Geo-Seis Helicopters, Inc., No. 3918 (May 10, 1994)
Docket No. SIZ-94-3-23-32


                    UNITED STATES OF AMERICA

                  SMALL BUSINESS ADMINISTRATION

                 OFFICE OF HEARINGS AND APPEALS

                        WASHINGTON, D.C.


SIZE APPEAL OF:                 )
                                )
Geo-Seis Helicopters, Inc.      )
                                )
     Appellant                  )
                                )
Re: Crescent Airways, Inc.      )  Docket No.  SIZ-94-3-23-32
                                )
Solicitation No.                )
R3-94-04                        )
U.S. Department of Agriculture  )
Forest Service                  )
Albuquerque, New Mexico         )


                             DIGEST

A corporation whose stock is publicly traded can qualify as a
small business concern for the purpose of bidding on procurements
set aside for small businesses, if the publicly traded
corporation, including its affiliates, meets the size standard
designated in the solicitation.

                            DECISION
                                
                          May 10, 1994
                                
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

Can a corporation whose stock is publicly traded, as opposed to a
corporation whose stock is privately held, qualify as a small
business concern for the purpose of bidding on procurements set
aside for small businesses, if the publicly traded corporation,
including its affiliates, meets the size standard designated in
the solicitation?

Facts

On December 23, 1993, the U.S. Department of Agriculture, Forest
Service, Albuquerque, New Mexico, issued the above-referenced
solicitation for certain helicopter services.  This was a total
small business, labor surplus, set aside, with a size standard of
1,500 employees or less under Standard Industrial Classification
(SIC) code 4522 (Air Transportation, Nonscheduled). Bids were due
on January 26, 1994.

By letter dated February 8, 1994, the Contracting Officer
forwarded a timely size protest from Geo-Seis Helicopters, Inc.
(Geo or Appellant), protesting the size status of Crescent
Airways, Inc. (CAI), to the Atlanta Regional Office of the Small
Business Administration (SBA or Agency) for a formal size
determination.  1/  In its protest, after naming several alleged
affiliates of CAI, Geo stated that:

     As of January 10, 1994 [prior to bid opening date] the above
     company or companies went "public", and is or are no longer
     "independently owned" and "operated" as required to meet the
     definition of SMALL BUSINESS as used in the above referenced
     solicitation, per Section I, Paragraph I.7 (a) definitions,
     under "Small business concern". 2/ [Footnote added.]

After notifying CAI of the protest, and receiving its response
thereto, the Regional Office issued a determination on March 9,
1994, which stated that CAI qualified as a small business concern
for the purpose of this procurement. 3/ Pertinent portions of
this determination are as follows:

     SBA Form 355 acknowledges affiliation with CAC [Crescent
     Airways Corporation], Mid-State/Executive Helicopters
     ("MSE"), DHI [Dooley Helicopters, Inc.], OHS [Omega
     Helicopter Services], Omega Helicopters, Inc. ("OHI"), and
     Citadel Capital Group, Inc. ("CCG"). CAI is 100% owned by
     CAC.  CAC is a publicly traded corporation, however, Mr.
     Jack Hereth owns the majority of the voting stock, 39.88%,
     or controlling interest in CAC.  Including the stock owned
     by Mr. Hereth's wife, sister and father, the Hereth family
     would control CAC with 42.9% of the voting stock.  There are
     other stockholders, but none of which own 10% or more.  Mr.
     Hereth is the Chairman of the Board, President and Chief
     Executive Officer of CAC and is the Chairman of the Board of
     CAI.

The Regional Office, after citing 13 CFR 121.401(e)(2), further
stated that:

     Based on the regulation, it is determined that CAI is
     controlled by Mr. Hereth and/or his family.... SBA Form 355
     shows the average employment of CAI and all of the
     affiliates is within the applicable size standard.
     
     In regard to the issue of independently owned and
     operated...the plain meaning of the Act [Small Business Act]
     is that the firm under consideration is not owned or
     controlled by a large business concern....
     
     ...It has been determined that CAI is deemed independently
     owned and operated, in that, the company is owned and
     operated by Mr. Hereth and/or the Hereth family and is not
     controlled, owned or operated by a large business concern.
     Therefore, CAI and its affiliates are determined to be a
     small business within the 1500 employee size criteria.

On March 18, 1994, GEO filed a timely Notice of Appeal with this
Office, which stated, in part, that: 4/

     Geo-Seis has not at any time raised a question as to whether
     the number of employees at Crescent Airways, Inc. and its
     affiliates violates the size standard.

     Instead, Geo-Seis argues that a publicly held corporation is not
     a small business concern because it is not independently owned
     and operated.
     
              *    *    *    *    *     *
                                
     According to its memorandum, the S.B.A. did not consider the
     difference between a private company, which is independently
     owned and operated, and a publicly owned company, which is owned
     and controlled by many investors.

Accordingly, the Appellant contends that 13 CFR 121.401(e)
applies to privately held companies only.  5/

CAI filed a response in opposition to the appeal on April 7,
1994.  Pertinent portions of this response are as follows:

     In Paragraph "4(h)" of the Appellant's Appeal, the Appellant
     states that 13 C.F.R. Part 121.401(e) applies to "privately
     held corporations." There are no provisions in 13 C.F.R. Par
     121.401(e) that could lead any reader to that conclusion.
     There are no provisions in any part of 121.401 that state
     that certain subparagraphs apply differently to a "public"
     company.  The concept of a "public" company is not defined
     in 121.101 through 121.1722, since the purpose of these
     regulations is to determine "size" based on either the
     number of employees, or the amount of receipts, not on the
     number of shareholders....
     
            *    *    *    *    *     *
                                
     In Paragraph "4(f)" the Appellant suggests that the shares are
     widely distributed and held by the "public" amount to 57% of the
     stock, and that these shareholders could "greatly influence" the
     decisions of management.  First, only 2,300,000 common shares
     (45.6% of total outstanding shares) are registered and held by
     many investors.  The management group consisting of four
     individuals own and control 2,850,000 (55.48) of the <f150,000
     outstanding shares.... The investors who hold 2,300,000 shares
     might "influence" management, but they definitely do not "control"
     the corporation.  The corporation is controlled by Jack Hereth, who
     owns and controls 2,206,720 shares, far more than any other investor.

Accordingly, CAI submits that the appeal is without merit and
should be denied. 6/

Discussion

The regulations governing this appeal are codified at 13 CFR Part
121, and this discussion will be limited accordingly. 13 CFR
121.1701. Pursuant to 13 CFR 121.403, a business concern eligible
for assistance as a small business is defined as being:

     (a)  ...a business entity organized for profit, with a place of
     business located in the United States and which makes a
     significant contribution to the U.S. economy through payment of
     taxes and/or use of American products, materials, and/or labor.
     
     (b)  Such business entity may be in the legal form of an
     individual proprietorship, partnership, corporation, joint
     venture, association, trust or a cooperative, except that where
     the form is a joint venture there can be no more than 49 percent
     participation by foreign business entities in the joint venture.
     
In addition, the regulation codified at 13 CFR 121.401(e)(2)
states that:

     A person is presumed to control or have the power to control
     a concern even though he or she owns, controls or has the
     power to control less than 50 percent of the concern's
     voting stock, if the block of stock he or she  owns,
     controls or has the power to control is large as compared
     with any other outstanding block of stock.

Control can also arise through the occupancy of director and/or
officer positions. 13 CFR 121.401(c)(2).

In this case, the initial and primary issue is whether a
corporation whose stock is publicly traded, as opposed to a
corporation whose stock is privately held, can qualify as a small
business concern for the purpose of bidding on procurements set
aside for small businesses, if the publicly traded corporation,
including its affiliates, meets the size standard designated in
the solicitation.

Neither 13 CFR 121.403, nor any other regulation codified at 13
CFR Part 121, makes a distinction between a publicly traded and a
privately held corporation, nor do we.  Further, we agree with
CAI that a concern's size is based either on its average annual
receipts or its number of employees, whichever is applicable,
rather than on how its stock is sold. 13 CFR 121.1601.

In addition, we agree with the Regional Office that Mr. Hereth
and his family control CAC, the publicly traded corporation and
parent company of CAI, and that the total number of employees of
CAC and CAI, plus other acknowledged affiliates, do not exceed
the size standard for this solicitation. 13 CFR 121.401(c)(2),
121.401(d), and 121.401(e)(2). Compare Size Appeal of Advanced
Composite Materials Corp., No. 3221 (November 29, 1989).

Conclusion

For the reasons stated herein, the Regional Office determination
that CAI qualifies as a small business concern for the purpose of
this procurement 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
                              
                              ________________________________
                              Gloria E. Blazsik (Concurring)
                              Administrative Judge
                              
                              _________________________________
                              G. Stephen Wright (Concurring)
                              Administrative Judge

___________________

1/   The Contracting Officer stated that the protest was received
     on the fourth business day after the January 26, 1994 bid
     opening.

2/   This provision in the solicitation states that "Small
     business concern," as used in this clause, means a concern,
     including its affiliates, that is independently owned and
     operated, not dominant in its field of operation in which it
     is bidding on Government contracts, and qualifies as a small
     business under the criteria and size standards in 13 CFR
     121.

3/   It is noted that the cover letter transmitting the size
     determination is dated March 9, 1994, whereas the size
     determination memorandum is dated March 10, 1994.

4/   It appears from the record that GEO received the Regional
     Office determination on March 14, 1994.

5/   The Appellant also appears to be alleging, for the first
     time on appeal, that CAI is not a "legal company." However,
     pursuant to i3 CFR 121.1701 and 121.1707, this issue will
     not be considered further.

6/   On May 6, 1994, the Appellant attempted to file a reply to
     CAI's response.  However, since the record had previously
     closed, this reply will not be considered further.