largely eviscerated the ordinary business operations exclusion. Corporate decisions involving “matters which have significant policy, economic or other implications inherent in them” may not be excluded as ordinary business matters, for example, which creates a gap through which countless proposals have made it onto corporate proxy statements.
Shareholder Activism in the United States: Managing Shareholder InterventionsStephen Bainbridge
This is a presentation I gave at the University of Auckland Faculty of Law on May 19, 2014. It is based on my paper Preserving Director Primacy by Managing Shareholder Interventions (August 27, 2013), which is available at SSRN: http://ssrn.com/abstract=2298415.
Even though the primacy of the board of director primacy is deeply embedded in state corporate law, shareholder activism nevertheless has become an increasingly important feature of corporate governance in the United States. The financial crisis of 2008 and the ascendancy of the Democratic Party in Washington created an environment in which activists were able to considerably advance their agenda via the political process. At the same time, changes in managerial compensation, shareholder concentration, and board composition, outlook, and ideology, have also empowered activist shareholders.
There are strong normative arguments for disempowering shareholders and, accordingly, for rolling back the gains shareholder activists have made. Whether that will prove possible in the long run or not, however, in the near term attention must be paid to the problem of managing shareholder interventions.
This problem arises because not all shareholder interventions are created equally. Some are legitimately designed to improve corporate efficiency and performance, especially by holding poorly performing boards of directors and top management teams to account. But others are motivated by an activist’s belief that he or she has better ideas about how to run the company than the incumbents, which may be true sometimes but often seems dubious. Worse yet, some interventions are intended to advance an activist’s agenda that is not shared by other investors.
This paper proposes managing shareholder interventions through changes to the federal proxy rules designed to make it more difficult for activists to effect operational changes, while encouraging shareholder efforts to hold directors and managers accountable.
Entrepreneurs will face a huge number of decisions as they move from concept to commercialization. One of the
first major decisions is what type of legal entity to form in order to move their great ideas forward. Why does it
matter? Because different entities have very different rules regarding limited liability, management and control
flexibility, capital structure, tax efficiency and eligible investors.
September 2011 - Business Law & Order - Douglas S. ParkerAnnArborSPARK
When forming a business one of the first decisions an entrepreneur will make is choice of entity. This session will cover the possible legal structures for your business activities, including the advantages and disadvantages of each type of entity in terms of limited liability, management of the business, employee compensation and tax matters. Learn the basics of Corporate Formation and understand the pros and cons of incorporating in Michigan and Delaware.
Revitalizing Rule 14a-8's ordinary business exclusion for shareholder proposalsStephen Bainbridge
Who decides what products a company should sell, what prices it should charge, and so on? Is it the board of directors, the top management team, or the shareholders? In large corporations, of course, the answer is the top management team operating under the supervision of the board. As for the shareholders, they traditionally have had no role in these sort of operational decisions. In recent years, however, shareholders have increasingly used SEC Exchange Act Rule 14a-8 (the so-called shareholder proposal rule), to not just manage but even micromanage corporate decisions.
The rule permits a qualifying shareholder of a public corporation registered with the SEC to force the company to include a resolution and supporting statement in the company’s proxy materials for its annual meeting. In theory, Rule 14a-8 contains limits on shareholder micro-management. The rule permits management to exclude proposals on a number of both technical and substantive bases, of which the exclusion in Rule 14a-8(i)(7) of proposals relating to ordinary business operations is the most pertinent for present purposes. Rule 14a-8(i)(7) is intended to permit exclusion of a proposal that “seeks to ‘micro-manage’ the company by probing too deeply into matters of a complex nature upon which shareholders, as a group, would not be in a position to make an informed judgment.”
Unfortunately, court decisions have largely eviscerated the ordinary business operations exclusion. Corporate decisions involving “matters which have significant policy, economic or other implications inherent in them” may not be excluded as ordinary business matters, for example, which creates a gap through which countless proposals have made it onto corporate proxy statements.
Shareholder Activism in the United States: Managing Shareholder InterventionsStephen Bainbridge
This is a presentation I gave at the University of Auckland Faculty of Law on May 19, 2014. It is based on my paper Preserving Director Primacy by Managing Shareholder Interventions (August 27, 2013), which is available at SSRN: http://ssrn.com/abstract=2298415.
Even though the primacy of the board of director primacy is deeply embedded in state corporate law, shareholder activism nevertheless has become an increasingly important feature of corporate governance in the United States. The financial crisis of 2008 and the ascendancy of the Democratic Party in Washington created an environment in which activists were able to considerably advance their agenda via the political process. At the same time, changes in managerial compensation, shareholder concentration, and board composition, outlook, and ideology, have also empowered activist shareholders.
There are strong normative arguments for disempowering shareholders and, accordingly, for rolling back the gains shareholder activists have made. Whether that will prove possible in the long run or not, however, in the near term attention must be paid to the problem of managing shareholder interventions.
This problem arises because not all shareholder interventions are created equally. Some are legitimately designed to improve corporate efficiency and performance, especially by holding poorly performing boards of directors and top management teams to account. But others are motivated by an activist’s belief that he or she has better ideas about how to run the company than the incumbents, which may be true sometimes but often seems dubious. Worse yet, some interventions are intended to advance an activist’s agenda that is not shared by other investors.
This paper proposes managing shareholder interventions through changes to the federal proxy rules designed to make it more difficult for activists to effect operational changes, while encouraging shareholder efforts to hold directors and managers accountable.
Entrepreneurs will face a huge number of decisions as they move from concept to commercialization. One of the
first major decisions is what type of legal entity to form in order to move their great ideas forward. Why does it
matter? Because different entities have very different rules regarding limited liability, management and control
flexibility, capital structure, tax efficiency and eligible investors.
This deck presents an introduction and overview of the so-called Benefit Corporation (a.k.a. the Public Benefit Corporation). It contrasts benefit corporations to related entities such as B Corps, flexible purpose corporations, non-profit corporations, and traditional business corporations.
Business Entities: classify, understand, choose, and manage.Berkman Solutions
Business entities are essential for starting, managing, and growing your business. This guides to business entities covers every major type, core concepts, criteria for choosing an entity, and legal entity management.
“Business entity” is a generic term with no legal significance per se. A business entity simply refers to the form of incorporation for a business. When a business incorporates, the law recognizes the business as a distinct entity which can enter contracts and acquire property among other rights and privileges.
There are, of course, some exceptions like sole proprietorships and general partnerships, which do not require incorporation. They also do not have the same right and privileges as incorporated legal entities.
There are four broad groups of business entities: limited liability companies, corporations, partnerships, and sole proprietorships. There are important flavors of each class of business entity.
Government contractors use different teaming arrangements to best position themselves for a future award. Frequently a key element should be a clear appreciation of the relationship between the teaming arrangement and the desired business outcome. The best approach is to put “a planning team” in place (lawyers and CPAs) before putting “your business team” in place for a proposal. Join us as we help you understand:
•JV’s versus teaming agreement – which is preferable—and when?
•Small business set aside concerns
•Pitfalls – poorly written or nonspecific agreements
•To consolidate or not to consolidate – a look at the financial statement impact
With good planning, you can position yourself to respond to RFP’s effectively, create a positive business relationship, and know what to expect at year-end.
From the point of choosing the appropriate business structure to the scope and extent of necessary contracts, there are numerous legal issues to address when starting a company. While certain legal issues may even bring a start-up to a grinding halt if neglected, there are many others that are possible to be handled with ease, provided you have the right information to make timely decisions. Given their importance across sectors, the following issues and details will be covered in “Legal For Startups”.
• Legal Aspects for Starting Up:
• Contractual safeguards:
• Employees and workplace regulations:
• Data Protection
This deck presents an introduction and overview of the so-called Benefit Corporation (a.k.a. the Public Benefit Corporation). It contrasts benefit corporations to related entities such as B Corps, flexible purpose corporations, non-profit corporations, and traditional business corporations.
Business Entities: classify, understand, choose, and manage.Berkman Solutions
Business entities are essential for starting, managing, and growing your business. This guides to business entities covers every major type, core concepts, criteria for choosing an entity, and legal entity management.
“Business entity” is a generic term with no legal significance per se. A business entity simply refers to the form of incorporation for a business. When a business incorporates, the law recognizes the business as a distinct entity which can enter contracts and acquire property among other rights and privileges.
There are, of course, some exceptions like sole proprietorships and general partnerships, which do not require incorporation. They also do not have the same right and privileges as incorporated legal entities.
There are four broad groups of business entities: limited liability companies, corporations, partnerships, and sole proprietorships. There are important flavors of each class of business entity.
Government contractors use different teaming arrangements to best position themselves for a future award. Frequently a key element should be a clear appreciation of the relationship between the teaming arrangement and the desired business outcome. The best approach is to put “a planning team” in place (lawyers and CPAs) before putting “your business team” in place for a proposal. Join us as we help you understand:
•JV’s versus teaming agreement – which is preferable—and when?
•Small business set aside concerns
•Pitfalls – poorly written or nonspecific agreements
•To consolidate or not to consolidate – a look at the financial statement impact
With good planning, you can position yourself to respond to RFP’s effectively, create a positive business relationship, and know what to expect at year-end.
From the point of choosing the appropriate business structure to the scope and extent of necessary contracts, there are numerous legal issues to address when starting a company. While certain legal issues may even bring a start-up to a grinding halt if neglected, there are many others that are possible to be handled with ease, provided you have the right information to make timely decisions. Given their importance across sectors, the following issues and details will be covered in “Legal For Startups”.
• Legal Aspects for Starting Up:
• Contractual safeguards:
• Employees and workplace regulations:
• Data Protection
Non-competition and Non-solicitation ProvisionsKevin Learned
In this seminar we analyzed non-competition and non-solicitation provisions in the contexts of M&A transactions, employee/consultant relationships and subcontracting agreements. We addressed issues that arise in the drafting and negotiation of these provisions, as well as issues related to enforcement and litigation, with a particular emphasis on issues impacting federal service contractors who operate in the DC/MD/VA region.
Help, My Business is in Trouble! (Series: Restructuring, Insolvency & Trouble...Financial Poise
When a business becomes financially troubled, the business owner often experiences denial, paralysis, or both. Lenders commonly lose confidence and then trust in the business, as communications tend to break down, deadlines are missed, and promises are broken. Small business owners commonly have issued personal guarantees, so business failure can often lead to personal financial stress. The good news is the business and business owner usually has some options, and even some leverage. This webinar explains what a business owner should- and should not- consider and do when dealing with financial trouble. Specific topics include discussion of bankruptcy (Chapters 7 and 11); assignments for the benefit of creditors; and friendly foreclosures. This webinar provides the business owner and her advisors with an overview of various restructuring and liquidation methods, a framework for how to decide between them, and practical tips for traversing the difficult environment that is financial distress.
To view the accompanying webinar, go to: https://www.financialpoise.com/financial-poise-webinars/help-my-business-is-in-trouble-2020/
The fourth webinar presentation in the M&A Litigation Series examines claims and other rights of action asserted by stockholders in connection with M&A transactions. Various types of claims and proceedings – ranging from fiduciary duty to federal securities to statutory appraisal – are discussed. Director and Officer indemnity and advancement obligations likewise are addressed.
On our agenda:
-Fiduciary Duty and Disclosure Claims
-Federal Securities Claims
-Statutory Appraisal
-Books and Records Inspection Rights
-D&O Insurance and Indemnity and Advancement Obligations
On March 20, 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-07 Consolidations (Topic 810): Applying Variable Interest Entities Guidance to Common Control Leasing Arrangements (hereafter ASU 2014-07 or the standard). This standard is the third accounting alternative proposed by the Private Company Council (PCC) and endorsed by the FASB. It is an accounting alternative that permits a private company reporting entity to elect to not apply the variable interest entity (VIE) guidance to certain leasing arrangements. If elected, the guidance of this standard must be applied to all qualifying lease arrangements.
The adoption of ASU 2014-07 may result in the deconsolidation of commonly controlled lessor entities that were previously consolidated under the VIE guidance, the removal of disclosures prescribed by the VIE guidance for consolidated and certain non-consolidated commonly controlled lessor entities, or the reduction in the documentation and procedures necessary to evaluate these types of entities under the VIE guidance.
This white paper examines the two primary sources of compliance obligations related to contracts: performance obligations and government regulations. For each source of compliance challenge, this paper identifies methods to improve compliance and contract management. Finally, this paper examines the kind of reporting that makes
Contracts create the network of relationships that allow organizations to thrive. Contracts generate revenue and control expenses. They allocate risks and responsibilities. Contracts create assets and liabilities. Contracts are the foundation of enterprise.
Compliance requirements touch every organization across industries. Regulations can lay down the rules of the road or impose barriers to business. Compliance is essential for success, like good brakes on a car.
This short presentation from Georgia business law firm HunterMaclean provides overview information on four important aspects of your business's legal "fitness": Business Structure, Employment, Agreements and Contracts, and Business Succession. The presentation contains links to articles with more information on each topic.
What Every Founder/Entrepeneur Must Know (Series: The Start-Up/Small Business...Financial Poise
Congratulations. You are a founder of a company and you have just been given an hour to ask several experts anything you want about the subject. Some questions will certainly focus on IP, since intellectual property is so important to so many businesses. Some questions will touch on outsourcing- perhaps of manufacturing, perhaps of certain other functions. Formation, capital raising, and HR are also fair game. And since the panel includes two attorneys, you can be sure that the conversation will cover both the business and legal aspects of the various topics discussed. The panel will also discuss planning for incremental growth; and, while pandemic continues, the availability of PPP loans and governmental assistance.
To view the accompanying webinar, go to:https://www.financialpoise.com/financial-poise-webinars/what-every-founder-entrepreneur-must-know-2021/
1Legal Issues for Managers 2007GIRLecture 9(Week 10)M.docxfelicidaddinwoodie
1
Legal Issues for Managers: 2007GIR
Lecture 9
(Week 10)
Module 3 (Part 2):
The Law of Business Associations
Law of Agency &
Law of Partnership
1
Administration
Ensure that you check the announcements on [email protected] ([email protected]) and your marks in My Marks.
You should now have your Mid-Semester Exam marks available in My Marks. If you want genuine feedback (not simply checking your grade as they have been scanned), you can see your exam papers this week during the times provided on [email protected] course site. A time will also be made available for the Deferred Mid-Semester Exams when we have received them back from scanning.
A notice about the time, date & place of the Deferred Mid-Semester Exam is now available on the course website.
IF you want to do well on the FINAL EXAM, in addition to making a genuine effort on the ASSIGNMENT continue practising your ILACs before you attend your seminars, add a few notes to your answers, download the seminar slides and try to attempt the answer again on your own. If you did not have a satisfactory answer, see your tutor in consultation and bring along your ILAC homework attempts. This is the most effective way to prepare for the Final Exam.
2
2
Recap of Last Week
The Law of Companies/Corporations
Summary
The essential characteristics of a ‘company’ and why they are important.
The different types of business structures available, in particular companies, and when can they be used to meet the needs of business & society.
The main duties imposed upon the directors of a company.
The concepts of insolvency and insider trading.
The way companies can be wound-up.
Quick Question:
The Corporations Act 2001 (Cth) prohibits trading in shares with the advantage of information that is not publicly available. This offence is also known as …………………………… and is prohibited by section ..........
3
3
Business Structures
BUSINESS
STRUCTURES
Sole
Trader
Partnership
Joint
Venture
Incorporated
Associations
Trust
Company
Proprietary
Company
Public
Company
Large
Small
4
Seek the advice of a good accountant & lawyer when considering what form of business structure you may want to set-up. The main consideration should be liability – Not taxation. Thus, this message applies to today’s lecture and next weeks! Strategic planning is the key to business success.
44% of businesses fail in the first 3 years
Failing to plan, is planning to fail!
See separate mind-map on the types of companies in those lecture slides when available
http://www.business.gov.au/business- ...
The Devastating Effects of Mismanaged Subsidiary Governance: How You Can Lear...Athennian
This webinar, hosted by Adrian Camara (Co-founder & CEO of Athennian) and Paul Sutton (Founder of LCN Legal), will dive into a causal analysis of corporate scandals and oversights that have led to severe financial and criminal penalties. Discover tangible ways to prevent the mismanagement of corporate data that befell companies like BlackRock & Holcim.
The Devastating Effects of Mismanaged Subsidiary Governance: How You Can Lear...
Small Business Affiliation Rules
1. www.mwllegal.com
SMALL BUSINESS
AFFILIATION RULES
Teaming Agreements and Size Protests
2. About the Firm
2
McMahon, Welch and Learned, PLLC represents many
small and mid-sized federal services contractors in
Northern Virginia, DC and Maryland, including small-
disadvantaged firms, veteran-owned firms, women-
owned firms and Hub Zone qualified firms. We also
have a strong corporate and acquisitions-support practice
which focuses on general business legal matters of
significant interest to the broader business community.
www.mwllegal.com
3. Presenters
3
J. Patrick McMahon, Partner
Mr. McMahon has nearly thirty years of experience with a
primary focus on representation of companies that offer
information technology products and services to the federal
government. Mr. McMahon advises corporations and other
business entities in connection with all aspects of their federal
procurement business including contract award and
terminations, claims, contract disputes, bid protests, and prime
contractor/subcontractor relationships.
www.mwllegal.com
4. Presenters
4
William T. Welch, Partner
Mr. Welch has twenty years of experience providing legal
counsel for the entire lifecycle of a government contractor from
contract negotiation, award, and protests to contract
administration and contract claims. Mr. Welch also has
experience in teaming agreements, subcontractor agreements,
and related issues. In addition, Mr. Welch advises contractors
who qualify for small business set-aside awards, 8(a)
competitive and non-competitive contracts, and HUBZone
and Service-Disabled, Veteran Owned contracts.
www.mwllegal.com
5. Moderator
5
Kevin R. Learned, Partner
Mr. Learned’s practice focuses on advising clients on general corporate
and securities matters, including company formation and governance,
buy-sell agreements, operating and stockholder agreements, mergers and
acquisitions, private offerings of debt and equity securities (including
friends and family, angel, venture capital and private equity
investments), corporate divorces and other reorganizations, joint
ventures, small business certifications (including 8(a), SDVO, WOSB,
HUB Zone and MBE/DBE certifications), executive employment and
equity matters, deferred compensation plans, franchise agreements,
trademarks, and other commercial contracts and agreements.
www.mwllegal.com
7. Why Size is Important
7
Small Business Set-Asides
Procurements can be set-aside for small
business competition.
Company size must not exceed the size
standard set for the procurement.
www.mwllegal.com
8. Why Size is Important
8
NAICS Codes (North American Industry
Classification System)
A code is assigned by industry and/or
products/services to be provided to almost all
federal solicitations, procurements or RFPs.
Each NAICS code is associated with a size
standard that has been set by the SBA.
www.mwllegal.com
9. How Does SBA Determine Size?
9
Size Standards
Personnel/Staff –
NAICS Code 517110, Wired Telecommunications Carriers, has
a size standard of 1500 employees.
Receipts/Total Receipts – Includes “total income” from whatever
sources, including pass-through income.
NAICS Code 541930, Translation and Interpretation Services,
has a size standard expressed in terms of dollars – $7 million.
NAICS Code 541511, Custom Computer Programming
Services, has a size standard of $25.5 million.
www.mwllegal.com
10. How Does SBA Determine Size?
10
Period of Measurement
If you have been in business for at least three
years, SBA will look at your total receipts for
the most recently completed three fiscal years,
divided by three.
Modified rules if you have been in business for
less than three years or if one of your years is a
short year.
www.mwllegal.com
11. How Does SBA Determine Size?
11
Self-Certification
Companies bidding on set-asides must certify that they are
small.
Each time you sign the representations and certifications
that accompany your offer, you are making a formal
certification that your size representations are accurate.
Penalties for false certification of size – 15 USC §645(d) –
$500,000 + 10 years.
When do you need to be small – 13 CFR 121.404.
www.mwllegal.com
12. Affiliation
12
Definition
Concerns and entities are affiliates of each
other when one controls or has the power to
control the other, or a third party or parties
controls or has the power to control both. It
does not matter whether control is exercised,
so long as the power to control exists –
13 CFR 21.103(a).
www.mwllegal.com
13. Affiliation
13
Relevant Factors
SBA considers factors such as ownership,
management, previous relationships with or ties
to another concern, and contractual
relationships, in determining whether affiliation
exists.
In determining whether affiliation exists, SBA
will consider the “totality of the circumstances,”
and may find affiliation even though no single
factor is sufficient to constitute affiliation.
www.mwllegal.com
14. Affiliation
14
Examples of Affiliations Recognized By SBA
Stock Ownership
Stock Options/Agreements to Merge
Common Management
Identify of Interest
Newly Organized Concern
Franchises and License Agreements
Joint Ventures
www.mwllegal.com
15. Affiliation – Stock Ownership
15
A person that owns, or has the power to control, 50
percent or more of a concern's voting stock, or a block
of voting stock that is large compared to other
outstanding blocks of voting stock, controls or has the
power to control the concern.
Control can be negative. Negative control includes
instances where a minority shareholder has the ability,
under the concern's charter, by-laws, or shareholder's
agreement, to prevent a quorum or otherwise block
action by the board of directors or shareholders.
www.mwllegal.com
16. Affiliation – Stock Ownership
16
OpCo and InvestCo are affiliated in the
following two examples, where OpCo is owned
51% by John Smith and 49% by InvestCo:
OpCo’s bylaws say that at least two shareholders
must be present to make a quorum to vote on
shareholder resolutions.
OpCo’s bylaws say that all expenditures in excess of
$100,000 must be approved by at least 75% of the
shareholders.
www.mwllegal.com
17. Affiliation – Stock Options/
17
Agreements to Merge
SBA treats stock options, convertible
securities, and merger agreements as though
the rights granted have been exercised.
Agreements to enter into merger talks are not
sufficient to create affiliation.
www.mwllegal.com
18. Affiliation – Common Management
18
Affiliation arises where one or more officers,
directors, managing members, or partners
control the board of directors and/or
management of one company and also control
the board of directors or management of one or
more other companies.
www.mwllegal.com
19. Affiliation – Identity of Interests
19
Affiliation may arise among two or more
companies with an “identity of interest”.
Classic example of identity of interest is family
relations. Two companies owned by immediate
family members are presumed to be affiliated.
Assumption is rebuttable.
Other examples of identity of interest:
individuals or firms with common investments, or
firms that are economically dependent through
contractual or other relationships.
www.mwllegal.com
20. Affiliation – Newly Organized
20
Concern
Affiliation may arise where former officers, directors,
principal stockholders, managing members, or key
employees of one concern organize a new concern in the
same or related industry or field of operation, and serve as
the new concern's 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.
www.mwllegal.com
21. Affiliation – Franchise/License
21
Agreements
Typical franchisor/franchisee relations do not by
themselves create affiliation. Tests include whether the
franchisee has the right to profit from its efforts and
bears the risk of loss commensurate with ownership.
Affiliation may arise, however, through other means,
such as common ownership, common management, or
excessive restrictions upon the sale of the franchise
interest.
www.mwllegal.com
22. Affiliation – Joint Venture
22
A Joint Venture is another type of affiliation.
Under new rules published in February 2011,
SBA has announced that joint ventures will not
necessarily be considered affiliates unless they
are enduring (3 or more contracts in a two year
period).
www.mwllegal.com
23. Why Can Teaming Be Dangerous?
23
Affiliation
Easy to accidentally drift into affiliation situation
Joint Venture
Presume affiliation unless excepted
The Subcontractor Relationship
Small Prime Contractor v. Large Subcontractor
Case Study – CardioMetrix, Inc.
Ostensible Subcontractor
www.mwllegal.com
24. Why Can Teaming Be Dangerous?
24
Case Study – CardioMetrix, Inc.
No Teaming Agreement
No Subcontract Agreement
Deemed unduly dependent on, and thus an
affiliate of, its large subcontractor
www.mwllegal.com
25. Why Can Teaming Be Dangerous?
25
Ostensible Subcontractor
“Ostensible” means appearing to be true, but
not necessarily so.
SBA defines an ostensible subcontractor as
one that performs primary and vital
requirements of a contact or a subcontractor
upon which the prime contractor is unusually
reliant – 13 CFR 121.103(h)(4).
www.mwllegal.com
26. How to Avoid Affiliation
26
Seven Factors
Who will manage the contract?
Who has the requisite background and expertise to perform?
Who chased the contract?
Who wrote the proposal?
Does the teaming agreement assign discrete tasks for
performance?
What is the distribution of the amount of work to be
performed by each?
Who has the higher skilled staff, more costly staff?
www.mwllegal.com
27. How to Avoid Affiliation
27
Content of the Teaming Agreement
Limitation in Subcontracting Requirement– 13 CFR 125.6(a)(1).
Teaming Agreement Should Not:
unduly restrict the prime contactor’s right to select other subcontractor;
insist on escrow or lock box provisions;
include over-reaching subcontract provisions that are favorable to the Sub;
assign primary and vital contract performance requirements to the Sub;
assign the higher skilled and higher salaried staff to the Sub;
assign project or program management to the Sub;
suggest a sharing of program management with the Sub; or
suggest any arrangement between the Prime and the Sub that would allow the
Sub to control either directly or indirectly the Prime contractor’s relationship
with the customer.
www.mwllegal.com
28. How to Avoid Affiliation
28
Content of the Teaming Agreement
Tailored Agreements.
Do not rely on the large business to
understand these rules – they often do not.
www.mwllegal.com
29. Size Protests
29
What is a Size Protest?
A legal challenge of a prospective awardee’s
size.
Usually occurs in the context of a procurement
and only after a company has been selected for
award.
www.mwllegal.com
30. Size Protests
30
Who can file a Size Protest?
In the context of a procurement:
A small business competitor in the procurement who
has not been eliminated during the procurement.
A large business who could perform the work and
where only one small business submitted a proposal.
The contracting officer.
The SBA Government Contracting Area Director.
www.mwllegal.com
31. Size Protests
31
When and Where to file?
For a contractor protest, within five (5)
business days of when the contractor receives
notice of the proposed awardee.
Protests must be submitted directly to the
Contracting Officer within the time required.
www.mwllegal.com
32. Size Protests
32
Who Decides the Protest?
The Contracting Officer receives the protest,
but does not make the decision on size.
The SBA Government Contracting Area
Director makes the initial decision.
SBA size determinations are subject to appeal
to the SBA Office of Hearings and Appeals.
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33. Why Can Teaming Be Dangerous?
33
Case Study – DoverStaffing
Undue reliance on incumbent management
Over-reliance on incumbent staff
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34. Questions?
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