AA Engineers & Associates, Inc., No. 3824 (September 13, 1993) Docket No. SIZ-93-6-1-64 UNITED STATES OF AMERICA SMALL BUSINESS ADMINISTRATION OFFICE OF HEARINGS AND APPEALS WASHINGTON, D.C. SIZE APPEAL OF: ) ) AA Engineers & Associates, Inc. ) ) Appellant ) ) ) Docket No. SIZ-93-6-1-64 8(a) Size Determination ) Case No. 06-SD-93-033 ) SBA Dallas Regional Office ) Dallas, Texas ) DIGEST When a concern receives 89 percent of its revenues during the twelve months prior to application for the 8(a) program from sales of products from a single concern, it is generally affiliated with its supplier through contractual relationships, pursuant to 13 CFR 121.401(k). DECISION September 13, 1993 WRIGHT, Administrative Judge, Presiding: Jurisdiction This appeal is resolved in accordance with 15 U.S.C. 632 et seq., and the regulations codified at 13 CFR Part 121. Issues Whether AA Engineers and Associates, Inc. was affiliated with Carder Cement Products, Inc. through contractual relationships. Whether Carder Cement Products, Inc. was an other-than-small concern. Facts On May 27, 1993, AA Engineers and Associates, Inc. (AA or Appellant) filed a timely 1/ appeal 2/ of an adverse Small Business Administration (SBA) Dallas Regional Office size determination dated April 29, 1993. This determination resulted from a request initiated by the Division of Program Certification and Eligibility (DPCE) of the Dallas Regional Office, pursuant to regulations codified at 13 CFR 121.1101 through 121.1103. The firm's application for assistance under the 8(a) program was made in May 13, 1992 and, pursuant to 13 CFR 121.1103(a), the Regional Office size determination was made as of that date. That determination concluded AA to be generally affiliated with Carder Concrete Products, Inc. (Carder) because ...89 percent of its revenues for the 12 month period prior to its application for the 8(a) program are attributable to sales of Carder Concrete products. Under the provisions of 13 CFR 121.401(k),... AA is generally affiliated with Carder Concrete since it is dependent upon Carder Concrete to such a degree that its economic viability would be in jeopardy without such contracts/business. Even absent a finding of general affiliation, AA is other than small for the purposes of being eligible for assistance under the section 8(a) program under SIC Code 5032 since its supplier is other than a small manufacturer. The sole owner listed on SBA Form 355, Siraj Adnan, President of the firm, which has four employees, indicated to the Regional Office that "AA deals in generally non-stock items that are built to specific designs, sizes or criteria appropriate and pertinent to each specific project [and]...are non-stockable either due to massive size, design or hazardous content...." The firm also distributes hazardous chemicals for Enhansco, a chemical manufacturer. In a letter to the Regional Office, cited in its determination, Mr. Adnan indicates the following: Evelyn Gross, AADD, MSB/COD recommended a combination of Codes 3084, 3272, and 5051 be applied in order to cover our business activities. In reference to Item #5 of your letter, our major source of revenue comes from selling engineered products or supplies, not engineering supplies to Heavy Construction contractors namely under SIC Code 1623. The products sold generally consist or reinforced concrete pipe-RCP, plastic pipe-PVC, ductile iron pipe-DIP, manholes, inlets, etc." Emphasis in Original. Based on this and other evidence, the Regional Office determined that AA is not the manufacturer of any of the products provided; neither of the construction materials nor of the chemicals...Since the company acknowledged in its original application that 50 percent of its revenues came from the wholesale distribution of construction materials, and since that is confirmed by the financial analysis of the company by the DPCE unit as noted in its evaluation statement that "it appears apparent from the financial statements that the applicant concern's primary revenue is earned as a wholesaler/dealer (91%), not engineering services (9t)." The restrictions for the products sold are for health and practical reasons and not intended to circumvent the Walsh-Healy Public Contracts Act. Thus, the Regional Office further reasoned, as follows: Since AA neither stocks the products sold nor makes regular and recurring sales to the general public from such stock, it cannot meet the "regular dealer" requirements of the Walsh-Healy Public Contracts Act. If it is not the manufacturer of such products and either a broker in the products of or is affiliated with each of those companies as an agent of the companies whose products it represents. As a broker, it would be ineligible for the 8(a) program. Alternatively [sic], if it is affiliated with its suppliers, it would exceed the applicable size standard at least with respect to those products provided by Carder Concrete. According to information in a Dun & Bradstreet report, Carder Concrete employs 200 people. However, it is a subsidiary of CRH PLC. Through the interest of the parent company, sister subsidiaries are Amcor, Inc., California Concrete Pipe Corporation, Hurst Concrete Products, Inc., Arizona Concrete Holdings, Inc., and Utility Vault Company, Inc.. CRH America, alone employs 800 and Old Castle, Inc. employs 3000. Even if AA could qualify as a regular dealer, it would not be a small business for the purpose of selling those concrete products, since, as a nonmanufacturer, it would have to provide the product of a small manufacturer. While no specific chemical products were listed in the file, the same would hold true with respect to such products. AA generally challenges the conclusions of the Regional Office. It specifically argues that [y]our information on the employment base for Carder is in error. Carder became an employee-owned company in January, 1993. It's [sic] employment base is 44 individuals and Enhansco has an employment base of less then [sic] 10 individuals. Both of these firms are small manufacturers. (see attached statements from these firms) Therefore, your decision that AA Engineers exceeds the size standard of 500 employees is wrong not to mention that you have not established any basis for affiliation. AA also disagrees that its economic viability would be in jeopardy without Carder and distinguishes between the taking of physical possession of Carder products and the taking of legal possession of them. Discussion The regulatory provision found at 13 CFR 121.401(k) indicates the following: Affiliation through contractual relationships. Affiliation generally arises where once [sic] concern is dependent upon another concern for contracts and business to such a degree that its economic viability would be in jeopardy without such contracts/business. Both the application of the regulatory provision found at 13 CFR 121.401(k) as a bar to Appellant's qualification and the Regional Office's conclusion that "AA is other than small for the purposes of being eligible for assistance under the section 8(a) program under SIC Code 5032 since its supplier is other than a small manufacturer," turn on the size status of Carder. Review of the information used by the Regional Office to conclude that Carder was other than a small concern demonstrates that the basis of its conclusion was a Dun and Bradstreet report issued in February 1993. In contrast, the Appellant now asserts, in its sworn pleading, that "Carder became an employee-owned company in January 1993," with an employee base of 44 individuals. This Office accords signed, sworn statements greater weight than information received from third-party financial reporting services, such as Dun and Bradstreet reports. See, Size Appeal of General Engineering Services. Inc., No. 3809 (1993). However, in the present case, the size determination has been correctly made, pursuant to 13 CFR 121.1103(a), as of May 13, 1992, the date of Appellant's application for assistance under the 8(a) program. Even if the evidence adduced by Appellant is accurate, it is inapposite to a determination as of the date of assistance application. Furthermore, based on information presented during the course of the size investigation and not disputed by AA in the present appeal, the Regional Office concluded that 89 percent of AA's revenues for the twelve months prior to the application for the 8(a) program are attributable to the sales of Carder Concrete Products, Inc.. Given this evidence, we conclude that the Regional Office correctly found AA generally affiliated with a large concern through contractual relationships. Accordingly, that determination should be affirmed. Conclusion The determination of the Regional Office is AFFIRMED; the relief sought in this appeal is DENIED. This constitutes the final decision of the Small Business Administration. See 13 CFR 121.1720(b). _________________________________ G. Stephen Wright (Presiding) Administrative Judge _________________________________ Gloria E. Blazsik (Concurring) Administrative Judge _________________________________ Michael S. Cole (Concurring) Administrative Judge _______________ 1/ Pursuant to 13 CFR 121.1705, this appeal was filed within thirty calendar days from receipt of the size determination which was dated April 29, 1993. 2/ During the time the record in this case remained open, this Office received five letters generally recommending AA or Mr. Adnan. These are immaterial to the resolution of this appeal.