Under the 13 CFR 125.1, joint ventures would not be affiliated if they pass on work to similarly situated subcontractors. (1) Business concerns owned in whole or substantial part by investment companies licensed, or development companies qualifying, under the Small Business Investment Act of 1958, as amended, are not considered affiliates of such investment companies or development companies. in the. (4) Business concerns which lease employees from concerns primarily engaged in leasing employees to other businesses or which enter into a co-employer arrangement with a Professional Employer Organization (PEO) are not affiliated with the leasing company or PEO solely on the basis of a leasing agreement. The affiliation rules described above are waived under the PPP program for any of the following 3 reasons: (1) any business concern with less than 500 employees that, as of the date on which the loan is funded, is assigned a North American Industry Classification System (NAICS) code beginning with the digits 72; (2) any business concern operating as a franchise that is assigned a franchise identifier code … 1 That confusion focused on whether to conduct “affiliation” analysis under Section in Title 13 CFR §121.301 (“Section 301(f)”) or §121.103 – the right answer is Section 301(f)). 1141j), are not considered affiliated with the cooperative by virtue of their membership in the cooperative. 1601 et seq. On June 10, year 2, XY submits an offer for Solicitation 2. (a) Special rules for ANCs. (i) Venture capital operating companies, as defined in the U.S. Department of Labor regulations found at 29 CFR 2510.3-101(d); (ii) Employee benefit or pension plans established and maintained by the Federal government or any state, or their political subdivisions, or any agency or instrumentality thereof, for the benefit of employees; (iii) Employee benefit or pension plans within the meaning of the Employee Retirement Income Security Act of 1974, as amended (29 U.S.C. (2) Except as provided in paragraph (h)(3) of this section, concerns submitting offers on a particular procurement or property sale as joint venturers are affiliated with each other with regard to the performance of that contract. INTRODUCTION As the Small Business Administration (SBA) and the Department of the Treasury roll out their emergency relief programs under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), guidance related […] (3) Options, convertible securities, and agreements that are subject to conditions precedent which are incapable of fulfillment, speculative, conjectural, or unenforceable under state or Federal law, or where the probability of the transaction (or exercise of the rights) occurring is shown to be extremely remote, are not given present effect. 632), and subject to SBA's affiliation rules under 13 CFR 121.301(f) unless specifically waived in the Act; or. Department of. The SBA has indicated that lenders are not required to make an independent determination regarding the applicability of affiliation rules under 13 CFR § 121.301 to borrowers. The applicable regulation states that affiliation may arise among two or more persons with an identity of interest. ��K��*��]?��ĤF�|� Those rules deem entities to be affiliates based on factors including stock ownership, overlapping management, and identity of interest. Section 121.103. On May 22, year 2, XY submits an offer for Solicitation 1. SBA affiliation and the importance of maintaining SBA size rules are also very important for small business loan programs and grant programs. (1) Parties to a joint venture are affiliates if any one of them seeks SBA financial assistance for use in connection with the joint venture. 13 CFR § 121.301(f)(l). • The waiver of the affiliation rules does not apply to Company Z, because Company Z is in the construction industry. (2) SBA considers factors such as ownership, management, previous relationships with or ties to another concern, and contractual relationships, in determining whether affiliation exists. in Employment and. § 121.103 How does SBA determine affiliation? You just learned about: Normal Affiliation Rules For more information, check out this related resource: Funding a Business (vi) Investment companies, as defined under the 1940 Act, which are not registered under the 1940 Act because they are beneficially owned by less than 100 persons, if the company's sales literature or organizational documents indicate that its principal purpose is investment in securities rather than the operation of commercial enterprises. This SBA regulation provides some general principles of affiliation but notes that for applicants in SBA’s Business Loan, Disaster Loan, and Surety Bond Guarantee Programs, the size standards and bases for affiliation are set forth in 13 CFR 121.301. within a. labor. Link to an amendment published at 85 FR 66178, Oct. 16, 2020. (ii) Two firms approved by SBA to be a mentor and protégé under § 125.9 of this chapter may joint venture as a small business for any Federal government prime contract or subcontract, provided the protégé qualifies as small for the size standard corresponding to the NAICS code assigned to the procurement, and the joint venture meets the requirements of §§ 124.513 (c) and (d), §§ 125.8(b) and (c), §§ 125.18(b)(2) and (3), §§ 126.616(c) and (d), or §§ 127.506(c) and (d) of this chapter, as appropriate. The SBA’s Second Interim Final Rule provides its reasoning for exempting faith-based organizations from the SBA’s affiliation rules and amends the text of 13 CFR 121.103(b) to account for the religious exemption. h�bbd``b`�@�� H��@��$!$�f`bd��``$���x�@� )
512(b)(12) if the organization generated unrelated business taxable income. %%EOF
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Small business concerns owned and controlled by ANCs are eligible for participation in the 8(a) program and must meet the eligibility criteria set forth in § 124.112 to the extent the criteria are not inconsistent with this section. April 3, 2020 1. For purposes of this paragraph (h), contract refers to prime contracts, and any subcontract in which the joint venture is treated as a similarly situated entity as the term is defined in part 125 of this chapter. But there is a catch: borrowers have to look at the 2019 version of § 121.301 ( see 81 Fed. Many issues have arisen related to the Small Business Administration’s (SBA) “affiliation rules” for determination of whether a small business is eligible for a loan under the Paycheck Protection Program (PPP), which is part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). Small Business Administration and SBA affiliation rules regarding identity of interest challenges can be complex and confusing when litigating in a small business size protest case. As such, an individual joint venture may be awarded more than three contracts without SBA finding general affiliation between the joint venture partners where the joint venture had received two or fewer contracts as of the date it submitted one or more additional offers which thereafter result in one or more additional contract awards. %PDF-1.5
(8) These exceptions to affiliation and any others set forth in § 121.702 apply for purposes of SBA's SBIR and STTR programs. • Myth 2: The SBA’s affiliation rules, especially the excep-tions, can be read in isolation. 23 0 obj
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financial. (5) For financial, management or technical assistance under the Small Business Investment Act of 1958, as amended, (an applicant is not affiliated with the investors listed in paragraphs (b)(5) (i) through (vi) of this section. (1) In determining size, SBA considers stock options, convertible securities, and agreements to merge (including agreements in principle) to have a present effect on the power to control a concern. The affiliation rules do not apply to faith-based organizations that would otherwise be qualified for PPP loans, but for affiliation. In addition, affiliation will not be found based upon the performance of common administrative services so long as adequate payment is provided for those services. § 121.103 The regulations are available online at Title 13 Part 121 of the Code of Federal Regulations (CFR). A. The individual parties to XY must form a new joint venture if they want to seek and be awarded additional contracts as a joint venture. That sounds simple enough, but – again – the SBA has very specific ideas on what it means to own or control. Borrowers must apply the affiliation rules that appear in 13 CFR 121.301(f), as set forth in the Second PPP Interim Final Rule (85 FR 20817). The agency shall evaluate the offer in the same manner as other offers with due consideration of the capabilities of the subcontractors. Of that 200, 195 are with Firm B, and the value of those contracts is greater than 70% of the revenue over the previous three years. Under SBA regulations, certain affiliation rules are considered when calculating the number of employees of a business to determine whether it meets the SBA size standards for a small business. § 121.103 How does SBA determine affiliation? 80a-1, et seq. https://www.youtube.com/user/watsontw8. For purposes of this paragraph (b)(10), the term “faith-based organization” includes, but is not limited to, any organization associated with a church or convention or association of churches within the meaning of 26 U.S.C. (4) An individual, concern or other entity that controls one or more other concerns cannot use options, convertible securities, or agreements to appear to terminate such control before actually doing so. This is consistent with SBA regulations in effect prior to the enactment of the CARES Act. These meas… See 85 FR 20817 (April 15, 2020). Without this level of protection, small businesses run the risk of losing government contracts through small business size protests due to affiliation. (i) Affiliation based on franchise and license agreements. All aspects of the relationship between the prime and subcontractor are considered, including, but not limited to, the terms of the proposal (such as contract management, technical responsibilities, and the percentage of subcontracted work), agreements between the prime and subcontractor (such as bonding assistance or the teaming agreement), and whether the subcontractor is the incumbent contractor and is ineligible to submit a proposal because it exceeds the applicable size standard for that solicitation. The most basic example of affiliation is Common Ownership.  The Affiliation Rule states that the detailed affiliation standards contained in 13 CFR 121.103 do not apply to PPP borrowers. Individuals or firms that have identical or substantially identical business or economic interests (such as family members, individuals or firms with common investments, or firms that are economically dependent through contractual or other relationships) may be treated as one party with such interests aggregated.
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