Family Relationships are still a Viable Basis of Affiliation

December 12, 2016

Businesses Controlled By Brothers Were Presumed Affiliated, Says SBA

Source: SmallGovCon, Steven Koprince, November 28, 2016U.S. SBA

Businesses controlled by brothers were presumed affiliated under the SBA’s affiliation rules.

In a recent size determination, the SBA Office of Hearings and Appeals held that a contractor was affiliated with companies controlled by its largest owners’ brother, even though the companies had only minimal business dealings.  OHA’s decision highlights the “familial relationships” affiliation rule, which can often trip up even sophisticated contractors–but the decision, which was based on a March 2016 size determination request, did not take into account changes to that regulation that went into effect a few months later.

OHA’s decision in Size Appeal of Quigg Bros., Inc., SBA No. SIZ-5786 (2016) arose from a HUBZone Program application submitted by Quigg Bros., Inc..  On March 30, 2016, the HUBZone Program office asked that the SBA Area Office conduct a size determination on Quigg Bros. to determine whether the company was a small business in its primary NAICS code, 237310 (Highway, Street, and Bridge Construction).

The SBA Area Office determined that Quigg Bros. was owned by six related individuals. The two largest shareholders were John Quigg and Patrick Quigg.  The SBA Area Office determined that all six of the owners, including John Quigg and Patrick Quigg, controlled Quigg Bros.

The SBA Area Office then proceeded to examine potential affiliation with various other entities.  As is relevant to this post, William Quigg–the brother of John Quigg and Patrick Quigg–controlled three companies: Root Construction Inc. (RC), Barrier West, Inc. (BW), and Cottonwood, Inc.  These companies were identified as “related parties” in Quigg Bros.’ financial statements.  When the SBA asked for an explanation, Quigg Bros. stated that “[b]ecause we have loaned money to these entities our CPAs feel they are related.” However, Quigg Bros. pointed out, William Quigg was not an owner or officer of Quigg Bros., nor were John Quigg or Patrick Quigg involved as owners or officers of RC, BW, or Cottonwood.  READ MORE….

Contact your nearest PTAC to learn about government contracting.


Keep up to date follow us on Twitter, LinkedIN or Facebook!

 For help with Government Contracting: contact your nearest Procurement Technical Assistance Center (PTAC). Funded through Cooperative Agreements between the U.S. Department of Defense and state and local governments/institutions, PTACs provide free and low-cost assistance in virtually all areas of government contracting.