SIZE APPEAL OF: ALPHAPORT, INC., APPELLANT RE: BANNER QUALITY MANAGEMENT, INC.

*1 On October 17, 2016, the U.S. Small Business Administration (SBA) Office of Government Contracting, Area I (Area Office) issued Size Determination No. 01-2016-051, finding Banner Quality Management, Inc. (BQM) is an eligible small business for the procurement at issue.

*1 Alphaport, Inc. (Appellant), who previously protested BQM's size, contends the size determination is clearly erroneous, and requests that SBA's Office of Hearings and Appeals (OHA) reverse the size determination and find BQM to be an ineligible small business for the instant procurement. 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 March 24, 2016, the U.S. National Aeronautics and Space Administration (NASA) issued Request for Proposals (RFP) No. NNC16ZNA009R seeking a contractor to provide technical support to NASA's Safety Center (NSC). The Contracting Officer (CO) set the procurement aside for women-owned small businesses and designated North American Industry Classification System (NAICS) code 611430, Professional and Management Development Training, with a corresponding $11 million annual receipts size standard.

*1 According to the RFP, the contractor will provide Safety and Mission Assurance (SMA) training/professional development, discipline training and support, System for Administration Training and Education Resources for NASA (SATERN) administration, information dissemination and knowledge sharing including Safety and Mission Assurance (SMA) website content development, Agency-wide conference support, operational support of IT systems, and other related services. (RFP § 2.0) The contractor will provide and support training development, and maintenance and acquisition activities that support the NSC. (Id. § C.3.1.) The requirements include further duties to provide training and professional development support including web-based training, and technology research and benchmarking. Regarding SMA training, the contractor must “have the capability and subject matter expertise for the development, maintenance, and/or acquisition of courses primarily for Web-Based Training (WBT) for the Office of Safety and Mission Assurance (OSMA), the NSC and [SMA Technical Excellence Program (STEP)].” (Id. § C.3.1.1.). The contractor must have the capability to provide courses involving NASA policy and techniques on mishap investigations. The contractor will develop and deliver classroom teaching materials to NASA centers and off-site locations as required by NSC instructors. (Id.) In supporting NASA's Technical Excellence Office (TEO), the contractor must develop practitioner and job-focused training in: (i) System Safety; (ii) Reliability and Maintainability; (iii) Quality Engineering; (iv) Software Assurance; (v) Occupational Safety; and (vi) Aviation Safety. (Id.)

*2 The contractor must be capable of providing formal project management for the development of all SMA and discipline training, including course development and scheduling, while tracking budget information. These duties require the management of funding and administrating NSC's association memberships. (Id. § C.3.1.2.) The contractor will further administer SATERN. Other duties include SMA website content development, technical writing and graphics design, publishing reports, distributing electronic newsletters, providing monthly safety messages support, NASA mishap investigation report technical support, audits and assessments support, video production, and conference and event support. (Id. § C.3.2.)

*2 The RFP states, “[t]he contractor shall have the capability and expertise to provide the planning, design and management of IT systems that integrate computer hardware, software and communications technologies supporting hosting environment services for the NSC in accordance with federal and NASA requirements.” (Id. § C.3.3.1.) These duties require the contractor to provide computing services, data storage services, service monitoring and management of government furnished equipment. This includes providing surveillance and monitoring of the NSC IT systems 24 hours a day and 7 days a week. Software application and database development for NSC software applications and web publishing processes, as well as staffing the NSC Help Desk will also be required. (Id. §§ C.3.3.2-3.3.3.) Data mining, analysis and trending, project management and support, OSMA mishap investigation program manager support, establishing a task management system, business management and administration, and performance surveillance, are all tasks, with specific duties for each one, which the contractor must be able to perform.

*2 The RFP requires offerors to identify their key personnel. These are “defined as the group of individuals responsible for the management of the contract and includes the Contractor management representative at least one level above the Contractor's Project Manager.” (Id. § L, at 81.) Additionally, offerors must provide a detailed analysis on how they will perform the following four Sample Work Requirements: (i) SMA Training Course Development; (ii) Information Dissemination and Outreach; (iii) Application Development; and (iv) Data Analysis. (Id. at 83-5.)

*2 On August 17, 2016, the CO announced that BQM was the apparent successful offeror. On August 24, 2016, Appellant, the incumbent contractor, protested BQM's size. BQM is not an eligible small business, Appellant alleged, because it is affiliated with DB Consulting Group (DB) and Peerless Technologies (Peerless). Appellant contended BQM is affiliated with DB through a familial identity of interest. The relationship between BQM and DB includes shared employees, consultants, and common management. Additionally, BQM lacks the experience to perform the vital contract requirements, and thus is unusually reliant upon DB and Peerless in violation of the ostensible subcontractor rule. (Protest at 1.) BQM is also affiliated with DB and Peerless due to economic dependency. (Id. at 4.)

*3 On September 13, 2016, BQM responded to Appellant's allegations and submitted a copy of its proposal.

*3 The proposal states that [XXXX] and [XXXX] are BQM's two major subcontractors and two other concerns, [XXXX] and [XXXX] are its two minor subcontractors. (Proposal, Vol. I. at 1-2.) The Program Manager (PM) will be Mr. XXXX, who in turn reports to XXXX, the Phase-In Manager and BQM's Sr. VP for Federal Programs. [The PM] and [Phase-In Manager] are both BQM employees and are BQM's proposed Key Personnel. (Id. at 43.) [The PM] will have control over every part of the contract and will have the autonomy to make any decision relating to contract performance. (Id. at 2.) The group responsible for NASA IT Security Awareness Training Center (ITSATC) will be led by XXXX. (Id. at 5.) Further, there are three main [XXXX] that report directly to [XXXX]: (i) [XXXX]; (ii) [[XXXX]; and (iii) [XXXX]. (Id. at 25.) The NSC Outreach and Creative Services Manager will be filled by the incumbent [XXXX], and BQM intends to hire the incumbent [XXXX]; both report to [the PM] directly.

*3 The proposal further notes that at all times BQM will be performing at least 51% of the solicited work. [XXXX] and {XXXX] will each be responsible for approximately [XX]% of the total contract value. Specifically, [XXXX] will manage the [XXXX] areas. In contrast, “[XXXX] will concentrate in [XXXX], [[XXXX] and a variety of subject matter expertise.” (Id. at 39.) The proposal further notes that BQM intends to hire the incumbent personnel, except for the [[XXXX] and [XXXX], which will be staffed by [XXXX] and [XXXX], respectively. Thus, out of the 36 proposed positions, including PM and Subject Matter Expert, BQM will provide 18, with [XXXX] providing [XX] and [XXXX] also providing [[XX]. (Id. at 44-45.)

*3 BQM's proposal further contained documentation regarding its financial capability to perform the instant solicitation. BQM provided bank statements reflecting its cash flow, and further noted that it had an existing line of credit and was in the process of obtaining another line of credit specifically for supporting the contract at issue. (Id. Vol. II. at 28.) In addition, the proposal contained the total proposed cost for BQM, DB, and Peerless. Based on the total contract costs, including all options, BQM is responsible for [over 51%], Peerless for [XX]%, and DB for [XX]%. (Id. at 32.)

*3 Regarding past performance, the proposal listed two NASA contracts in which BQM was a subcontractor, two U.S. Air Force contracts in which Peerless was the prime contractor, and two NASA contracts in which DB was the prime contractor. (Id. Vol. III. at 2-16.)

*3 On October 17, 2016, the Area Office issued its size determination finding BQM is a small business concern for the procurement at issue. The Area Office determined BQM is not affiliated with either DB or Peerless.

*4 The Area Office found that BQM was incorporated in 2009, remained dormant until 2013, and is 100% owned by Mrs. Pura A. Stalnaker. DB's former COO was Mr. Richard Stalnaker, who owned 5% of DB and is Mrs. Stalnaker's husband. The Area Office states that Mr. Stalnaker dissolved his ownership interest in DB on August 8, 2016, the same day he resigned his position as COO of DB. (Size Determination, at 2.) However, BQM's size is determined as of April 25, 2016, the date it submitted its initial offer, including price. Thus, Mr. Stalnaker is deemed to have been an employee of DB as of the date for determining BQM's size. (Id.)

*4 According to the Area Office, DB is a privately owned business, with Mr. Gerald Boyd, Jr. and his father owning 95% of DB's interest. Because Mr. Boyd, Jr. and his family hold 95% of DB's interest, Mr. Stalnaker is deemed to not have control over DB, and thus no familial identity of interest affiliation exists between DB and BQM. (Id. at 3.) The Area Office further found that BQM and DB did not share employees. Only one individual, Ms. Michelle Zuckerman, a full-time employee of DB, was found to have performed human resources duties for BQM for approximately 6 hours a month. The Area Office reasoned that Ms. Zuckerman's role at both DB and BQM was not sufficient to “change the outcome of this size determination.” (Id. at 3.)

*4 Next, the Area Office notes that BQM became an active business in 2013, and since then BQM has received three contracts, two of which have been as subcontractors to DB and Peerless on their NASA contracts. The Area Office further noted that after receiving ownership information on Peerless, it does not find that DB and Peerless are affiliated with each other. (Id.) Regarding BQM's subcontract with DB, which lasted from October 2013 to May 31 2015, the Area Office found that the subcontract accounted for 83.8% of BQM's 2013 revenues, 99.8% of its 2014 revenues, and 41.1% of its 2015 revenues. (Id.)

*4 The Area Office, in considering whether BQM and DB were affiliated due to economic dependence and the 70% rule found at 13 C.F.R. § 121.103(f)(2), cited to OHA precedent in determining that BQM was not economically dependent upon DB. The Area Office stated that because BQM became active in 2013 and the contract with DB ended in June 2015, the facts here meet the exception to the 70% rule. (Id. at 4; citing Size Appeal of Cherokee National Healthcare Services, Inc., SBA No. SIZ-5343 (2012); and Size Appeal of SP Technologies, LLC, SBA No. SIZ-5319 (2012).) The Area Office further noted the revenue from the DB contract did not cover BQM's expenses, and that Ms. Stalnaker covered the difference by making loans to the company and returning her potential salary. (Id. at 4.) BQM is a subcontractor to Peerless for NASA's PACE IV contract. The subcontract began in June 2015 and BQM did not receive revenues from it until the latter half of 2015. The Area Office thus determined BQM is not economically dependent upon Peerless. (Id. at 5.)

*5 Lastly, the Area Office considered whether BQM is affiliated with DB or Peerless based on the ostensible subcontractor rule. The proposed key employees for the instant solicitation were both employees of BQM prior to BQM's proposal submission. Further, the staff BQM intends to hire will come from the incumbent contractor, a tactic OHA has deemed required by Executive Order, and not indicative of a violation of the ostensible subcontractor rule. (Id. at 5.) Further, the incumbent contractor is neither Peerless nor DB. The Area Office also found that BQM's proposal indicates that it has the relevant experience to perform the primary and vital contract requirements, as it performed similar tasks as a subcontractor in NASA's PACE III and PACE IV contracts. BQM's proposal further shows that BQM is providing [over 51]% of the proposed labor costs, and that it will perform [over 51]% of the total contract, with DB performing [XX]% and Peerless [XX]%. (Id. at 6.) The Area Office concluded that no violation of the ostensible subcontractor rule existed and found BQM to be an eligible small business.

*5 On November 1, 2016, Appellant filed the instant appeal. Appellant argues the Area Office erred in finding BQM is a small business for the instant procurement and requests that OHA reverse the size determination.

*5 Appellant argues the Area Office's analysis of the ostensible subcontractor failed to rely on BQM's lack of experience and corporate resources in performing the primary and vital contract requirements; and in recognizing that DB and Peerless fill the gaps in BQM's lack of capability, thus making BQM unusually reliant on both DB and Peerless. (Appeal, at 3.) Appellant contends the primary and vital contract requirements are professional and management development training, because this is the NAICS code assigned to the contract. (Id. at 4.) The Area Office failed to determine BQM would perform these requirements. Specifically, the Area Office found that BQM will manage the contract, thus is performing the primary and vital requirements. However, OHA has stated the prime contractor must not manage a subcontractor's performance; it must perform the primary and vital requirements. (Id. at 5; citing Size Appeal of Bell Pottinger Communications USA, LLC, SBA No. SIZ-5495 (2013).) Here, Appellant states that BQM lacks the experience to perform the primary and vital requirements because its website does not list training and development as services offered by BQM. Appellant further maintains that BQM may not be managing the contract. According to Appellant, BQM's proposed PM, XXXX, stated in his LinkedIn profile that he is DB's Information Technology Applications Manager. This illustrates BQM's unusual reliance on DB to perform the contract. (Id.)

*5 Next, Appellant asserts the fact that BQM will hire incumbent staff is relevant because BQM's “intent to hire [Appellant's] incumbent staff confirms that BQM currently lacks the relevant experience and skillsets to perform the primary and vital requirements.” (Id. at 6.) Appellant asserts the Area Office's finding BQM has been performing similar tasks as a subcontractor is inaccurate. (Id.) The past experience BQM relied on does not include professional and management development training as the principal purpose, and thus BQM's work as a subcontractor failed to give it the necessary experience to perform the instant solicitation. That DB and Peerless have experience in performing the primary and vital requirements is irrelevant, as the ostensible subcontractor rule requires the prime contractor to have the capacity to perform the primary and vital requirements. In addition, BQM's labor distribution does not provide which concern will be responsible for performing which contract requirement, and the size determination does not expand on the Area Office's calculation, specifically which contract requirements fall under BQM's [over 51]% share of the labor distribution. (Id. at 6-7.)

*6 Appellant further argues that BQM's undue reliance on DB and Peerless meets the four key factors previously considered by OHA in an ostensible subcontractor analysis. (Id. at 7; citing Size Appeal of Modus Operandi, Inc., SBA No. SIZ-5716 (2016); and Size Appeal of Professional Security Corp., SBA No. SIZ-5548 (2014).) Here, DB and Peerless are unable to compete for the instant solicitation because of their size. A large percentage of BQM's current employees have been employed by DB and Peerless, thus BQM is relying on personnel from its subcontractors to perform the contract at issue, including its proposed PM. Lastly, BQM does not have the requisite experience to perform the instant solicitation, and relied on the past experience of its subcontractors. Appellant also suggests that BQM relied financially on DB and Peerless in preparing the proposal. (Id. at 7-9.)

*6 Appellant next argues BQM is economically dependent on DB and Peerless because BQM does not qualify as a new entity. The Area Office noted that BQM was dormant until 2013, yet provided no discussion of any tax returns or documentation showing this to be true, while Appellant's Dun & Bradstreet Report shows BQM has been in business for over 5 years. (Id. at 10.) Appellant maintains that the new entity exception relied on by the Area Office was flawed because BQM subcontracted for DB in 2013 and Peerless in 2015, did not pursue other business opportunities in this period, and BQM “failed to show that the DB and Peerless subcontracts were insufficient to financially support the company's operations.” (Id.) The subcontracts BQM had with DB and Peerless were long-term contracts which established an extended business relationship between the concerns. However, OHA has previously applied the new entity exception when the business relationship in question involved short-term contracts for small amounts. Here, the contracts account for the great majority of BQM's revenues and, further, one of them was with DB, whose COO at the time is married to BQM's owner. (Id. at 11.)

*6 The cases relied on by the Area Office are inapposite here because they involved concerns that had terminated their business relationship, while here BQM's relationship with DB and Peerless continues. Conversely, the facts here align with those in Size Appeal of Veterans Tech, LLC, SBA No. SIZ-5763 (2013), in which the new entity exception was not applied because the challenged concern had been in existence for three years and derived most of their revenues from a concern in which it contracted for a long duration. (Id. at 12.) The Area Office thus failed to show how BQM would have remained viable without the subcontracts it received from DB and Peerless. Furthermore, the Area Office should have reviewed whether BQM's subcontract with Peerless violates the 70% rule, despite BQM not receiving revenue from Peerless until the second half of 2015. (Id. at 14.)

*7 In addition, Appellant argues that BQM and DB share common management. Appellant contends that Mr. Stalnaker's role as DB's COO allows him to exercise control over DB's operations. Given that Mr. Stalnaker was BQM's original incorporator, and that BQM was being run out of the Stalnaker's home, Appellant maintains that Mr. Stalnaker was thus “participating in the management of [[BQM]'s business, while also acting as an executive at DB.” (Id. at 15.) This conclusion is reflected in the fact that BQM received a subcontract from DB that lasted almost two years.

*7 Finally, Appellant argues the Area Office failed to consider that affiliation existed between BQM and DB, and Peerless to a smaller extent, based on the totality of the circumstances. According to Appellant, there are numerous circumstances present here that required a finding of affiliation. (Id. at 16.)

*7 On November 17, 2016, BQM responded to the appeal. BQM argues Appellant has not identified any clear errors of fact or law, thus OHA should affirm the size determination.

*7 BQM maintains the Area Office properly determined BQM will perform the contract's primary and vital requirements. Disputing Appellant's claim that the primary and vital contract requirements are professional and management development training, because that is the NAICS code associated with the RFP, BQM argues that Appellant's original protest claimed that the primary and vital requirements are the six areas of support in the SOW. (Response at 4.) Accordingly, Appellant is making a new argument on appeal, which OHA should not consider. BQM adds that OHA has rejected the notion that a NAICS code determines a contract's primary and vital requirement, as they provide guidance but are not dispositive. (Id. at 5; citing Size Appeal of Tinton Falls Lodging Realty, LLC, SBA No. SIZ-5546 (2014); and Size Appeal of BCS, Inc., SBA No. SIZ-5654 (2015).)

*7 BQM notes that its proposal expressly lays out BQM's ability to perform the work sought. BQM's involvement performing NASA's PACE III and IV contracts as a subcontractor provided the necessary experience to execute the work sought here. BQM adds that its proposal clearly states that BQM will perform [over51]% of the contract's total value, while DB will perform [XX]% and Peerless [XX]%. If measuring based on total labor costs, BQM will perform [over 51]%, with DB performing [XX]% and Peerless [XX]%. (Id. at 7.) The proposal further provides that two current BQM employees will be the key personnel tasked with managing the contract, [the PM] and [Phase-In Manager], thus supporting the Area Office's determination that BQM is responsible for contract management. The key personnel were both BQM employees at the time of proposal submission. BQM argues OHA has previously found that the prime contractor is performing the primary and vital requirements when it has the ability to perform the contract, performs the majority of the work, and manages the contract. (Id. at 8; citing Size Appeal of Giacare & Medtrust JV, LLC, SBA No. SIZ-5690 (2015).) Thus, contrary to Appellant's claims, contract management is a key factor in any analysis of a contract's primary and vital requirements.

*8 BQM maintains that in response to the original protest, it stated that it provides training and professional development and support, contrary to any assertions levied by Appellant. BQM hiring incumbent staffs, who are not employees of DB nor Peerless, is relevant here “because it reinforces the fact these personnel, who will be retained by [BQM] and become [BQM] employees, will be performing contract work.” (Id. at 12.) Further casting doubt over Appellant's arguments that BQM lacks experience because PACE III and IV do not provide the same services as those sought here, BQM asserts the cases relied on by Appellant do not support any argument that the Area Office erred in finding BQM has past experience that is transferable to the RFP requirements found here. Thus, the NAICS code associated with the PACE III and IV contracts have no bearing in this case. In addition, Appellant's claim that the labor distribution does not distinguish between the requirements performed by BQM, DB, and Peerless are without merit. BQM contends it provided the Area Office with a breakdown of the percentage of work each concern is responsible for, and a staffing plan that provides the labor distribution based on each area of the SOW. (Id. at 15.)

*8 Next, BQM disputes Appellant's allegations that BQM is unduly reliant on DB or Peerless based on the factors highlighted in Modus Operandi, Inc., SBA No. SIZ-5716 (2016). BQM explains that Modus Operandi, Inc., only applies when the alleged affiliate is the incumbent contractor, which is not the case here. (Id. at 16.) Here, BQM is not hiring the large majority of the workforce from Peerless or DB and any claim that BQM is employing a ‘significant percentage’ of former DB and Peerless employees is factually untrue, as three of the four individuals named by Appellant have never worked for DB or Peerless. One individual worked for BQM an average of six hours per month providing human resources functions. (Id. at 17.) Additionally, the factors in Modus Operandi, Inc., relied upon by Appellant, require that the proposed management must have served with the subcontractor in the incumbent contract. Given that Appellant is the incumbent contractor, this factor is not met either.

*8 BQM further disputes Appellant's contentions it is economically dependent upon Peerless or DB. According to BQM, the Area Office correctly found BQM's status as a dormant concern allowed it an exception to a mechanical application of the 70% rule. Despite Appellant's allegation that the Area Office did not properly analyze BQM's status as a new entity, Appellant failed to point to any authority that rebuts the Area Office's conclusion. In addition, BQM states that after its subcontract with DB terminated in June 2015, it entered into a subcontracting relationship with a different firm and was therefore no longer reliant upon DB for revenue. (Id. at 21-22.) Given that DB is BQM's subcontractor, BQM is clearly no longer economically reliant upon DB. The amount BQM received from its subcontract work with DB was $[XXXX], while its subcontract with Peerless resulted in $[XXXX] in billings. Thus, Appellant's reliance on OHA cases where the exception to the 70% rule was not applicable is misplaced, as those cases involved multi-million dollar contracts spanning several years. (Id. at 23.) Conversely, the facts in Size Appeal of Cherokee Nation Healthcare Services, Inc., SBA No. SIZ-5343 (2012) are analogous to those found here. BQM explains that similar to the challenged concern in Cherokee Nation Healthcare Services, Inc., BQM was dormant for four years before receiving two subcontracts from its alleged affiliate. BQM maintains OHA properly ruled that applying the 70% rule would be unjust and would penalize a startup concern. (Id. at 24.)

*9 BQM next challenges Appellant's claims that the Area Office had to consider whether BQM had pursued other economic opportunities beyond DB and Peerless before finding that the exception to the 70% rule applies. Appellant's reliance on Size Appeal of Olgoonik Solutions, LLC, SBA No. SIZ-5669 (2015) is erroneous. OHA noted that working to pursue other business opportunities as a new business may bolster the argument that the exception to the 70% should apply, but it is not a determining factor. (Id. at 26.) Regarding Peerless, BQM's tax returns for the applicable period clearly show that BQM was not reliant in Peerless for more than 70% of its revenues.

*9 Turning to Appellant's claims that BQM and DB are affiliated based on common management, BQM argues that Mr. Stalnaker sold his interest to his wife in 2013, and beyond being the initial incorporator, he has held no management position with BQM. Therefore, Mr. Stalnaker holds no position that may cause him to have control over BQM. (Id. at 30.) In addition, Appellant's allegations that Mr. Stalnaker's role as COO of DB gave him control over DB are also misplaced. The presumption that a COO may control a concern can be rebutted, which BQM did in its size protest response and which persuaded the Area Office. BQM provided a shareholder agreement that showed Mr. Stalnaker, DB's former COO and 5% shareholder, has no control over DB, given that DB's 75% owner and CEO has control based on DB's Stockholder Agreement. (Id. at 31.)

*9 Finally, BQM argues the Area Office did not err in finding BQM, DB and Peerless were not affiliated based on the totality of the circumstances. The circumstances Appellant alleged would warrant such a finding “are either “circumstances' that [Appellant] used as proof of other alleged bases of affiliation, which were properly considered by the Area Office, or are patently false.” (Id. at 32-33.) None of the issues raised by Appellant would cause the Area Office to find that either DB or Peerless has the power to control BQM.

*9 On November 23, 2016, after the close of record, Appellant filed a motion requesting leave to reply to BQM's Response. The motion contained Appellant's reply. A reply to a response is not permitted unless the Judge orders a reply to be filed and served. 13 C.F.R. § 134.206(e). Here, Appellant had ample opportunity to request a review of the Area Office file before BQM filed its response and could have requested a motion to extend the close of record in order to file a supplemental appeal. Appellant chose not to engage in any of these actions, and instead requested a Protective Order and leave to view the Area Office file after the record closed. Accordingly, I EXCLUDE Appellant's reply from the record.

*10 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).

*10 SBA regulations provide that when a subcontractor is actually performing the primary and vital requirements of the contract, or the prime contractor is unusually reliant upon the subcontractor, the two firms are affiliated for purposes of the procurement at issue. 13 C.F.R. § 121.103(h)(4). The area office, in determining whether there is a violation of the ostensible subcontractor rule, must examine all aspects of the relationship, including the terms of the proposal and any agreements, between the prime contractor and its subcontractor. (Id.; Size Appeal of C&C Int'l Computers and Consultants Inc., SBA No. SIZ-5082 (2009); and Size Appeal of Microwave Monolithics, Inc., SBA No. SIZ-4820 (2006).) OHA has previously stated that ostensible subcontractor inquiries 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). The purpose of the rule is to “prevent other than small firms from forming relationships with small firms to evade SBA's size requirements.” Size Appeal of Fischer Bus. Solutions, LLC, SBA No. SIZ-5075, at 4 (2009).

*10 Here, the primary and vital requirements are to manage the training development, maintenance and acquisition activities that support the NSC. Training will occur within a, number of fields, and the contractor must provide the management necessary for NASA to receive the appropriate training. Project management providing course development and scheduling, while tracking budget information is further required in order to fully perform this contract. There are other duties involving website content design, graphic design, and IT systems management that are required, but they all require that the prime contractor provide management of those duties as well.

*10 BQM's proposal provides a breakdown as to how the contract will be staffed in order to fill the positions necessary to perform the contract requirements. The proposal unequivocally states that a BQM employee will serve as PM, and another BQM employee will be in charge of the phase-in requirements. The proposal further states that the PM will report directly to BQM and no employee from either DB or Peerless will be allowed to make any decisions on behalf of BQM.

*11 OHA has found that when multiple subcontractors are present, a violation of the ostensible subcontractor rule can be found when the prime contractor will not provide the services that constitute the primary and vital requirements. Size Appeal of EarthCare Solutions, Inc., SBA No. SIZ-5183 (2011) (“Although Appellant continually emphasizes that all three subcontractors would provide emergency and rapid response services, what is important is that Appellant will not provide those services, which constitute the primary contract requirements.”) Here, of most importance is the fact that neither DB nor Peerless are performing a majority of the work, whether individually or together. Once again, the proposal specifically states that out of the 36 positions expected to be filled, 18 of those will be by BQM, with DB and Peerless providing [XX] each. The record thus very clearly shows that BQM is not relying on DB and Peerless in performing the contract's primary and vital requirements.

*11 Appellant disagrees. Appellant's arguments rest in BQM not having the experience to perform the primary and vital requirements. It appears that Appellant's arguments are based upon mere speculation, because they were made without having access to the proposal at issue here. Again, the proposal makes very clear that a majority of those performing the work sought will be employed by BQM. Appellant also takes issue with BQM proposing to hire a large contingent of the incumbent contractor's employees. Appellant points to OHA case law holding that this is an indicia of unusual reliance. Size Appeal of Modus Operandi, Inc. SBA No. SIZ-5716 (2016). However, in all those cases which found the hiring of an incumbent's employees to be an indicia of affiliation, the ostensible subcontractor was the incumbent, and it was the ostensible subcontractor's own employees who were being hired by the challenged concern. Modus Operandi, supra; Size Appeal of Professional Security Corp., SBA No. SIZ-5548 (2014); and Size Appeal of DoverStaffing, Inc., SBA No. SIZ-5300 (2011). Here, neither of the two firms charged with being an ostensible subcontractor is the incumbent, indeed, the incumbent is Appellant itself. Appellant can point to no authority which finds that the hiring by the challenged concern of the incumbent contractor's employees to be an indicia of unusual reliance, when the incumbent is not one of the concerns alleged to be the ostensible subcontractor.

*11 Further, OHA has repeatedly ruled that Executive Order 13,495 encourages the hiring of incumbent non-managerial personnel, and doing so does not lead to a violation of the ostensible subcontractor rule. Size Appeal of National Sourcing, Inc., SBA No. SIZ-5305, at 12 (2011) (“In light of widespread industry practice and the Executive Order, OHA has opined that the hiring of incumbent non-managerial personnel cannot be considered strong evidence of unusual reliance.”).

*12 Of significance in the case at hand is the fact that BQM will be providing the employees responsible for contract management. Further, contrary to Appellant's assertions, BQM's proposal does provide a breakdown as to which firm will perform which duties. In addition to the two key employees, BQM will perform the entire Training and Development portion of the contract, with [XX] employees. BQM will also provide [XX] of thirteen employees for Mishap Investigation and Knowledge Sharing, and [XX] of twelve employees for IT Systems Support, for total of 18 employees, to [XX] each for Peerless and DB. (Proposal at 45.) Appellant submits nothing to question the Area Office's calculation that BQM is performing the majority of the work. Thus, I find that BQM is unequivocally performing the contract's primary and vital requirements, performing a majority of the work sought, managing the contract, and according to the CO, has the ability to perform the contract.

*12 Next, I find Appellant's argument regarding BQM's ability to perform the contract meritless. Any analysis regarding a concern's experience and competency to perform a contract are matters of responsibility, and “responsibility determinations are beyond the jurisdiction of the size determination process.” Size Appeal of TCE Incorporated, SBA No. SIZ-5003, at 11 (2008). The Area Office was not required to determine whether BQM had the capability to perform the contract. That responsibility belongs to the CO, as he or she will determine whether the past experience relied on by the prime contractor meets the CO's expectations. Rather, the Area Office needed to determine whether BQM relied on the past performance of its subcontractors, instead of its own. Size Appeal of DoverStaffing, Inc., SBA No. SIZ-5300 (2011) (“When a prime contractor relies almost totally upon the experience of other firms to establish its relevant experience, that is probative evidence it is unusually reliant upon its subcontractor to perform the contract in question”.)

*12 The record is clear that the RFP requested the prime contractor to provide its own past experience, and allowed proposals to contain past experience regarding an offeror's proposed subcontractors. BQM has submitted a well put together proposal which makes use of two subcontractors, yet it did not rely on their past experience as a substitute for its own. Appellant however claims that this being BQM's first ever prime contract shows that it is relying on the past performance of its subcontractors. It appears that Appellant fails to understand that all companies must start somewhere, and providing subcontractor services is where BQM has started. A concern may rely upon its past experience as a subcontractor and be found not to be unusually reliant upon its large business subcontractor. Size Appeal of Human Learning Systems, LLC, SBA No. SIZ-5785 (2016). Penalizing a concern for not having prime contractor experience at the time of its first prime contractor award is not what the ostensible subcontractor rule is designed to do, nor has OHA taken that particular stand in the past. The rule's purpose is to prevent a prime contractor from obtaining a small business set aside when it is unduly reliant upon its large subcontractor to perform the work sought. The facts clearly show that is not the case here.

*13 Appellant argues that BQM is not a new entity and the Area Office erred in finding BQM was not affiliated with DB and Peerless due to having an identity of interest with those firms based upon BQM's economic dependence upon them.

*13 Again, I disagree with Appellant. Concerns may be found affiliated due to having an identity of interest based upon one concern being economically dependent upon the other. 13 C.F.R. § 121.103(f). Here, however, the Area Office correctly found that BQM's status as a dormant business for four years until obtaining its first subcontract with DB precludes a finding of economic dependence even though BQM received 70% or more of its revenues from DB. There is an exception to the rule that a firm is economically dependent upon another firm if it derives 70% or more of its revenues from another firm. OHA previously stated “that in a case such as this, where the challenged firm has only recently begun operations either initially or after a period of dormancy, and is dependent upon its alleged affiliate for only one small contract of short duration, which by itself could [not] sustain a business, that a finding of economic dependence is not warranted.” Size Appeal of Argus and Black, SBA No. SIZ-5204, at 6-7 (2011). Further, the rule “would unduly penalize start-up operations, which may have had the chance to obtain only one or two contracts at the time they face a size determination.” (Id.)² The Area Office correctly applied that exception.

*13 I cannot find BQM is economically dependent on DB based on its contract with DB. BQM had been dormant for a number of years and upon starting back up again, it contracted with DB to perform as a subcontractor. This subcontract ended in 2015 and BQM subsequently contracted with Peerless for work that commenced in late 2015. Finding BQM economically dependent upon DB or Peerless would result in the same injustice OHA attempted to avoid in Size Appeal of Argus and Black and Size Appeal of Cherokee Nation Healthcare Services, Inc. by finding an exception to the 70% rule. I thus conclude that the facts here do not support a finding that BQM is economically dependent upon either Peerless or DB because BQM had been dormant until it received a contract with DB. Although this contract accounted for over 70% of BQM's revenues, BQM has already moved on from DB and contracted with Peerless, and even further, has been awarded the instant solicitation as the prime contractor. To find economic dependence based upon a concern's first contract after a period of dormancy, with a concern which the challenged firm is no longer dependent upon, would unduly penalized the concern, and go against established OHA precedent. I must also note that Appellant's reliance on Size Appeal of Veterans Tech, LLC is grossly misplaced. In that situation, the challenged firm was not a startup or dormant concern. Rather, it had a long standing relationship with the affiliated concern resulting in millions of dollars in revenues. Those facts are significantly different than those in the instant case, and thus that decision is inapposite here.

*14 Concerns may be found affiliated based upon common management, where one or more officers, directors, managing members or partners who control the management of one concern also control the management of the other. 13 C.F.R. § 121.103(e). Here, Appellant argues that Mr. Stalnaker's position as COO of DB mandates a finding of affiliation between BQM and DB based on common management. Again, Appellant has failed to support any of its claims, and thus has failed to establish that the size determination is based upon clear error. Appellant's claims miss the most obvious observation: BQM does not have any common employees or management with DB.

*14 OHA has long held, however, that affiliation through common management “does not require total control of a concern, just critical influence or the ability to exercise substantive control over a concern's operations.” Size Appeal of Envtl. Quality Mgmt, Inc., SBANo. SIZ-5429, at 6 (2012); and Size Appeal of DMI Educational Training LLC, SBA No. SIZ-5275, at 6 (2011). Mr. Stalnaker's role within BQM ceased the moment he transferred his interest in BQM to his wife in 2013. He currently holds no position with BQM, and thus has no power to control it. Indeed, 13 C.F.R. § 121.103(e) indicates that affiliation may arise through “one or more” common officers or directors. Here, however, the two concerns have no common officers or directors. Thus, I must dismiss as meritless Appellant's claim that Mr. Stalnaker, who holds no interest in or any position with BQM, and does not have power to control DB, links common management between BQM and DB.

*14 Appellant 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).