The Small-Business Guide to Government Contracts: How to Comply with the Key Rules and Regulations and Avoid Terminated Agreements, Fines, or Worse

By Steven J. Koprince | Go to book overview

CHAPTER 3
SUBCONTRACTOR
OR OSTENSIBLE
SUBCONTRACTOR?

AS IF AVOIDING general affiliation wasn’t enough, small government contractors must also avoid ostensible subcontractor affiliation (also known as contract-specific affiliation), a special type of affiliation under which your small business can be found affiliated with its subcontractor for purposes of a single contract—even if you have no preexisting relationship with the subcontractor.

The government has focused on ostensible subcontractor affiliation in recent enforcement actions. In perhaps the most high-profile example, in late 2010, the SBA suspended GTSI Corporation—a computer technology company and top-100 federal contractor in revenues—from all government contracting for allegedly serving as an ostensible subcontractor to two small businesses. The SBA alleged that GTSI and the small companies were ineligible to receive set-aside contracts because GTSI, as a large subcontractor, was too heavily involved in the contract work (the SBA also suspended the small businesses in question). The federal courts have gotten into the act, as well: One district court struck down a subcontract agreement as “il

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