SIZE APPEAL OF: NVE, INC., APPELLANT RE: ACE MAINTENANCE AND SERVICES, INC.

*1 On October 28, 2014, the U.S. Small Business Administration (SBA) Office of Government Contracting, Area V (Area Office) issued Size Determination No. 05-2014-058, finding that Ace Maintenance and Services, Inc. (ACE) is an eligible small business for the procurement at issue.

*1 NVE, Inc. (Appellant) contends the size determination is clearly erroneous, and requests that SBA's Office of Hearings and Appeals (OHA) reverse the size determination and find ACE to be an ineligible small business for the instant procurement. For the reasons discussed infra, the appeal is DENIED, and the size determination is AFFIRMED.

*1 OHA decides size determination appeals under the Small Business Act of 1958, 15 U.S.C. § 631 et seq., and 13 C.F.R. parts 121 and 134. Appellant filed the instant appeal within fifteen days of receiving the size determination, so the appeal is timely. 13 C.F.R. § 134.304(a). Accordingly, this matter is properly before OHA for decision.

*1 On June 11, 2013, the Department of the Navy, Naval Facilities Engineering Command (NAVFAC), Washington, DC, issued Solicitation N40080-13-R-0451 (RFQ), seeking a contractor to provide janitorial services at numerous locations of the Naval Support Activity, Bethesda, MD. The Contracting Officer (CO) issued the procurement as a Small Business Set- Aside, firm fixed-price/indefinite quantity contract, and assigned North American Industry Classification System (NAICS) code 561720, Janitorial Services, with a corresponding $16.5 million annual receipts size standard.

*1 The RFQ requires the contractor perform janitorial and custodial services at the Naval Support Activity (NSA) in Bethesda, MD, NAVFAC Washington at NSA Bethesda, Joint Task Force (JTF) at NSA Bethesda, Army Troop Command, Walter Reed National Military Medical Center (WRNMMC), and National Intrepid Center of Excellence (NICoE). At WRNMMC, the RFP lists 15 different special janitorial and custodial requirements that are specific for this location, and which the contractor must perform. Accordingly, the contractor will be required to “furnish all labor, supervision, management, tools, materials, equipment, facilities, transportation, incidental engineering, and other items necessary” in order to perform the contract. RFP, at 10. Under key personnel, the RFP required the contractor to provide a Project Manager, Quality Control Manager, Site Safety and Health Officer (SSHO), Executive Housekeeper, Assistant Executive, and on-site supervisor. Id. at 23. The contractor must also provide an Environmental/Energy Manager.

*2 The RFP states that offerors shall provide a proposal that includes two volumes: (i) Technical Proposal; and (ii) Price Proposal. The CO was to award the contract to the proposal that provides the best value to the government, with price and other factors considered. The evaluation factors are broken into Price, and four non-cost/price factor categories: (1) Technical/Management Approach; (2) Corporate Experience; (3) Safety; and (4) Past Performance on Recent, Relevant Projects. However, the technical factors, when combined with the past performance rating, are approximately equal to price. Id. at 170-181.

*2 On July 23, 2014, the CO notified all unsuccessful offerors that ACE had been selected for award. On July 30, 2014, Appellant, an unsuccessful offeror, filed a protest with the CO, claiming that Appellant was affiliated with its parent company, Sandy's Supply, Inc. (Sandy's Supply). The protest also claimed ACE was affiliated with J7J Maintenance, Inc. dba J&J Worldwide Services (J&J) under the ostensible subcontractor rule and totality of the circumstances.

*2 On June 23, 2014, ACE submitted its proposal in response to the RFQ. The proposal states that ACE, as the prime contractor, will perform 51% of the contract requirements, while its subcontractor will perform the remaining 49%. Proposal, Volume I, at 3. The proposal highlights ACE and J&J's past prime/subcontractor relationship, and ACE's total project control for the contract at issue through the Project Manager. Beyond the Project Manager, ACE will provide the key personnel of Executive Housekeeper and Assistant Executive Housekeeper. In turn, J&J will provide the Quality Control Manager and SSHO. Additionally, J&J will be in charge of the Outlying Building Department, providing the required on-site supervisor. The proposal further states ACE will be responsible for services at WRNMMC, where ACE employees will serve as the Custodial Supervisors. Id.

*2 ACE established that it had performed significant relevant work in the past, primarily under its Southeast Regional Medical Command (SRMC) contract, which included providing janitorial services at 5 locations. This contract lasted from 1997 to 2011. Id. at 172. The past performance and relevant corporate experience of the proposal also lists multiple janitorial services contracts performed by J&J as the prime, including the San Antonio Military Medical Center - North, where ACE served as J&J's subcontractor. Id. at 175.

*2 The proposal states that the Project Manager “is the central point of authority and responsibility for management and performance for the resultant contract.” Id. at 41. The proposal's organizational chart makes clear that the Project Manager reports only to ACE's President and that all other key personnel are under the supervision of the Project Manager. In addition, the Project Manager is a current J&J employee who will be hired as a full-time ACE employee upon contract award. The proposal further states the number of Full-Time Employees (FTEs) needed for the work at WRNMMC will be about XX, while the number of FTEs needed for the Outlying Buildings will range between XX and XX. Id. at 49.

*3 On October 28, 2014, the Area Office issued its size determination finding ACE was affiliated with Sandy's Supply but was not affiliated with its subcontractor, J&J, under the ostensible subcontractor rule.

*3 The Area Office found that ACE's officers and directors are two brothers, Mr. Ronald Kopel and Mr. Kenneth Kopel. Additionally, the Kopel brothers equally own Sandy's Supply, which shares a common location and office space with ACE. Size Determination, at 2. Mr. Kenneth Kopel owns a private psychology practice, but besides their involvement in ACE and Sandy's Supply, they are not partners, members, officers, directors, or principal shareholders in any other business. The Area Office further found that none of ACE's owners, supervisors, or key employees have ever been employed by J&J, but that ACE planned on hiring several J&J employees for the procurement at issue. ACE does serve, however, as a subcontractor to J&J on a janitorial contract for the San Antonio Military Medical Center-North. Regarding ACE and J&J's past relationship, the Area Office found that between 1991 and 1996, J&J was ACE's subcontractor for a janitorial contract at Fort Gordon. The Area Office did not find any contractual relationship between Sandy's Supply and J&J. Id.

*3 In its response to the protest, ACE states that it is affiliated with Sandy's Supply and Mr. Kenneth Kopel's medical practice. However, ACE disputes any affiliation with J&J under the ostensible subcontractor rule, as ACE will be performing the primary and vital contract requirements. ACE also states J&J does not have the power to control ACE, thus no affiliation under the totality of the circumstances exists between the two concerns. ACE maintains that it has been performing janitorial services contracts since 1991. In 2002, ACE started to perform a multiple-site contract for janitorial services at the SRMC. ACE's SRMC contract lasted until 2012, and accounted for the majority of ACE's revenues for the past three fiscal years. Id. at 4. ACE, in its response, asserts that there was no subcontract agreement with J&J in place at the time it submitted its final proposal because the RFP only required a Letter of Commitment from the subcontractor. ACE further responded that its final proposal assigns J&J less than 25% of the FTE work required.

*3 After reviewing Appellant's proposal and response to the protest, the Area Office determined that ACE and J&J were not affiliated under the ostensible subcontractor rule. The Area Office observed that ACE had significant and comparable experience in the work sought by the RFP, because it has been in this line of work since 1991. The Area Office noted that ACE plans on hiring three individuals employed by J&J to perform the key roles of Project Manager, Executive Housekeeper, and Assistant Executive Housekeeper. According to the Area Office, ACE's hiring of a J&J employee “does not undermine ACE's control of the contract.” Id. at 7.

*4 In finding that ACE will be performing the majority of the primary and vital requirements, the Area Office found that ACE will perform janitorial services in the WRNMMC Buildings, which account for XX% of the FTE workload, while J&J will perform janitorial services in the outlying buildings. Further, two J&J employees will perform the quality control, safety and health, environmental services and other discrete tasks that amount to no more than 49% of the contract. The Area Office also notes that the majority of employees performing janitorial services are ACE employees. Even though the Project Manager and other key employees are currently J&J employees, the Area Office found that they will become ACE employees who report to ACE's executive leadership. Finding that ACE is not unduly reliant on J&J, the Area Office determined that ACE is a proven concern with relevant experience and that nearly all of the key management functions fall under an ACE employee purview.

*4 Analyzing the protest's totality of the circumstances claim, the Area Office looked at the consulting agreement between ACE and J&J, and their prior subcontracting relationship, and found that these factors do not amount to affiliation. Given that ACE is not reliant on J&J for its revenues, and J&J does not have the power to control ACE based on their contractual relationship, the Area Office found no affiliation under the totality of the circumstances.

*4 Lastly, the Area Office considered ACE's size, along with its affiliates, as of the date it submitted its initial offer, August 8, 2013. After reviewing the federal tax returns for ACE, Sandy's Supply, and Mr. Kenneth Kopel's medical practice, the Area Office found it did not exceed the $16.5 million size standard.

*4 On November 10, 2014, Appellant filed its appeal of the size determination with OHA. Appellant argues the Area Office committed errors of fact and law, and thus the size determination should be reversed.

*4 Appellant argues that contrary to the Area Office's findings, J&J will perform the primary and vital requirements of the contract. Appellant asserts that the Quality Control Manager, a key employee, will be a J&J employee, performing duties that are part of the contract's primary and vital requirements. Appeal at 5-6; citing Size Appeal of SM Resources Corporation, Inc., SBA No. SIZ-5338 (2012). Because the Quality Control Manager has authority over the contract's performance objectives, Appellant argues that a J&J employee will have management power over ACE employees in the WRNMMC. Appellant adds the Area Office did not give probative weight to a J&J employee serving as the SSHO, as well as the XXXX.

*4 Appellant further contends that the Project Manager, a J&J employee before being hired by ACE for purposes of this contract, reports to ACE's executive board, consisting of the brothers Kopel, and who are not located near the contract's place of performance. Appellant argues that in the past OHA has “rejected the assertion that control by an ostensible subcontractor is negated where managers hired from an ostensible subcontractor will be subject to the management of a corporate executive located far from the site of performance of the proposed contract.” Id. at 8; citing Size Appeal of Professional Security Corporation, SBA No. SIZ-5548 (2014). Appellant adds that the SBA profile point of contact for ACE are two J&J employees.

*5 Appellant maintains that ACE's use of J&J employees for point of contact, key employee positions for the procurement at issue, preparation of the proposal, and ACE's lack of new contract awards since 2011, shows J&J will be performing primary and vital requirements of the contract at issue and ACE's unusual reliance on J&J. Id. at 9.

*5 Appellant asserts that ACE is affiliated with J&J under the totality of the circumstances. Appellant points to the two J&J employees listed as point of contact persons for ACE, and to an agreement between the firms for J&J to provide ACE consulting and accounting services as indicia of affiliation. Appellant further asserts ACE is dependent upon J&J for revenue under a subcontract.

*5 On December 2, 2014, ACE filed its response to the appeal. ACE requests that OHA affirm the size determination and deny Appellant's appeal because it has not shown any clear error of fact or law by the Area Office.

*5 ACE proposes that the contract's primary and vital requirements are the performance and supervision of janitorial services. According to ACE, its proposal allows for J&J to perform some of the same type of janitorial services performed by ACE, with the exception of some tasks reserved for upper management. J&J will perform the work in the outlying buildings while ACE will perform the work at WRNMMC, with the Project Manager, employed by ACE, supervising all aspects of the work. The Project Manager, in turn, reports directly to ACE's President. ACE allows that although the SSHO and Quality Control Manager are J&J employees, they report to the Project Manager. Response, at 5-6.

*5 According to ACE, the Area Office properly recognized that ACE will perform the majority of the work required while also employing the highest ranking manager. Because the work required in WRNMMC account for XX% of the FTEs in its proposal, all ACE employees, ACE maintains that it will perform the majority of the primary and vital contract requirements. ACE disputes Appellant's allegations that the XXXX will perform supervisory work in WRNMMC. ACE's proposal does not define any work at WRNMMC to be performed by the XXXX, a position that, according to the solicitation, is not a key employee. ACE adds that although the SSHO and Quality Control Manager are J&J employees, the majority of the contract's key personnel will be ACE employees. Id. at 9-10.

*5 ACE further argues that it is not unusually reliant on J&J, as Appellant alleges. ACE notes that J&J is not the incumbent contractor, which in the past “has been considered a primary factor to show that an ostensible subcontractor relationship does not exist.” Id. at 12; citing Size Appeal of Fischer Business Solutions, LLC, SBA No. SIZ-5075 (2009). In addition, ACE challenges Appellant's contention that ACE lacked the relevant experience to perform the contract while relying on J&J's past experience. ACE states that it has significant past relevant experience based on its SRMC contract, which “meets all of the elements of the relevant corporate experience and past performance outlined in the RFP.” Id. at 14.

*6 ACE further argues its proposal calls for ACE to perform the overall project management while J&J performs the contract's quality control requirements. Because OHA in the past has allowed for a subcontractor to perform discrete contract tasks without violating the ostensible subcontractor rule, ACE contends the Area Office did not err by finding that J&J's tasks do not amount to performing a majority of the contract's primary and vital requirements. Id. at 15.

*6 Next, ACE concedes that some of the contract's key personnel are current J&J employees, but that fact alone does not warrant a finding of the ostensible subcontractor rule. ACE states that in the past, OHA has found that if key personnel that are subcontractor employees are subordinate to the prime contractor, no affiliation exists. Id. at 17; citing Size Appeal of National Sourcing, SBA No. SIZ-5305, at 11 (2011). ACE notes that its proposed management chart for key personnel states that the Project Manager, Work Control Manager, Executive Housekeeper, and Assistant Executive Housekeeper are all to be ACE employees, while the SSHO and Quality Control Manager are J&J employees. ACE acknowledges that although the Project Manager will be hired from J&J, that fact is not sufficient to find unusual reliance “where he/she would become an employee of the prime contractor upon contract award and would report to the prime contractor's executive leadership”, as is the case at hand. Id. at 19; citing Size Appeal of Maywood Closure Company, LLC & TPMC-Energy Solutions Environmental Services 2009, LLC, SBA No. SIZ-5499 (2013). The Project Manager, upon contract award, will become an ACE employee and report to ACE's President.

*6 ACE further challenges Appellant's claim that ACE's executive leadership's location is suggestive of ACE's affiliation with J&J. ACE contends the OHA cases cited by Appellant are inapposite to the instant case because in those cases the subcontractor was also the incumbent contractor, thus the relationship was subject to heightened scrutiny. Additionally, in the cases cited by Appellant, the project manager hired from the incumbent subcontractor was the project manager for the incumbent contract. Here, none of those situations are present, and unlike the cases cited by Appellant, ACE's President has a defined role with key responsibilities for the contract at hand. Id. at 22-23.

*6 Lastly, ACE maintains it is not affiliated with J&J under the totality of the circumstances. ACE notes that in order to find affiliation under the totality of the circumstances, the power of one concern to control another must be present. ACE argues the situation here clearly establishes J&J does not have the power to control ACE. Even though two J&J employees serve as point of contact in ACE's SAM profile, that is the direct result from a Consulting Agreement between ACE and J&J. That agreement, according to ACE, does not establish J&J has the power to control ACE. The agreement establishes a set fee by which J&J provides “back office administrative support to ACE”, including serving as a point of contact in ACE's SAM profile. Id. at 25-26. ACE adds Appellant's assertion that ACE is reliant upon J&J for its revenues is false, as ACE's role as a subcontractor to J&J in other contracts accounts for a small fraction of ACE's revenues. ACE concludes Appellant has failed to establish how the Area Office's determination was based on clear error of fact or law.

*7 On December 12, 2014, Appellant filed a reply to Appellant's response. Appellant alleges the Area Office did not consider relevant information that would lead to a finding of affiliation between ACE and J&J under the ostensible subcontractor rule.

*7 Appellant states that the percentage of FTEs allocated to J&J employees is much larger than previously mentioned. Appellant maintains the percentage of J&J FTEs accounts for 51.24% of all FTEs, not XX% as represented by ACE. Reply at 2-3. Thus, the Letter of Commitment cited by the Area Office was erroneous when it limited J&J's role as performing up to 49% of the work. Appellant adds that almost all of ACE's revenues for 2013 came from subcontracts from J&J and a joint venture in which J&J is a member. Appellant once again maintains that the role of ACE's President is limited to activities at the start of the contract, while the majority of the department managers will continue to be J&J employees. Id. at 4. The proposal listed five department managers, with three of them to be J&J employees and the other two current J&J employees to be hired by ACE. One of those department managers is the XXXX, which is not part of the RFP's list of key employees but listed in ACE's proposal as a key management position. Lastly, the quality control duties required of the contract will be performed by J&J with no supervision from the Project Manager and only responsible to ACE's President, who will not perform any direct labor on the contract. Id. at 10-11. Appellant reasons this is further evidence of J&J's role as an ostensible subcontractor.

*7 Next, Appellant maintains the Service Agreement between ACE and J&J for administrative support goes beyond those services, and provides services that show the intermingling relationship between ACE and J&J. Appellant further contends the Area Office did not take into consideration a teaming agreement between ACE and J&J that was in existence, and acknowledged, in ACE's proposal. Appellant challenges that “if ACE did not have a teaming agreement with J&J, despite ACE's statement in the proposal that there was one, there was no agreement between ACE and J&J limiting the amount to be subcontracted to J&J.” Id. at 6. Appellant observes that contrary to ACE's statements, J&J assisted in drafting portions of the proposal that did not correspond to the work assigned to J&J. The proposal also contained references to J&J resources which show ““that either J&J's role in preparing the proposal was not limited to the portions of the work that it was to perform or that its role in performance of the contract will extend far beyond the areas acknowledged by ACE in its submission to SBA.” Id. Appellant concludes that the above mentioned facts demonstrate ACE and J&J are affiliated under the ostensible subcontractor rule.

*7 On December 23, 2014, ACE filed its sur-reply to Appellant's reply. ACE argues Appellant based its allegation on incorrect and misleading statements.

*8 ACE challenges Appellant's assertions that J&J is assigned over 50% of the FTEs for the procurement at hand. ACE states its proposal contained a mixed staffing schedule for the outlying buildings in anticipation of the government increasing the level of service required. Sur-reply, at 2. This alternative staffing schedule would serve as a substitute, and not in addition, to ACE's proposed staffing levels. ACE maintains Appellant's claims were the result of Appellant counting “the alternative staffing levels for the outlying buildings as if they were cumulative, rather than as substitutes for the base level of staffing.” Id. at 3.

*8 Next, ACE claims Appellant's allegations that ACE's revenues for 2011, 2012, and 2013 are not the result of the SRMC contract in which ACE was the prime contractor are incorrect. For fiscal years 2011 and 2012, ACE continued to receive revenues from the SRMC contract, while it never concealed the source of its revenues for 2013. ACE argues Appellant failed to understand that the financial statements provided to the Area Office reflects ACE's total revenues for the past three fiscal years combined. Id. at 5. Thus, ACE never mislead the Area Office as to the amount or source of its revenues.

*8 Regarding Appellant's statements that the majority of department managers are J&J employees that outnumber ACE's employees, ACE maintains its proposal breaks down the staffing charts into five offices and departments. ACE employees will head three out of the five, with J&J employees the other two. All department heads still report directly to the Project Manager, an ACE employee. Id. at 7. ACE adds that, contrary to Appellant's assertions, the Quality Control Manager is subordinate to the Project Manager, yet also maintains an open communication channel with ACE's President for quality and safety measures.

*8 ACE further disputes Appellant's contention there is no agreement limiting J&J's amount of work to be performed. ACE acknowledges the Letter of Commitment with J&J signifies ACE and J&J's agreement to team for this procurement, which is reflected in the proposal. This letter, as previously stated, limits J&J to perform no more than 49% of the contract. Id. at 12.

*8 Lastly, ACE never misrepresented J&J's involvement in drafting the proposal, as Appellant proposes. Appellant has nothing to base their accusation on, and ACE asserts that J&J only participated in drafting the portion of the proposal dealing with J&J's proposed work and printing the proposal. Id. at 13.

*8 Appellant has the burden of proving, by a preponderance of the evidence, all elements of the appeal. Specifically, Appellant must prove the size determination is based upon a clear error of fact or law. 13 C.F.R. § 134.314. OHA will disturb an area office's size determination only if, after reviewing the record, the administrative judge has a definite and firm conviction that the area office erred in making its key findings of fact or law. Size Appeal of Taylor Consultants, Inc., SBA No. SIZ-4775, at 11 (2006).

*9 The ostensible subcontractor rule stipulates that a prime contractor and its subcontractor may be treated as affiliates if the subcontractor performs the primary and vital requirements of the contract, or if the prime contractor is unusually reliant upon the subcontractor. 13 C.F.R. § 121.103(h)(4). Of utmost importance in any ostensible subcontractor rule is whether the subcontractor is performing the primary and vital contract requirements, and which concern is responsible for contract management. Size Appeal of Maywood Closure Company, LLC & TPMC-EnergySolutions Environmental Services 2009, LLC, SBA No. SIZ-5499 (2013). A contract's primary and vital requirements are those closely associated with the solicitation's primary purpose. Size Appeal of Santa Fe Protective Servs., Inc., SBA No. SIZ-5312, at 10 (2012). When examining the relationship between a prime and subcontractor, OHA will look into all aspects of the relationship, including any agreement between the concerns, and whether the subcontractor is the incumbent contractor. Size Appeal of C&C Int'l Computers and Consultants Inc., SBA No. SIZ-5082 (2009).

*9 Here, the contract's primary and vital requirements are providing janitorial and custodial services at numerous NAVFAC buildings. Additionally, the contractor must provide all the labor and tools to perform the contract. The solicitation states that the key personnel for the contract will be composed of five individuals: (i) Project Manager; (ii) Quality Control Manager, (iii) SSHO; (iv) Executive Housekeeper, (v) Assistant Executive Housekeeper, and on-site supervisor.

*9 Ostensible subcontractor cases are “intensely fact-specific given that they are based upon the specific solicitation and specific proposal at issue.” Size Appeals of CWU, Inc., et al., SBA No. SIZ-5118, at 12 (2010). Further, in any ostensible subcontractor rule analysis, the question is “in essence, whether a large subcontractor is performing or managing the contract in lieu of a small business [prime] contractor.” Size Appeal of Colamette Construction, SBA No. SIZ-5151, at 7 (2010). The Area Office determined that ACE, the prime contractor, is responsible for providing the majority of the key employees required by the solicitation, including the Project Manager. I agree. The proposal clearly establishes that the Project Manager has control over contract performance, and reports only to ACE's President. It is clear that ACE is carrying out the primary and vital contract requirements, as the overwhelming majority of the FTEs performing the required janitorial duties are ACE employees. Thus, even though ACE and J&J would be performing the same type of services, ACE would manage the contract and its employees will perform a majority of the work.

*10 Appellant attempts to paint J&J's role as performing a majority of the work, and making ACE unduly reliant upon them. Appellant contends that the proposed Project Manager, SSHO and Quality Control Manager are currently J&J employees, in violation of the ostensible subcontractor rule. I disagree. The proposal makes clear that ACE and J&J will be responsible for performing janitorial and custodial duties for all the buildings associated with the procurement, but the majority of the work will be concentrated at WRNMMC, where ACE employees will be in charge of supervision and all janitorial and custodial services. In addition, it appears that Appellant misinterpreted ACE's proposal containing the number of FTEs provided by J&J. As ACE explains, and a review of the proposal clearly shows, the staffing schedule proposed by ACE contained a number of options for the government's utilization, including three different FTE staffing schedules for the buildings staffed by J&J employees. Appellant's claim that the percentage of FTEs supplied by J&J exceeds 50% of the total FTEs for the contract is contrary to what the proposal states. Based on these facts, I cannot find that J&J is performing a majority of the contract's primary and vital requirements or that ACE is unduly reliant upon J&J.

*10 Appellant rests its argument on the fact that the Project Manager, SSHO and Quality Control Manager are currently J&J employees. However, as ACE explains, the Project Manager will become an ACE employee upon contract award, thus he will not be subject to control by J&J. The fact that J&J is supplying the SSHO and Quality Control Manager does not support a conclusion that J&J controls the contract, as the Project Manager, an ACE employee, will have unimpeded control over the contract. As ACE correctly points out, OHA has previously stated that when key personnel, even if hired from the subcontractor, remain under the supervision and control of the prime contractor, there is no violation of the ostensible subcontractor rule. Size Appeal of InGenesis, Inc., SBA No. SIZ-5436, at 15-16 (2013) (“the use of two current [subcontractor] employees ([Deputy PM] and [Senior Recruiter]) as key personnel does not create unusual reliance.”); Maywood Closure Company, LLC & TPMC-Energy Solutions Environmental Services 2009, LLC, SBA No. SIZ-5499 (2013) (finding that no affiliation existed when a subcontractor employee was proposed as project manager because he would become a prime contractor employee upon contract award.) These cases hold it is relevant, but not determinative, to an ostensible subcontractor rule analysis, if a prime contractor hires key personnel from its proposed subcontractor. Here, while Appellant is correct in stating ACE's hiring of its contract management personnel from J&J is one factor which could, if combined with other factors, lead to a finding of an ostensible subcontractor rule violation, this factor, by itself, is not probative of undue reliance.

*11 As OHA has recognized, when subcontractor employees are proposed as key personnel, no violation of the ostensible subcontractor rule exists if they remain subordinate to the prime contractor employees. Here, the Project Manager will be an ACE employee under the control of ACE's President. ACE will also be managing the contract and providing the majority of the staff that will perform the contract's primary and vital requirements. Thus, ACE's plan to hire the Project Manager from J&J does not jeopardize ACE's control over the contract management, or establish undue reliance.

*11 I also disagree with Appellant that ACE is reliant upon J&J for its experience in performing the type of work called for by the solicitation. ACE is an established company with a record of performing tasks similar to those sought here, both as a prime contractor and subcontractor. Additionally, the Area Office failed to find ACE would be receiving financial help from J&J to perform the contract or that the proposal unduly relied on J&J's previous corporate experience performing this type of work as a prime contractor. Thus, it is clear that the Area Office, in making their determination, properly and adequately considered ACE's past performance in this field of work, and I cannot disagree with their findings that ACE did not unduly relied on J&J's past experience.

*11 The regulations provide that, 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. 13 C.F.R. § 121.103(a)(5); Size Appeal of Faison Office Products, LLC, SBA No. SIZ-4834 (2007) at 11; (“an area office must [first] find facts and explain why those facts caused it to determine one concern had the power to control the other.”) The relationship between the concerns has to be dependent enough that it renders them affiliated. Size Appeal of Procedyne Corp., SBA No. SIZ-4354 (1999). Sound discretion must be utilized in any analysis under the totality of the circumstances, as the facts must explain why one concern can control another. Faison Office Products, LLC, SBA No. SIZ-4834 (2007); Size Appeal of BA Urban Solutions, LLC, et al., SBA No. SIZ-5521 (2013) (finding that under the totality of the circumstances, the facts must show that one concern has the power to control another.)

*11 In the case at hand, Appellant argues that under the totality of the circumstances ACE and J&J are affiliates. Appellant maintains the use of J&J employees to fill key personnel positions and as points of contact for ACE, the Service Agreement between ACE and J&J where J&J provides consulting and accounting services, and ACE's role as a subcontractor to J&J in other projects, by which ACE is dependent on revenues, is evidence of J&J controlling ACE and the Area Office erroneously failed to find affiliation based on the totality of the circumstances. I disagree.

*12 Taken as a whole, the relationship between ACE and J&J is not indicative of affiliation. ACE and J&J have worked together on contracts in the past, with both concerns serving as prime and subcontractor, but this does not establish J&J's control over ACE. Appellant simply states that ACE and J&J have had a long business relationship but fails to explain how this resulted in J&J's control over ACE, and how the Area Office erred in finding no affiliation under the totality of the circumstances. Simply showing an ongoing business relationship between two firms is not enough to establish that one controls or has power to control the other.

*12 Here, J&J does not own any part of ACE, no J&J employee serves on ACE's Board, and the record establishes that ACE is not economically dependent on J&J for revenues. Further, Appellant's argument that J&J employees listed as point of contact in ACE's SAM profile is indicative of control is unpersuasive. ACE has a Service Agreement with J&J to provide consulting services, thus listing J&J employees as point of contact under ACE's SAM profile does not render ACE under the control of J&J or show ACE is unduly reliant upon J&J. As ACE explains, the two employees Appellant mentions in their appeal are listed as consultants, which falls under the services J&J provides as a result of consulting services agreement between the concerns. The agreement between ACE and J&J is for services provided in exchange for a set fee, which in no way allows J&J to have the power to control ACE.

*12 Although most of ACE's revenues for 2013 come from acting as a subcontractor to J&J, ACE's 2013 revenues are not at issue here, as they are irrelevant to a size determination based on the contract at hand. As the Area Office explained, size is calculated as of August 8, 2013, the date ACE submitted its initial offer, thus only revenues for 2010, 2011, and 2012, are utilized when calculating ACE's average annual receipts. Size Determination, at 7; citing 13 C.F.R. § 121.104. Additionally, as ACE points out, the Services Agreement between ACE and J&J does not provide J&J with any means by which it could have the power to control ACE. The agreement includes a set fee for the services provided by J&J, thus paying another concern for services, whether accounting or consulting, can in no way be construed as relinquishing power to control to another concern. ACE and J&J undoubtedly have ties to each other but their enduring business relationship is not sufficient to find affiliation under the ostensible subcontractor rule or totality of the circumstances since it does not amount to control of one concern over the other. Therefore, I find no error in the Area Office finding ACE and J&J are not affiliated under the totality of the circumstances or ostensible subcontractor rule.

*12 Appellant has/has not demonstrated that the size determination is clearly erroneous. Accordingly, the appeal is DENIED, and the size determination is AFFIRMED. This is the final decision of the Small Business Administration. See 13 C.F.R. § 134.316(d).