Bunkoff General Contractors, Inc., No. 3804 (July 19, 1993) Docket No. SIZ-93-5-24-60 UNITED STATES OF AMERICA SMALL BUSINESS ADMINISTRATION OFFICE OF HEARINGS AND APPEALS WASHINGTON, D.C. SIZE APPEAL OF: ) ) Bunkoff General Contractors, Inc. ) ) Appellant ) Docket No. SIZ-93-5-24-60 ) Solicitation No. ) 15029D-CF ) General Electric Company ) Knolls Atomic Power Laboratory ) Schenectady, New York ) DIGEST Affiliation can arise under the identity of interest rule when two or more persons, and/or their respective companies, have common investments in more than one concern. When the President and sole owner of one concern is the President and 30 percent owner of a second firm, the two firms are affiliated under the common management rule. When making an affiliation determination, consideration may be given to the totality of the circumstances relative to each alleged affiliate. DECISION July 19, 1993 WHITE, Administrative Judge, Presiding: Jurisdiction This appeal of a size determination is decided pursuant to the Small Business Act of 1958, 15 U.S.C. 631 et seq., and the regulations codified at 13 CFR Part 121. Issue Is Bunkoff General Contractors, Inc. affiliated with Caldwell Associates, Taconic Capital Corp., Bucknell Real Estate and/or Lansing Lane Associates? Facts On December 31, 1992, General Electric Company (GE), Knolls Atomic Power Laboratory, Schenectady, New York, issued the above- referenced solicitation (IFB) for a subcontractor to provide certain "modifications to Building 75 at the Kesselring Site, West Milton, New York." 1/ This solicitation was restricted to small business concerns with $17.0 million or less in average annual receipts under Standard Industrial Classification (SIC) code 1541 (General Contractors-Industrial Buildings and Warehouses). Bids were due on February 1, 1993. The low bidder was Bunkoff General Contractors, Inc. (Bunkoff or Appellant). The second low bidder was LaCorte H.C.M. Corporation (LaCorte). By letter dated February 2, 1993, LaCorte protested the size status of Bunkoff, alleging that Bunkoff is affiliated with the following companies: R.S.J. Contractors [RSJ] Albany Mechanical [Albany] Shaker Rental Equipment [Shaker] Bucknell Real Estate (Partner Eddy Dugan) [Bucknell] LaCorte further alleged that the combined average annual receipts of Bunkoff and its affiliates exceed the size standard for this solicitation. On February 3, 1993, the Department of Energy (DOE) forwarded LaCorte's protest, along with GE's transmittal letter of the same date, to the Region 2 Size Specialist of the Small Business Administration (SBA or Region 2) for a formal size determination. SBA advised Bunkoff of the protest on February 11, 1993 and, after receiving its responses thereto, determined that Bunkoff was other than small for this procurement, and all future procurements with a size standard of $17.0 million or less in average annual receipts. Portions of this April 19, 1993 adverse determination are as follows: ... A timely response was received from Charles W. Czirr, Treasurer (of Bunkoff]. Data submitted included completed SBA Forms 355 and 1340; corporate documents and financial statements and/or Federal Income Tax Returns for 1990, 1991, and 1992 for the following nine concerns: Bunkoff General Contractors, Inc. (Bunkoff) R & J holdings Ltd. (R&J) R S J Construction Corp (RSJ) New York Affordable Housing Group (NYAHG) Lansing Lane Associates (Lansing) Oak Ridge Development Corp. (Oak) SUDE Development Corp. (SUDE) Karner Pines Executive Park (KP) Caldwell Associates (Caldwell) In addition statements explaining the status of these firms were ;rovided by Mr. Czirr and Bunkoff's attorney, Paul J. Goldman. 2/ [Footnote added.] Bunkoff's position is that they are not affiliated with the above mentioned firms, as: a) These are personal business ventures of Richard A. Bunkoff. b) The aggregation of the receipts of Richard A. Bunkoff's construction businesses with his real estate investments is inappropriate as they are engaged in other industries under different SIC codes. c) The revenue of the firms engaged in selling houses, which they categorize as capital assets, should be excluded from receipts under the exception of 13 CFR 121.402 (b) (2) .... Prior to addressing the status of Bunkoff with the other eight concerns cited above in its determination, and Bunkoff's relationship with other possible affiliates, including those named by LaCorte in its protest letter, SBA made the following prefatory remarks concerning the above-cited position taken by Bunkoff in this matter: Pursuant to 13 CFR 121.401, in determining the existence of affiliation, the appropriate factors to be considered are common ownership, management and common facilities, financial and contractual relationships and identity of interest of family members and persons with common interests in more than one concern. According to 13 CFR 121.402 referenced above, receipts are defined to include all revenue, accrued from whatever source. Therefore, the type of business in which the firm is engaged is clearly immaterial to a finding of affiliation. In addition, firms engaged in selling newly constructed homes are not considered to be selling their capital assets. Consequently, if such a firm is affiliated with the applicant, the revenue from this business is included in gross receipts. Further, pertinent corporate or partnership information submitted to Region 2 concerning Bunkoff and the eight noted concerns, which includes the names of the officers or partners, positions held, and percent of ownership, if any, is as follows: 1. Bunkoff Richard Bunkoff President 100% Delores Bunkoff 3/ Secretary 2. R&J Richard Bunkoff Secretary/Treasurer 100% Delores Bunkoff President Richard Bunkoff and R&J guarantee all bonding for Bunkoff. 3. RSJ Richard Bunkoff President Delores Bunkoff Secretary/Treasurer RSJ is a subsidiary of R&J, which is 100 percent owned by Richard Bunkoff. 4. NYAHG Richard Bunkoff President 33 1/3% Duncan Barrett Vice President 33 1/3% Edward Duggan Secretary/Treasurer 33 1/3% 5. Lansing 4/ Richard Bunkoff President 30% Donald Ellett, Jr. Secretary 40% Ronald Shelli Treasurer 30% 6. Oak Richard Bunkoff President 50% Edward Duggan Secretary/Treasurer 50% 7. SUDE Richard Bunkoff President 50% Edward Duggan Secretary/Treasurer 50% 8. KP Richard Bunkoff President 50% 9. Caldwell 5/ Richard Bunkoff Partner 25% Duncan Barrett Partner 25% Based on the above corporate and partnership data, SBA concluded that: The ... eight firms are affiliated with Bunkoff by identity of interest, ...family relationships, common management and ownership through the following officers, stockholders and management: Richard A. Bunkoff .... Delores Bunkoff .... Edward C. Duggan and Duncan Barrett. During the course of its investigation, Region 2 also considered other possible affiliates of Bunkoff, and included the following additional firms in its size determination: Taconic capital Corp. (Taconic) School 10 Associates (School 10) Hudson Restoration Group I (Hudson I) Hudson Restoration Group II (Hudson II) Hudson restoration Group III (Hudson III) Comparable information submitted an behalf of Bunkoff for these five concerns, numbered 10 through 14, respectively, plus pertinent SBA comments, are as follows: 10. Taconic 6/ Duncan Barrett President 100% "We find Bunkoff to be affiliated with Taconic ... through an identity of interest. Duncan Barrett is President and sole owner of Taconic. Mr. Barrett has common investments with Richard A. Bunkoff in the following firms: NYAHG - each person owns 1/3 of the firm and are corporate officers Caldwell each person is reflected as 25% partners School 10 Mr. Barrett is reflected as a 30% partner and Richard A. Bunkoff controls 30% of the partnership by a separate holding through R&J" 11. School 10 R&J Partner 30% Duncan Barrett Partner 30% Bucknell Partner 30% NYAHC Partner 9% "The limited partnership of School 10 ... is affiliated through the common ownership of the partners: R&J- 30%;Bucknell...-30*; Duncan Barrett-30% and NYAHG 9% .... " 12. Hudson I R&J Partner 95% Steven and Mary Ann Gazolla Partners 5% 13. Hudson II Richard Bunkoff Partner 25% Delores Bunkoff Partner 25% Steven Gazolla Partner 25% Mary Ann Gazolla Partner 25% 14. Hudson III Richard Bunkoff Partner 25% Delores Bunkoff Partner 24% Steven Gazolla Partner 26% Mary Ann Gazolla Partner 24% Region 2 further determined that, based on the above holdings, the Hudson Restoration Group 1, 11 and III partnerships were also affiliated with Bunkoff through common ownership and management. Of the four firms mentioned in the protest letter, Region 2 determined that RSJ and Bucknell were affiliated with Bunkoff. RSJ has already been listed and discussed (No. 3), and comparable information submitted on behalf of Bunkoff for Bucknell, along with pertinent SBA comments, are as follows: 15. Bucknell Edward Duggan President 100% "Bucknell is affiliated with Bunkoff through an identity of interest and contractual relations. Edward Duggan is President and 100% owner of Bucknell and a 50% co-owner with Richard A. Bunkoff in Oak and SUDE. Additionally, Mr. Duggan and Richard A. Bunkoff each hold 1/3 share in NYAHG; ... and 30% of School 10 [Edward Duggan's interest in School 10 is through Bucknell] ...." It also appears that Bucknell is a subcontractor to Bunkoff on the Oak project. It further appears that Bucknell contracts directly with Oak as Note 2 to Oak's financial statements, dated December 31, 1991 and December 31, 1992, reflects an accounts payable to Bucknell for completed construction work in addition, this same Note 2 on both statements shows that Oak has a loan payable to both SUDE and to Bucknell. Note 3 to SUDE's December 31, 1992 financial statements reflects an account receivable from Bucknell, and Note 3 to SUDE's December 31, 1991 statement shows a mortgage receivable from Bucknell. In conclusion, Region 2 stated in its April 19, 1993 determination that: Based on the evidence the firm has provided to this office, SBA concludes the above mentioned fourteen firms have sufficient involvement with Bunkoff that rises to a level of affiliation. The totality of circumstances ... were ... considered in our finding. The average annual receipts are calculated from the total gross receipts reduced by intercompany transactions as reported by Mr. Czirr. Small Business Administration - Region 2 finds Bunkoff General Contractors, Inc. to be other than a small business for this procurement, and all future procurements with a size standard of $17.0 million average annual receipts. On May 20, 1993, Bunkoff filed a Notice of Appeal with this Office which stated, in part, that: 7/ Bunkoff General Contractors, Inc. ("Bunkoff") strongly disagrees with this [Region 2] determination our disagreement centers on the inclusion of two groups of companies as affiliates of Bunkoff.... The first group addressed pertains to Bucknell and Taconic. Bunkoff argued that Edward Duggan is the sole owner and President of Bucknell and that, during the past three years, less than 20 percent of Bunkoff's and Bucknell's annual gross receipts could be attributed to the contractual relationship between the two companies. 8/ As for Taconic, Bunkoff stated that it has no ownership interest in nor any management position with Taconic, and that there have been no intercompany loans, common bonding, guarantees, or sharing of equipment and facilities by these two concerns. The second group addressed by Bunkoff on appeal involves Lansing and Caldwell. Its statement concerning Lansing is as follows: I own 30% of the stock of Lansing and am a passive investor for tax purposes in this company. The other partners, Donald A. Ellett, Jr. owns 40% and Ronald S. Shelli owns 30%. Together their ownership of the company totals 70%. I do not have a controlling interest in Lansing. Mr. Ellett and Mr. Shelli are not officers, directors, key employees, or co-investors in any other company or business venture that I am currently or formerly involved in. Therefore, I am not in the position to control Lansing and can in no way use Lansing to benefit Bunkoff. It is noted for the record, however, that, although it appears from the statement made by Bunkoff that Lansing is a partnership, each of the three tax returns submitted for Lansing is entitled "U.S. Income Tax Return for an S Corporation." Further, the supporting documentation for Bunkoff's SBA Form 355 reflects that Bunkoff also stated in its appeal that "we requested financial statements from Bucknell for the purpose of disclosing Bucknell's annual receipts and our request was denied. instead we were provided with only a schedule summarizing Bucknell's annual receipts." It is noted for the record that this schedule reflects revenue for work performed by Bucknell for both NYAHG is and Oak. Richard Bunkoff is Lansing's President, Donald Ellett is its Secretary, and Ronald Shelli is its Treasurer. In addition, all three tax returns show Bunkoffts/RSJ's mailing address. In reference to Caldwell, Bunkoff acknowledged that Richard Bunkoff and Duncan Barrett each owned a 25 percent partnership interest in Caldwell and that Duncan Barrett was involved with Richard Bunkoff in KYAHG and School 10. However, Bunkoff contends that this relationship is insufficient to support a finding that it is affiliated with Caldwell. In conclusion, Bunkoff reiterated its belief that these four firms should be excluded from Region 2's affiliation determination, and requested a hearing to resolve these issues on appeal. Discussion The first issue to be addressed is Bunkoff's request for an oral hearing. Pursuant to the regulation codified at 13 CFR 121.1714(a), the Presiding Judge: ... generally decides the appeal upon the written record without an oral hearing or oral argument. An oral hearing shall be held only when the Presiding Judge determines, upon examination of the docket file and consideration of such additional facts as may be acquired on notice to the parties, that there is a genuine dispute as to any material fact of decisional significance which cannot be resolved except by confrontation of witnesses. In this case, a review of the record demonstrates that there is no genuine dispute as to any material fact of decisional significance that cannot be resolved except by confrontation of witnesses. Therefore, the Appellant's request for an oral hearing is denied. In addition, 13 CFR 121.1706(a)(4) and (a)(5) requires that the Notice of Appeal include a full and specific statement of the reasons why the size determination appealed is alleged to be erroneous, and that arguments be presented in support of such allegations. The Notice of Appeal before us is deemed to meet these requirements only as to that portion of Region 2's determination that found the Appellant to be affiliated with Bucknell, Taconic, Lansing and Caldwell. Accordingly, the only remaining issue to be decided on appeal is the issue of Appellant's affiliation with these four named concerns. The regulation at 13 CFR 121.401 will primarily govern the resolution of this affiliation issue. Portions of this regulation are as follows: (a) General rule. (1) ... size determinations shall include the applicant concern and all its domestic and foreign affiliates. Moreover, all affiliates, regardless of whether organized for profit, must be included. (3) In determining whether affiliation exists, consideration shall be given to all appropriate factors, including common ownership, common management, and contractual relations. (d) Identity of interest between and among persons as an affiliation determinant. Affiliation can arise between or among two or more persons with an identity of interest, such as members of the same family or persons with common investments in more than one concern. In determining who controls or has the power to control a concern, persons with an identity of interest may be treated as though they were one person. (h) Affiliation through common management. Affiliation generally arises where officers, directors, or key employees serve as the majority or otherwise as the controlling element of the board of directors and/or the management of another concern. (i) Affiliation through common facilities. Affiliation generally arises where one concern shares office space and/or employees and/or other facilities with another concern, particularly where such concerns are in the same or related industry or field of operation, or where such concerns were formerly affiliated. In addition, we shall also consider the totality of the circumstances relative to each of the four firms in question. Size Appeal of Hook Pilots, Inc., No. 3763 (April 9, 1993). Caldwell: Richard Bunkoff, the President and sole owner of the Appellant, and Duncan Barrett, the President and sole owner of Taconic, each own a 25 percent partnership interest in Caldwell. Further, Duncan Barrett and Richard Bunkoff each own 33 1/3 percent of NYAHG, with Richard Bunkoff serving as its President, and Duncan Barrett serving as its Vice President. R&J, which is wholly owned by Richard Bunkoff, who also serves as its Secretary/Treasurer, owns 30 percent of School 10; another 30 percent is owned by Duncan Barrett; and another nine percent is owned by NYAHG. R&J, which is wholly owned by Richard Bunkoff, holds a note from Caldwell. RSJ, a subsidiary of R&J, shows a completed contract with Caldwell during 1990. In addition, the Appellant reported a substantial amount of revenue from Caldwell during the past three years. Taconic: Taconic is wholly owned by its President, Duncan Barrett. Duncan Barrett and Richard Bunkoff, the President and sole owner of the Appellant, each own 33 1/3 percent of NYAHG, with Richard Bunkoff serving as its President, and Duncan Barrett serving as its Vice President. Further, Duncan Barrett and Richard Bunkoff each own a 25 percent partnership interest in Caldwell. R&J, which is wholly owned by Richard Bunkoff, who also serves as its Secretary/Treasurer, owns 30 percent of School 10; another 30 percent is owned by Duncan Barrett; and another nine percent is owned by NYAHG. In addition, Taconic's tax returns show the Appellant's mailing address. Bucknell: Bucknell is wholly owned by its President, Edward Duggan. Edward Duggan and Richard Bunkoff, the President and sole owner of the Appellant, each own 50 percent of Oak and SUDE, with Richard Bunkoff serving as President, and Edward Duggan serving as Secretary/Treasurer of these two concerns. Further, Edward Duggan and Richard Bunkoff each own 33 1/3 percent of NYAHG, with Richard Bunkoff serving as its President, and Edward Duggan serving as its Secretary/Treasurer as well. R&J, which is wholly owned by Richard Bunkoff, who also serves as its Secretary/Treasurer, owns 30 percent of School 10; another 30 percent is owned by Bucknell; and another nine percent is owned by NYAHG. According to the Appellant, Bucknell is also a subcontractor to Bunkoff on the Oak project. It further appears that Bucknell contracts directly with Oak, as Oak's financial statements reflect accounts payable to Bucknell for completed construction work; Bucknell's schedule of receipts also reflects revenue for work performed for NYAHG; Oak also has a loan payable to both SUDE and Bucknell; and SUDE shows an account receivable and a mortgage receivable from Bucknell. Lansing: Richard Bunkoff, the President and sole owner of the Appellant, owns 30 percent of Lansing and serves as its President. Further, Lansing's tax returns show the Appellant's mailing address. In addition, R&J, which is wholly owned by Richard Bunkoff, holds a note receivable from Lansing. The Appellant also reported a substantial amount of revenue from Lansing during the applicable three year period. Determination: Due to the common investments of Richard Bunkoff, Duncan Barrett, Edward Duggan, and/or their respective companies in the other noted concerns, it is the determination of this Office that the Appellant is affiliated with Caldwell, Taconic, and Bucknell under the identity of interest rule. As for Lansing, we also find that the Appellant and Lansing are affiliated pursuant to the common management rule. Further, when we consider the financial, contractual, and other stated interrelationships, the four firms are deemed to be affiliated with the Appellant under the totality of circumstances relative to each of these alleged affiliates. Conclusion For the reasons stated herein, the Region 2 size determination is AFFIRMED. This constitutes the final decision of the Small Business Administration. See 13 CFR 121.1720(a), (b), and (c). ________________________________ Elwin H. White (Presiding) Administrative Judge ________________________________ Michael S. Cole (Concurring) Administrative Judge ________________________________ G. Stephen Wright (Concurring) Administrative Judge _______________ 1/ GE is the management and operating contractor of the U. S. Department of Energy, Schenectady Naval Reactors Office, Schenectady, New York, under Prime Contract No. DE-AC12- 76SNO0052. This subcontract covers construction/renovation work to be performed at this facility. 2/ Mr. Czirr also addressed the specific allegations of affiliation contained in LaCorte's protest letter. 3/ Delores Bunkoff is the wife of Richard Bunkoff. 4/ Note 4 of R&J's consolidated financial statements for 1990 and 1991 reflects a mortgage receivable from Lansing. In addition, the Appellant shows on its Schedule of Annual receipts a substantial amount of revenue from Lansing during the applicable three year period. 5/ Note 4 of R&J's consolidated financial statements for 1990 and 1991 reflects a note receivable from Caldwell. In addition, RSJ, a subsidiary of R&J, which is 100 percent owned by Richard Bunkoff, shows a completed contract with Caldwell during 1990. Further, the Appellant shows on its Schedule of Annual Receipts a substantial amount of revenue from Caldwell during each of the past three years. 6/ Taconic's tax returns for 1990 and 1991 show the Appellant's mailing address (the 1992 tax returns were under extension). 7/ Bunkoff stated that it received the April 19, 1993 Region 2 size determination on April 21, 1993. Therefore, this appeal is timely under the 30-day rule, and will apply to future procurements only. 13 CFR 121.1705. 8/ Apparently Bunkoff is the prime contractor for Oak, as Bunkoff stated in its appeal that "Bucknell is a subcontractor to Bunkoff on this project."