SIZE APPEAL OF: Q INTEGRATED COMPANIES, LLC, APPELLANT

*1 On June 10, 2016, the U.S. Small Business Administration (SBA) Office of Government Contracting, Area II (Area Office) issued Size Determination Nos. 2-2016-031, -032, finding Q Integrated Companies, LLC (Appellant), an other than small business.

*1 Appellant requests that SBA's Office of Hearings and Appeals (OHA) reverse the size determination and find Appellant to be a small business, or, in the alternative, remand the matter back to the Area Office for a new determination of Appellant's size. For the reasons discussed infra, I DENY the appeal, and AFFIRM the size determination.

*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 July 25, 2014, the U. S. Department of Housing and Urban Development (HUD) issued Solicitation No. DU204SA-13-R-0005 (RFP) for marketing support for its Real Estate Owned (REO) portfolio. Nine geographic areas were set aside for small businesses. The Contracting Officer (CO) designated North American Industry Classification System (NAICS) code 531210, Offices of Real Estate Agents and Brokers, with a corresponding $7.0 million annual receipts size standard, as the appropriate code. After SBA increased the size standard for NAICS code 531210 to $7.5 million, the CO amended the RFP to adopt the higher size standard.² Appellant submitted its initial offer on September 23, 2014, and its final proposal revisions on September 9, 2015.

*2 In the event of default on a Federal Housing Administration (FHA) loan, the lender acquires title to the property, files for the insurance benefits and conveys the property to HUD. This gives HUD a substantial inventory of real estate to manage and sell. HUD relies upon contractors to perform these tasks. This RFP seeks Asset Manager services. The purpose of the contract is to obtain marketing and sales services for HUD's REO properties. (RFP at 15.) The contractor is required to list, market, select the best offer, execute sale documents, oversee the closing process, and ensure proceeds are timely delivered to HUD. (RFP at 29.)

*2 HUD made the award for Area 6A (Alabama, Mississippi, and Tennessee) to Appellant on January 29, 2016, and issued a notice to unsuccessful offerors on February 1, 2016. Two protests were filed, by ARNC Bridge Consulting (ARNC) on February 6, 2016, and by Alpine/First Preston JV VI (Alpine) on February 8, 2016. ARNC contended Appellant is a front for Matt Martin Real Estate Management (MMREM), the incumbent. Alpine asserted Appellant has an ostensible subcontractor relationship with MMREM. The CO referred the protests to the Area Office for a size determination.

*2 On February 24, 2016, Appellant filed its response to the protests with the Area Office. Appellant's SBA Form 355 identifies it as a Limited Liability Company. The two members are Christopher Ognek, with a 51% interest, and the Matthew J. Martin Revocable Trust (Trust), with a 49% interest. Mathew J. Martin is Grantor, Trustee, and a beneficiary of the Trust. The Trust received its interest from MMREM Holdings, LLC, on June 30, 2014. The transfer was described as “for the benefit of Matthew J. Martin as beneficial owner, and not as a change in ownership or control.” (First Amendment to Operating Agreement, June 30, 2014.) The Form 355 makes clear that MMREM, the Trust, Matt Martin Real Estate Holdings, LLC, Matt Martin Real Estate Holdings 2, LLC, Matt Martin Real Estate, LLC, and MJM Property Preservation and Management, LLC (collectively, MMREM), are all affiliated, controlled by Mr. Martin.

*2 Mr. Christopher Ognek is Appellant's Manager. Appellant's Operating Agreement vests the company's management in the Manager. (Operating Agreement § 5.1.1.) The Manager has “full, exclusive, and complete discretion, power and authority, ... to manage, control, administer, and operate the business and affairs of the Company for the purposes herein stated, and to make all decisions affecting such business and affairs ...” (Operating Agreement § 5.1.3.) These powers include acquiring real estate; constructing, owning, leasing, conveying or mortgaging any real or personal property; entering into contracts; purchasing insurance, borrowing money; executing leases; executing any other necessary instruments; making any expenditures which the Manager, in his or her sole discretion deems appropriate; entering into any kind of activity necessary to accomplish the Company's purposes, investing Company reserves, and making distributions. (Id.) The Manager need not obtain the consent of any members prior to making any decisions. (Id. § 5.1.5.) The only exceptions to the Manager's authority are for “extraordinary actions” (such as fundamentally changing Appellant's business, selling all of its assets, admitting new members, and amending the Operating Agreement), which require a 70% vote of the members. (Id. § 5.2.)

*3 The Operating Agreement further provides:

*3 There is also a Master Services Agreement (MSA) between Appellant and MMREM, effective September 23, 2013. The MSA designates Appellant as the subcontractor and specifies Appellant will provide real estate services to MMREM under the agreement. MMREM is committed to no minimum order, and may terminate the agreement at any time in whole or in part, at its sole convenience. There are provisions defining what default will mean by Appellant, but not by MMREM. MMREM may issue a stop-work order at any time. Section 10(g) includes a noncompete provision, restricting Appellant from doing business with MMREM's customers during the term of the MSA and for three years after the MSA's expiration or termination. Appellant stated that it received about [XX]% of its revenues under the MSA between 2012 and 2015. (Protest Response at 4.) Under the MSA, Order No. 1 was for Appellant to provide MMREM 2 FTEs for a short time in 2013, and Order No. 2 was for Appellant to provide MMREM 4 FTEs for a year as staffing support.

*4 The Technical Proposal states Appellant “subcontracts three segments of work: Third Party Quality Control, Vendor Management, and Marketing. Subcontracting of the Marketing department in [its] entirety to a single subcontractor allows [Appellant] to keep clear lines of delineation between the prime and subcontractor.” (Proposal Vol. II at 9, § 2.1.1.)

*4 Appellant concedes in its Protest Response that some of its employees are co-located with MMREM in Texas, Pennsylvania, and California in connection with the MSA, but states “the vast majority” of its revenues are from its residential and commercial brokerage it operates out of its Virginia office. (Id.) In 2012, none of its receipts were MMREM related; in 2013 that percentage was [XX]%; in 2014, it was [XX]%; and in 2015 it was [XX]%. (Id. at 5.)

*4 Appellant argued that it is not affiliated with the MMREM companies because Mr. C. Ognek has complete control over Appellant's day-to-day affairs. (Id. at 13.) Appellant also argued that MMREM will not be its “ostensible subcontractor”. (Id.)

*4 On June 10, 2016, the Area Office issued its Size Determination finding Appellant other than small. The Area Office found Christopher Ognek is Appellant's 51% Member/Manager, and the Matthew J. Martin Revocable Trust (Trust) is the 49% member. The officers are Michael Ognek, President, and Christopher Ognek, Vice President. Appellant has two affiliates, Ando Properties and Investment, LLC, and 4951 Commerce, LLC. Appellant shares office space with MMREM, and has employees co-located with MMREM pursuant to the MSA. (Size Determination at 2.) The Area Office found affiliation on three grounds: (1) the restrictions on Mr. C. Ognek's ability to seek business opportunities, (2) the totality of the circumstances, and (3) the ostensible subcontractor rule.

*4 First, the Area Office reviewed Appellant's Operating Agreement. Mr. C. Ognek has unconditional control of daily operations as Manager. However, the Area Office found that a supermajority vote is required under certain circumstances to amend the agreement. Sections 5.5.2 and 5.5.3 prevent Appellant and Mr. C. Ognek from pursuing certain business opportunities for a certain period of time. Section 5.5.2. provides that Appellant cannot, for five years, participate in any way in any business in competition with MMREM or its affiliates without MMREM's consent. Section 5.5.3 provides that Mr. C. Ognek, while Manager or Member of Appellant and for three years thereafter may not participate in any way in any business in competition with Appellant or MMREM or its affiliates. These provisions cannot be changed without a 70% vote of the membership. The Area Office concluded these provisions gave MMREM, the minority member, the power to control the firm, and, thus, Appellant is affiliated with MMREM. (Id. at 5-6.)

*5 Second, the Area Office found a number of other factors to support a finding that Appellant and MMREM are affiliated through the totality of the circumstances. The Trust owns 49% of Appellant, which is more than a simple investment and gives MMREM a significant presence in the organization. Appellant receives [XX]% of its revenues from MMREM. The MSA has the potential to be a significant source of Appellant's revenue. MMREM is Appellant's subcontractor on this procurement and will perform 49% of the work including the primary and vital requirements. Mathew Martin, through the Trust and ownership of MMREM, will receive 50% of Appellant's share of the profits, in addition to 49% as the subcontractor. Appellant must rely on MMREM for the required bonding. The Operating Agreement's noncompete sections 5.5.2 and 5.5.3 support a finding of affiliation, as does the acknowledgement that MMREM provides Appellant “with significant business opportunities.” MMREM has the potential to provide Appellant with a significant source of revenue. Further, section 5.5.3 of the Operating Agreement provides Appellant has a business relationship with MMREM which will involve the provision of contracting services by Appellant to MMREM and the provision of consulting and corporate support services by MMREM to Appellant. Appellant has access to MMREM's business infrastructure and contracts, and MMREM is provided access to opportunities restricted to small business. (Id. at 6-7.)

*5 Third, the Area Office found Appellant affiliated with MMREM under the ostensible subcontractor rule, even though the Area Office noted that Appellant had the experience to perform the contract, experience obtained as a subcontractor to incumbent MMREM on previous HUD work. (Id. at 8.) The Area Office determined the primary and vital task of this contract is for the contractor to locate a purchaser for property designated for foreclosure by HUD. This is the Marketing Manager's task. (Id. at 10.) Appellant is subcontracting this portion in its entirety to MMREM. (Proposal at 9, § 2.1.1.) In all, Appellant would perform 51% of the labor cost, and MMREM would perform 49%. (The Area Office also noted that Mr. Martin, as indirect owner of 49% of Appellant, would receive a portion of Appellant's profits, for a total of approximately 74% of the profits.) The teaming agreement sets the fee MMREM will receive for properties sold. The teaming agreement outlines the employees MMREM will provide in the marketing department as well as three positions it will occupy under the Special Services Manager. (Id. at 10.) The Area Office concluded MMREM will perform the primary and vital functions of the contract, and so Appellant is affiliated with it under the ostensible subcontractor rule. Therefore, Appellant is other than small.

*5 On June 27, 2016, Appellant filed the instant appeal. Appellant argues the Area Office erred in finding it other than small and requests the size determination be reversed and Appellant be found to be small. With its appeal, Appellant submits as new evidence the June 27, 2016 declaration of Mr. C. Ognek that provides background information and describes the preparation of its Proposal.

*6 First, Appellant argues the Area Office erred in finding the noncompete provisions in Appellant's Operating Agreement, by themselves, give MMREM the power to control it. Appellant argues that no SBA regulation or OHA precedent supports finding affiliation solely on the basis of a noncompete agreement. It has been cited in size determinations as one of a number of factors supporting a finding of affiliation, but not as a sole ground. Further, OHA has not itself mentioned this factor when affirming the size determinations. Size Appeal of Sure-Way Systems, Inc., SBA No. SIZ-4972 (2008); Size Appeal of CDP Assoc., Inc., SBA No. SIZ-2410 (1986); Size Appeal of Clarklift of Nebraska, Inc., SBA No. SIZ-2679 (1987). (Appeal at 4-5.) Appellant further points to a recent SBA notice on Franchise Agreement review, providing that noncompete provisions are not excessive control. 79 Fed. Reg. 72748 (Dec. 8, 2014).

*6 Appellant also argues the noncompete provisions are not valid under Virginia law, and thus cannot be a basis for finding control. (Appeal at 6.) Even if the noncompetition provisions were enforceable, Appellant argues they do not give MMREM the power to control Appellant, because their lines of business are different. Appellant's revenues are from brokerage operations and MMREM does not provide these services. (Id. at 7.)

*6 Second, Appellant argues that the Area Office erred in finding MMREM controls Appellant under the totality of the circumstances. Appellant argues Mr. C. Ognek is 51% owner and has, as the Area Office itself found, “unconditional control of daily operations”. (Id. at 8, quoting Size Determination at 5.) The Martin Trust's 49% interest does not give MMREM the power to control Appellant. A small business is not controlled by its 49% owner, and to find otherwise would question the eligibility of a great many businesses. (Id. at 9, citing, e.g., Size Appeal of Alares, LLC, SBA No. SIZ-5471 (2013).) Further, Appellant maintains that its [XX]% of revenues received from MMREM indicate independence, not control. It is less than half of what is held to support a finding of affiliation. Conversely, it is similar to amounts held not to constitute affiliation. (Id. at 9-10, citing, e.g., Size Appeal of Alutiiq Education and Training, SBA No. SIZ-5371 (2012).)

*6 Appellant argues that it and MMREM have an ongoing business relationship that is not indicative of control, citing Size Appeal of NVE Inc., SBA No. SIZ-5638 (2015); Size Appeal of Carwell Products, Inc. SBA No. SIZ-5507 (2013). The fact that Appellant performed some work for MMREM under a contract is not indicative of control. The Area Office's statement that MMREM has the potential to provide Appellant a significant source of revenue is speculative and irrelevant because size issues are decided as of the date the challenged concern submits its proposal. (Id. at 10-11.)

*7 Appellant further asserts MMREM's subcontractor role does not provide it with control. Appellant denies it is performing the primary and vital requirements of the contract. See supra. (Id. at 12.). MMREM does not control Appellant because it receives a share of profit from Appellant's operations. Appellant argues there is no precedent holding an alleged affiliate has the power to control a challenged concern because it receives a share of the concern's profits consistent with its minority ownership share. (Id. at 12-13.) Further, Mr. C. Ognek has sole discretion as to all distributions. (Id. at 13, citing Operating Agreement § 4.5.1, Att. 2, at 11). The Area Office erred when finding MMREM was entitled to 50% of Appellant's profits, its share entitles it to no more than 49%. (Id. at 13, citing Operating Agreement § 4.2.).

*7 Appellant denies relying upon MMREM for bonding. The bonding occurred after the submission of proposals, and is thus irrelevant. Further, Appellant was solely responsible for paying the bond. The bank required all members of the firm to pledge their ownership interests to the bank. Mr. C. Ognek and the Martin Trust did so, and signed guarantees for their proportionate share of liability for the bond. (Appeal at 13-14.) Appellant reiterates its contention the noncompete provisions do not give MMREM control over it. (Id. at 14.) Appellant argues the Area Office's comment Appellant has access to MMREM's business infrastructure and potential contracts is conclusory and vague. (Id.)

*7 Third, Appellant asserts the Area Office erred in finding violation of the ostensible subcontractor rule. Appellant maintains MMREM is not performing the primary and vital requirements of the contract, and points out the Area Office found that Appellant has the experience to perform the contract and would perform the majority of the work. (Id. at 15-16, citing Size Determination at 8.) Appellant maintains the RFP does not define the Marketing Manager as a primary and vital function of the contract, because it does not reference this position at all; it is a construct of Appellant's proposed organizational structure. (Id. at 17.) The RFP discusses only three key personnel: Contract Manager, Project Manager, and Quality Control Manager/Third Party Quality Control Vendor. (Id. at 17, citing RFP at 21.) Further the CO only described this role as “a primary and vital part” of the contract, not “the primary and vital part”. (Id. at 17.)

*7 In sum, Appellant asserts the Area Office did not understand the Marketing Manager's role when it found that official was performing the primary and vital requirements of the contract. (Id. at 18-19.) Further, contract award was based on Appellant's revised proposal relying only upon Appellant's own past performance, and Appellant is solely responsible for interfacing with HUD. These factors also support a finding that there is no violation of the ostensible subcontractor rule. (Id. at 19, citing Size Appeal of Alutiiq Education and Training, LLC, SBA No. SIZ-5371 (2012) and Size Appeal of LOGMET, LLC, SBA No. SIZ-5155 (2010).)

*8 On July 25, 2016, Alpine responded in opposition to the appeal. First, Alpine asserts the Area Office correctly determined the noncompete provisions in Appellant's Operating Agreement give MMREM the power to control Appellant by barring it from independently pursuing any opportunity for which it wishes to compete. Limiting the type of work a business may pursue is the very essence of control. Nothing in SBA's statutes, regulations, or OHA case law prevents noncompete clauses from being found a basis for a finding of affiliation based upon power to control. These provisions are one-sided, unalterable by the majority member. (Alpine Response at 3-5.) Appellant argues these provisions can never be enough, on their own to find control, but can cite no authority for this bright-line rule. The OHA cases to which Appellant cites establish that noncompete provisions may support a finding of affiliation. (Id. at 4.)

*8 Further, the Area Office is not required to perform state-specific legal analysis of the enforceability in court of the noncompete provisions. While Appellant asserts these provisions are “likely” to be unenforceable, it is, in essence, tacitly admitting these provisions exceed the ordinary provisions found in the marketplace, and thus are not at arm's length. Further, OHA has found that a Letter of Intent, even if not legally binding, may be given present effect for the purpose of finding affiliation. (Id. at 7, citing Size Appeal of WRS Infrastructure & Environment, Inc., SBA No. SIZ-5007 (2008).)

*8 Alpine also counters as unconvincing Appellant's arguments that these provisions do not unduly restrict it because the majority of its receipts are from brokerage operations, which MMREM does not provide, and because Appellant lacks the resources to compete against MMREM for non-set aside procurements. Alpine points out Appellant concedes it competed against MMREM in Area 2A of the instant procurement. (Id. at 8, citing Appeal at 7, n.7.) MMREM had the power to veto Appellant's competition with it. The noncompete provisions also prevent Appellant from working on its own or in teaming agreement with any other company to compete against MMREM. (Id. at 8-9.) It was not clear error for the Area Office to find these broad provisions give MMREM the power to control Appellant.

*8 Second, Alpine maintains the Area Office correctly found that multiple indicia establish MMREM's power to control Appellant under the totality of the circumstances. Appellant attacks each factor individually, but the point of the test is whether, taken together, they establish that MMREM has the power to control Appellant. (Id. at 9-10.) These include the noncompete provisions discussed above, MMREM's accounting for [XX]% of Appellant's revenue, Appellant's dependence upon MMREM for subcontracting expertise and resources, past performance and bonding. (Id. at 10.) Alpine points to other factors which support a totality of the circumstances finding. Out of Appellant's 10 to 19 employees, 6 to 10 of them were located in MMREM offices, supporting MMREM under the MSA. (Id. at 11, citing Appellant's letter to S. Nirk at 4 (Feb. 24, 2016) and Form 355, Items 10a & b.) Further, the Matthew J. Martin Revocable Trust is one of Appellant's two directors, contradicting Appellant's contention it does not share officers or directors with MMREM, and gives MMREM power to control Appellant. (Id. at 12.)

*9 Alpine points out that reliance upon another firm for as much as 30-40% of revenue could be an indicia of affiliation, depending upon the facts. (Id. at 13-14, citing Size Appeal of Faison Office Products, LLC, SBA No. SIZ-4834 (2007).) It was not clear error for the Area Office to look at all the factors and conclude Appellant and MMREM are affiliated under the totality of the circumstances.

*9 Third, Alpine maintains the Area Office correctly found Appellant affiliated with MMREM under the ostensible subcontractor rule. The Area Office correctly determined that marketing is a vital part of the contract, and Appellant concedes it will subcontract this work to MMREM. (Id. at 15, citing RFP Amendment 11 § 5.2.) Appellant cannot deny that the Marketing Manager is involved in all vital aspects of contract performance. He or she will handle the vital marketing functions, and will work closely with other senior personnel on all of contract performance. (Id. at 16, citing Proposal at 12.) Appellant has subcontracted all of marketing to MMREM. (Id. at 17, citing Proposal at 9 § 2.1.1.) Because marketing is the primary and vital function of the contract, Appellant is affiliated with MMREM under the ostensible subcontractor rule.

*9 Sage filed its response in opposition to the appeal on July 25, 2016. First, Sage maintains the noncompete provisions in Appellant's Operating Agreement constitute negative control by MMREM over Appellant. (Sage Response at 3.) Further, the Operating Agreement, at § 5.5.4, provides that if a court finds overbroad any portion of the noncompete provisions, the parties authorized the court to give that provision the broadest scope possible. This evidences the importance of the noncompete provisions to the parties, and shows the parties intended these restrictions, which amount to control of Appellant by MMREM. (Id. at 4.) Sage points to noncompete provisions in the MSA, at § 10(g), and in the teaming agreement for a 2014 HUD procurement requires Appellant to bid with no other teams, with no equivalent restriction for MMREM. (Id.)

*9 Second, Sage argues the Area Office properly found Appellant affiliated with MMREM under the totality of the circumstances. Sage reviews the factors the Area Office discussed and argues these support a finding of affiliation. Sage looks especially to the large portion of the profits of this contract which will accrue to MMREM as both 49% subcontractor and 49% owner of Appellant. Sage argues Appellant's contention Mr. C. Ognek can prevent the distribution of profits is not accurate. The Operating Agreement, at § 4.2, requires distribution of cash sufficient to pay taxes, and Appellant does not state that this has occurred or is likely. (Id. at 6-7.) Sage argues, given the many ties between them, Appellant is unlikely to do anything contrary to MMREM's wishes. (Id.)

*10 Sage maintains MMREM's 49% ownership of Appellant and 49% subcontracting share of this procurement, when taken with all the other factors here, including its performance of the primary and vital requirements and its dependence on MMREM for [XX]% of its revenue, indicates control. (Id. at 7-8.) While an ongoing business relationship does not necessarily establish control, all the factors here, together with the MSA, the Operating Agreement's noncompete provisions, and Appellant's providing MMREM access to small business opportunities in exchange for the use of MMREM's infrastructure, all point to affiliation under the totality of the circumstances. (Id. at 9.)

*10 Sage challenges Appellant's reliance on Size Appeal of NVE, Inc., SBA No. SIZ-5638 (2015) because it was not a totality of the circumstances case. Similarly, Size Appeal of Carwell Products, Inc., SBA No. SIZ-5507 (2013) rejected an allegation of control where there limited ties between two firms, but acknowledged affiliation may be found where the interactions between the firms are suggestive of control. (Id.)

*10 Sage also maintains MMREM's guaranty of payment and performance bonds is an indication of control, citing Size Appeal of Blue Cord Constr., SBA No. SIZ-5007 (2009). Sage also takes issue with Appellant's characterization of the Area Office's finding Appellant can avail itself of MMREM's business infrastructure and contracts as vague and conclusory. Because the finding is based upon the language of the Operating Agreement, any vagueness is attributable to Appellant and its members, not the Area Office. (Id. at 10.)

*10 Sage points out Appellant shares office space and has employees co-located with MMREM, and the Master Service Agreement has the potential to provide significant revenues to Appellant. The Operating Agreement, at § 5.5.6, provides Appellant has a business relationship with MMREM with Appellant providing contracting services to MMREM and MMREM providing consulting and support services to Appellant. Appellant has access to business infrastructure and MMREM has access to small business opportunities. (Id.) All these provisions support a finding of affiliation under the totality of the circumstances of Appellant with MMREM. (Id.)

*10 Third, Sage maintains the Area Office correctly found Appellant and MMREM are affiliated for this procurement under the ostensible subcontractor rule. The plain reading of the RFP supports the Area Office's finding that marketing is the primary requirement, and MMREM is performing it. Sage further maintains Appellant has failed to rebut the Area Office finding that MMREM's guaranty for the required bonds supports a finding of unusual reliance upon the ostensible subcontractor. (Id. at 11.)

*11 On July 27, 2016, Appellant filed a Motion for Leave to Reply to the Reponses, together with its Reply. Appellant maintains its Reply is limited to rebutting factual errors and new issues raised by the Responses. Appellant discusses HUD's informing the Area Office the marketing manager function is a vital part of the contract, and reiterates its position on the noncompete provisions. Appellant further asserts it correctly refuted the Area Office's totality of circumstances analysis. Appellant further maintains it has no Board of Directors, and regrets its error in its Form 355.

*11 On July 28, 2016, Alpine filed a Response to Appellant's Reply. Alpine maintains the Reply is a backdoor attempt to raise arguments Appellant could have raised but did not in its appeal. Size Appeal of Orion Constr. Corp., SBA No. SIZ-5694 (2015). Appellant's own exhibit shows the ostensible subcontractor is involved in every one of the categories the CO identified as vital. Alpine urges Appellant's Motion be denied. On July 29, 2016, Sage also opposed Appellant's Motion for Leave to Reply.

*11 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).

*11 OHA's review is based upon the evidence in the record at the time the Area Office made its determination. As a result, evidence that was not previously presented to the Area Office is generally not admissible and will not be considered by OHA. E.g., Size Appeal of Maximum Demolition, Inc., SBA No. SIZ-5073, at 2 (2009) (“I cannot find error with the Area Office based on documents the Area Office was unable to review.”). New evidence may be admitted on appeal at the discretion of the administrative judge if “[a] motion is filed and served establishing good cause for the submission of such evidence.” 13 C.F.R. § 134.308(a). The proponent must demonstrate, however, that “the new evidence is relevant to the issues on appeal, does not unduly enlarge the issues, and clarifies the facts on the issues on appeal.” Size Appeal of Vista Eng'g Techs., LLC, SBA No. SIZ-5041, at 4 (2009). OHA “will not accept new evidence when the proponent unjustifiably fails to submit the material to the Area Office during the size review.” Size Appeal of Project Enhancement Corp., SBA No. SIZ-5604, at 9 (2014).

*12 Here, Appellant had failed to submit Mr. Ognek's June 27, 2016 Declaration and its other new evidence in response to the protest, even though all of that information was available at the time. Appellant offers no rationale for not submitting it at that time. Accordingly, I EXCLUDE Appellant's proffered new evidence.

*12 Further, I agree with Alpine and Sage that Appellant's Reply to the Responses merely attempts to raise anew issues addressed in its appeal. A reply to a response is generally not permitted. 13 C.F.R. § 134.309(d). Accordingly, I EXCLUDE Appellant's Reply, and Alpine's and Sage's responses to it, from the record.

*12 Under the regulations governing the size determination program, affiliation is based on whether one concern controls, or has the power to control, another concern. 13 C.F.R. § 121.103(a)(1). Here, the Area Office found Appellant and MMREM affiliated on three independent grounds: (1) negative control by MMREM in the form of the noncompetition restrictions, (2) the totality of the circumstances rule, and (3) the ostensible subcontractor rule.

*12 The Area Office's first ground for finding Appellant and MMREM affiliated is the noncompetition provisions of Appellant's Operating Agreement. These are extraordinarily broad provisions, putting very tight restrictions for a long period of time on Appellant and on Mr. C. Ognek's ability to compete in the marketplace. The Operating Agreement provides that Appellant may not, for a period of five years, engage in any enterprise in competition with MMREM without MMREM's permission. Mr. C. Ognek during his term as Manager and for three years thereafter, may not engage in any enterprise in competition with Appellant or MMREM. Further, the Operating Agreement further provides that if a court strikes down any part of these provisions, they are to be reformed as broadly as the court will allow. This makes clear the parties' intention that these provisions are important and are to be enforced as strictly and broadly as possible. MMREM has placed a serious restriction on Appellant and its Majority Member, limiting the business they can engage in and any new lines of business they may wish to enter. This goes far beyond that type of provision which merely exist to protect a minority owner's investment. Size Appeal of EA Engineering, Science and Technology, Inc., SBA No. SIZ-4973 (2008).

*12 Appellant argues correctly that such noncompetition provisions have only been one factor in finding control, citing Size Appeal of Sure-Way Systems, Inc., SBA No. SIZ-4972 (2008); Size Appeal of Clarklift of Nebraska, Inc., SBA No. SIZ-2679 (1987); and Size Appeal of CDP Associates, Inc., SBA No. SIZ-2410 (1986). In all these cases, a noncompetition provision was included among the factors which led to the finding of affiliation, which OHA affirmed.³ There is nothing in the regulations or in OHA case law that supports a finding of affiliation based solely upon a noncompetition agreement. Accordingly, I agree with Appellant and find that it was error for the Area Office to find affiliation solely on the grounds of the noncompetition provisions of the Operating Agreement.

*13 Nevertheless, the Area Office's second ground for finding Appellant affiliated with MMREM is the totality of the circumstances rule. Under this rule, SBA will consider the totality of the circumstances in determining whether affiliation exists, and may find affiliation even though no single factor is sufficient to constitute affiliation. 13 C.F.R. § 121.103(a)(5). Even if the evidence is insufficient to show affiliation under a single independent factor, SBA may still find concerns are affiliated where the interactions between the concerns are so suggestive of reliance as to render them affiliated. Size Appeal of Lance Bailey & Associates, Inc., SBA No. SIZ-4817 (2006). In making this determination, SBA must evaluate all factors and regulatory criteria in determining whether affiliation is present. Id. A review of the totality of the circumstances may lead an area office to conclude one concern has the power to control the other, and that both are affiliated. Id.

*13 Here, the Area Office found Appellant affiliated with MMREM under the totality of the circumstances, citing a number of factors. Appellant attempts to argue that each factor should not lead to a finding of affiliation. However, Appellant has missed the point of the totality of the circumstances rule. The issue is not whether any one of the Area Office's enumerated factors would support a finding of affiliation, but whether all of them, taken together, give MMREM the power to control, and thus be affiliated with, Appellant.

*13 The contractual relationship between the firms is one of the factors SBA considers in determining whether control exists. 13 C.F.R. § 121.103(a)(2). These relationships may include the firm's Operating Agreement itself. Size Appeal of M&O Sanitation, Inc., SBA No. SIZ-2020 (1984). Control may be negative as well as affirmative, that is, the power to block actions by the firm is a form of control which can lead to a finding of affiliation. 13 C.F.R. § 121.103(a)(3).

*13 First, there are the noncompetition provisions which, while supportive of affiliation themselves, have been found to be factors supporting a finding of affiliation under the totality of the circumstances. Size Appeal of Clarklift of Nebraska, Inc., SBA No. SIZ-2679 (1987); and Size Appeal of CDP Associates, Inc., SBA No. SIZ-2410 (1986). These provisions are broad and provide MMREM with a measure of negative control over Appellant. Appellant argues against the validity of the noncompetition provisions of its own Operating Agreement under Virginia law. Alpine and Sage argue that these provisions would be valid. Such arguments amount to nothing more than speculation as to how the Virginia courts would rule should MMREM decide the noncompetition provisions had been violated and sue to enforce them. It is not error for an area office to choose not to undertake a legal analysis to determine the validity of a provision of a challenged concern's Operating Agreement (or Articles, By-laws, etc.) when the document appears on its face to be valid and it has not been challenged in court. To impose such a requirement on an area office, given the time constraints associated with size determinations, would be unrealistic and unduly burdensome. Size Appeal of CoSTAR Services, Inc., SBA No. SIZ-5745 (2016).⁴ Accordingly, I find that the noncompetition provisions support a finding of affiliation between Appellant and MMREM under the totality of circumstances.

*14 Further, MMREM owns 49% of Appellant. In itself, this is, of course, not the basis for a finding of affiliation. But it is a substantial percentage, and is one more factor leading to a conclusion that MMREM has the power to control Appellant. A minority interest of over 40% has been held to be a factor supporting a finding of affiliation under the totality of the circumstances. Size Appeal of Faison Office Products, LLC, SBA No. SIZ-4834 (2007).

*14 The Master Services Agreement provides there will be an ongoing subcontracting relationship between the two firms, which produces about [XX]% of Appellant's revenues. OHA has held that reliance by a challenged concern upon its alleged affiliate for 30% of its revenue could support a finding of affiliation ““depending upon the facts.” Id. Here, the facts include the other extensive ties between Appellant and MMREM which support a finding of affiliation under the totality of the circumstances. Appellant's reliance on OHA case law to rebut this finding is misplaced. As Sage pointed out, Size Appeal of NVE, Inc., SBA No. SIZ-5638 (2015) was not a totality of the circumstances case. Similarly, Size Appeal of Carwell Products, Inc., SBA No. SIZ-5507 (2013) acknowledged affiliation may be found where the interactions between the firms are suggestive of control. Further, a number of Appellant's employees sharing office space with MMREM, also supports a finding of affiliation under the totality of the circumstances. Id. MMREM also assists with the required bonding.⁵

*14 The case of Size Appeal of Field Support Services, Inc., SBA No. SIZ-4176 (1995), is apposite here. There, OHA affirmed a finding of affiliation based on the totality of the circumstances between a challenged concern, FSSI, and its large alleged affiliate, where one of FSSI's owners also owned a minority interest in the large alleged affiliate and that large concern, as the subcontractor to FSSI of the subject procurement would perform over 30% of the work. Here, there is also significant cross-ownership in the form of MMREM's 49% ownership of Appellant and also significant subcontracting — 49% of the instant procurement — to the large alleged affiliate, as well. These factors support a finding of affiliation.

*14 Appellant and MMREM thus have a number of significant ties. MMREM has a significant minority interest in Appellant. Appellant and its President, Mr. C. Ognek, are subject to very broad and strict noncompete provisions with respect to MMREM, the two firms have an ongoing contractor/subcontractor relationship under the Master Services Agreement, which accounts for [XX]% of Appellant's revenue. Some of Appellant's employees are co-located with MMREM. The Area Office's conclusion that all these factors, taken together are so suggestive of reliance by Appellant upon MMREM was not clear error. Accordingly, I conclude that Area Office was correct in finding Appellant and MMREM affiliated under the totality of the circumstances. Because MMREM is itself a large firm, Appellant is thus other than small.

*15 The Area Office's third ground for finding affiliation is the ostensible subcontractor rule. However, because Appellant and MMREM are generally affiliated, I need not consider whether they are affiliated under the ostensible subcontractor rule. Accordingly, the Area Office did not err in finding Appellant and MMREM affiliated, and that Appellant was thus other than small.

*15 For the above reasons, the appeal is DENIED, and the size determination is AFFIRMED.

*15 This is the final decision of the Small Business Administration. 13 C.F.R. § 134.316(d).