WASTE COLLECTION SERVICES, INC., APPELLANT
SBA No. SIZ-20041984 WL 41948August 8, 1984
SBA No. SIZ-2004 (S.B.A.), 1984 WL 41948
Small Business Administration (S.B.A.)
Office of Hearings and Appeals
[Size Appeal]
*1 WASTE COLLECTION SERVICES, INC., APPELLANT
*1 Docket No. SIZ-84-7-13-126
*1 Solicitation No. N62467-84-B-0473
*1 Dept. of The Navy
*1 August 8, 1984
DIGEST
It was concluded that the totality of circumstances present indicated that the subject concern was affiliated with two other firms. The relevant factors were:
*1 (a) the presence of a block of stock, amounting to nearly 50%, which is owned by one of the affiliates; (b) the sharing of key employees; (c) sharing a corporate director; (d) a history of prior subcontracting; (e) the strong possibility that a significant portion of the subject procurement will be subcontracted to the purported affiliate; (f) assistance in bid preparation; and (g) the provision, or offer, of bonding guarantees.
Consequently, the appeal was denied.
DECISION
RIOTTO, Administrative Judge, Presiding:
Jurisdiction
*1 The instant appeal is cognizable under 15 U.S.C. 632 and regulations published at 48 Federal Register 55,832 and 49 Federal Register 5024.
Issue
*1 Did SBA's Regional Office err in finding appellant Waste Collection Services, Inc. (‘Collection’) affiliated with Waste Industries, Inc. (‘Industries') and Kabco, Inc. (‘Kabco’)?
Facts
*1 On April 24, 1984, The Department of The Navy, Charleston, South Carolina, issued the above captioned solicitation for refuse collection. The solicitation was set aside for small business (defined here as concerns having $6 million or less average annual receipts). Collection was the low bidder, but its status as a small business was challenged by a competitor, Carolina Waste Systems, Inc., which argued that Collection was affiliated with several other firms, and thereby had receipts in excess of the applicable standard. Upon receipt of the protest, the Navy's Contracting Officer referred the case to SBA's Atlanta Regional Office for a size determination. After conducting an investigation, the Regional Office determined that Collection was affiliated with Kabco and Industries, undisputed large businesses, and was thus itself other than small. Collection thereupon filed the instant appeal.
*1 A review of the record on appeal in this matter (which consists of affidavits from the principals of Industries and Collection, argument by appellant's counsel and by the original protestant, and SBA data forms 355 and 1340) reveals the following facts, none of which is in dispute:
*1 1. Mr. Lonnie C. Poole, Jr. controls Kabco and Industries by virtue of majority stock ownership.
*1 2. Mr. Poole also controls 49.3% of Collection (the stock is actually owned by Mr. Poole's company, Industries),
*1 3. Mr. Poole is one of Collection's three directors, and also serves as that firm's secretary and agent for service of process.
*1 4. The other two directors of Collection are Mr. Graham A. Bell and Ms. Mary C. Bell. Mr. Bell controls the remaining (approximately) 50.7% of Collection's stock.
*2 5. Kabco helped Collection estimate the subject procurement.
*2 6. Collection has purchased equipment from Kabco.
*2 7. Collection has rented equipment from Industries.
*2 8. Collection has cleaned, repaired, and painted Industries' equipment, on a contract basis.
*2 9. Industries has performed subcontracts for Collection in the past, and Collection contemplates subcontracting a portion of the present procurement to it.
*2 10. Collection and Industries share at least one key employee (besides Mr. Poole), a Mr. Williams.
*2 11. Mr. Poole will personally indemnify Collection's bonding, if necessary.
*2 On appeal, Collection argues:
*2 1. That Mr. Poole is only a minority stockholder and minority director of Collection. and cannot control it.
*2 2. That Collection is not unduly reliant upon Industries and has engaged only in arm's length transactions with that firm.
*2 3. And that there has never been any joint venture agreement between the two concerns, or any formal agreement to subcontract this procurement.
*2 In his affidavit, Mr. Poole corroborates the above, maintaining that he does not control Collection and has merely had longstanding business relations with it.
Discussion
*2 The SBA regulations which define affiliation are found at 13 CFR 121.3. These regulations, however, are not to be construed as a rigid, all inclusive formulation. Rather it is a well established principle of size appeal decision making, particularly with regard to questions of affiliation, that SBA will not merely consider mathematical figures and percentages, or the outward form of corporate ownership, but will take into account all relevant circumstances reflecting the practical realities of business life. Size Appeal of Savini Construction Co., No. 477 (1971); Size Appeal of Heral Industries, No. 602 (1973).1
*2 In the case at hand, seven indicia of affiliation are present. None of these might be conclusive alone, but they are sufficient under the totality of circumstances, and in light of prior size appeals precedent, to support the Regional Office's determination. These factors are: (a) the presence of a block of stock, amounting to nearly 50%, which is owned by one of the affiliates; (b) the sharing of key employees; (c) sharing a corporate director; (d) a history of prior subcontracting; (e) the strong possibility that a significant portion of the subject procurement will be subcontracted to the purported affiliate; (f) assistance in bid preparation; and (g) the provision, or offer, of bonding guarantees.
*2 As noted above, there exists extensive relevant precedent holding these factors to be indicia of affiliation, particularly when they occur in conjunction.2
*2 It is concluded that the presence of these factors herein bespeaks not only a close and pervasive collaboration between the concerns in question, but also a general financial and technical dependency by Collection upon Mr. Poole personally and upon his companies, sufficient to justify a finding of affiliation.
*3 In light of the above reasoning and precedent, it is found that a preponderance of the evidence adduced in this matter indicates that appellant Collection is affiliated with Industries and Kabco, within the meaning of the Small Business Act and its regulations. Since it is undisputed that the latter two firms are other than small, in terms of the $6 million size standard, and inasmuch as Collection's revenues must be added to theirs when assessing small business size status (13 CFR 121.5(a)), it must be concluded that Collection, too, is other than small.
Conclusion
*3 The action of the Atlanta Regional Office is affirmed. Collection may not self-certify under this or a lesser standard unless it is subsequently recertified by SBA.
*3 This constitutes the final decision of the Small Business Administration. See regulations cited supra in jurisdictional paragraph.
Footnotes
This decision rests, in part, on certain prior cases decided by SBA's Size Appeals Board. Although the Size Appeals Board no longer exists, the judges of the Office of Hearings and Appeals, who now adjudicate size appeals, have adopted the body of cases decided by the Board as valid precedent, pursuant to the principle of stare decisis. See, Size Appeal of Genie Services, Inc., No. 1857 (1983).
See, particularly, Size Appeal of Nationwide Roofing, No. 1914 (1983); also see Size Appeal of Heral Industries Corp., supra; Size Appeal of International Maintenance Services, Inc., No. 73 (1983); Size Appeal of J.B.J., Inc., No. 116 (1964); In re Arotech Manufacturing. Co., No. 315 (1968); In re Howard R. Smith, No. 749 (1975); Size Appeal of Poly-Jon of Savannah, Inc., No. 1004 (1977); Size Appeal of American Asphalt & Paving, Inc., No. 1092 (1977); Size Appeal of Janes L. Ferry & Sons, Inc., No. 1098 (1977); Size Appeal of Modern Telecommunications, Inc., No. 1309 (1979).
SBA No. SIZ-2004 (S.B.A.), 1984 WL 41948
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