The Armed Services Board of Contract Appeals (“ASBCA”) decided a case recently on how to calculate small business participation when the Navy allowed, through a modification, the exclusion of one facility in that calculation for the small business subcontracting plan. The case, BAE Systems Southeast Shipyard Mayport LLC, ASBCA No. 59876 (July 2017) visited the question on when the agency allows removal of a component from a calculation of the 40% requirement of the contract for small business subcontractor plan participation how that is done. The agency allowed the removal of a shipyard, the only one in the area who could perform the work and was a large business, from the small business requirement through a modification and took issue with how the contractor removed the costs associated with that removal from the overall 40% calculation. Ultimately, the ABSCA decided that the contractor must remove the calculation of participation of the facility and its small business subcontractors from both the entire calculation-both the numerator and the denominator-for the calculation to be correct. The contractor had wanted to remove the excluded entity just from the denominator (lowering the overall costs) but not from the numerator, which would skew the participation calculation. The ASBCA found that in order for the percentage to be accurate, both the numerator and the denominator must include the same categories of costs. In a percentage, the numerator is a subset of portion of the denominator, meaning that the numerator represent a part of a whole while the denominator represents the total number of the parts within the whole. (Decision at 8). “It also means the numerator cannot be greater than the denominator.” In short, if the excluded facility does not count for or against the contractor in the 40% calculation, then it and its small business subcontractors for that facility cannot be counted as a part of the contract. Otherwise, ASBCA decided, the resultant calculation would put the small business participation at 235%, “which defies logic.” (Decision at 9). ASBCA further found that the record was not developed enough for a correct calculation of the small business percentage participation, and , thus, summary judgement was precluded.
For access to the case, please click here: 59876 BAE Systems Southwest Shipyards Mayport LLC 7.13.17