Did A Butterfly Just Flap Its Wings? The Potential Industry-Wide Consequences Of The SBA's Recent Suspension Of A Premier IT Contractor


There is a theory in physics that a seemingly isolated event in one part of the world can have a significant, downstream impact in another. They (the Physics set) call it the Butterfly Effect. It’s a central element of something called Chaos Theory (referenced by Jeff Goldblum in the original “Jurassic Park”), and you can see it in action in all walks of life. Even in Government contracting.

As you no doubt have heard by now, on Friday afternoon, without advance notice, the Small Business Administration suspended one of the country’s premier IT solutions and services providers. The suspension notice, which already has made its way around the Internet and back, alleges that the company’s conduct as a FirstSource subcontractor “would have made the prime contractor ineligible for award.” In other words, the SBA believes that subcontractor and the prime contractor (in this case, an Alaska Native Corporation, or “ANC”) were “affiliated,” thereby rendering the prime other than a Small Business.

Regardless of whether the allegations hold up under scrutiny or not, the SBA’s decision here, as a practical matter, could have a Butterfly Effect on industry generally.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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