PilieroMazza represented a disappointed bidder in its challenge of an SBA size ruling.  In this case the Office of Hearing Appeals (OHA) determined that two parties to a nonbinding Letter of Intent (LOI) were affiliated at the time one of the companies submitted a proposal on a small business set-aside contract even though the proposal was submitted before the acquisition was finalized but after the LOI was executed.  The deal was consummated prior to award of the contract, and a size protest filed.

OHA held that the LOI constituted an “agreement in principle” between the parties and, thus, must be given present effect.  Because an agreement in principle was found as of the date the proposal was submitted, the two entities were deemed to be affiliated and the small business was deemed ineligible for the small business set-aside.  Upon appeal, the U.S. Court of Federal Claims upheld the OHA ruling.

This ruling is a departure from practitioner understanding of the present effect rule.  Small businesses need to keep this ruling in mind when considering mergers and acquisitions that will affect their size status.