The Small-Business Loophole
The Small-Business Loophole: How Capital Networks Harvest “Set-Aside” Procurement —And Why the Paper Trail Keeps Breaking
A 2019 SBA size appeal over a Defense Information Systems Agency contract put a Sagewind Capital–owned contractor at the center of a familiar fight: who qualifies as “small,” who gets counted as “small,” and how taxpayer money can flow through consolidation systems without triggering a clean, public alarm.
What this is, in one screen
The trigger
A small-business set-aside award → a size protest → dismissal on specificity → no merits ruling → the system moves on.
The pattern
Capital-backed contractors accumulate acquisitions and vehicles while “small” status can remain operationally useful because size gets measured at specific moments and later growth often doesn’t re-open the door.
The live example
DHA’s UBO & DQMC support contract awarded as a Woman-Owned Small Business set-aside to “Team Intellect,” described publicly as worth up to $35M—with Tria noting it has supported that DHA office since 2004.
A contract award, a protest, and the question the system keeps dodging
In June 2019, the Defense Information Systems Agency’s contracting arm awarded a small-business set-aside contract— DISN Optical Network Enhancement Link 40—to By Light Professional IT Services, LLC. The procurement used NAICS 517311 and a corresponding 1,500-employee size standard, with award to the lowest-price technically acceptable offeror.
Three days later, a competitor, AOC Connect, LLC, filed a size protest. The logic was blunt: By Light was no longer “small,” the protester argued, due to acquisitions and timing rules—and because By Light had been acquired in 2017 by Sagewind Capital, LLC, described in the protest as a private equity firm “with over 2,300 employees.”
Why this matters
“Small business” isn’t just a label. It’s a distribution system: opportunities, vehicles, and long-duration revenue. When size disputes die on procedure (not merits), the question doesn’t get answered—it gets deferred.
In this case, the SBA Area Office dismissed the protest as “non-specific,” and SBA’s Office of Hearings and Appeals affirmed the dismissal. The ruling did not establish that By Light was large or small; it held the protest did not meet specificity requirements.
Who is Sagewind Capital—and why procurement is the business model
Sagewind Capital describes itself as a private equity firm focused on Defense and Government Technology, partnering with management teams to build companies serving government missions. Its leadership includes co-founder Raj Kanodia, who sits on boards of multiple Sagewind-backed government and defense technology firms.
The model matters because procurement is not just a sales channel; it is an operating system:
Procurement as an operating system
- Vehicle access → win a contract vehicle / spot / recompete.
- Durable task-order revenue → predictable cash flow.
- Leverage + roll-up → acquisitions financed by the stability of federal revenue.
- Bid gravity → more NAICS coverage, more past performance, more capture density.
The documented flashpoint: a “small business” set-aside, contested
The 2019 SBA appeal—Size Appeal of AOC Connect, LLC, SBA No. SIZ-6025—is useful because it lays out the anatomy of a procurement eligibility fight and the structural weakness: protests can fail without forcing facts into the daylight.
What the protest alleged (and what the decision did not prove)
- Acquisitions allegedly pushed employee counts beyond the size standard.
- Public-facing headcount claims were cited in the record as part of the protest logic.
- Private equity ownership and employee aggregation were central to the challenge.
Accountability doesn’t fail only when someone breaks a law. It fails when disputes collapse before the system is forced to decide.
The regulatory escape hatch: when “size” gets frozen in time
SBA typically measures size as of the date of the initial offer including price. Later revisions generally do not reset that date except in specific circumstances. This “freeze” point creates a predictable incentive: qualify at the right moment, win a long-duration vehicle, then grow after.
New documented case study: DHA UBO & DQMC “Team Intellect” award (WOSB set-aside)
This isn’t only a 2019 relic. A public contract-award disclosure by Tria Federal describes DHA’s Uniform Business Office (UBO) & Data Quality Management Control (DQMC) support contract as awarded to “Team Intellect”—a team listed as Intellect Solutions LLC, Tria Federal, TreeFrog Data Solutions, Guidehouse, and CIRE Data Solutions—as a Woman-Owned Small Business set-aside, worth up to $35 million.
Why this specific disclosure matters
It openly shows the set-aside label attached to a multi-entity “team,” and it frames the award as a continuation of long-running incumbent support: Tria states it has supported this DHA office since 2004 and that the win extends support for another 3.5 years. That’s not inherently improper—but it’s exactly the kind of “durable procurement revenue” pattern that makes set-asides contested terrain.
What the award says the work is
According to the same disclosure, the team will provide services and material supporting the UBO and DQMC office within DHA’s Cost Accounting Division. The UBO is described as responsible for oversight and guidance for three cost recovery programs. The DQMC Program is described as providing command oversight and structure to improve submission of complete, accurate, timely data and to assure standardization across the Military Health System.
Primary source
Tria Federal LinkedIn post (contract award disclosure): #triafederal #poweringpossible #contractaward (DHA UBO & DQMC)
The mechanism of capture: how “small” can become a label, not a reality
1) Set-asides reward a boundary condition: qualify once, benefit for years
The “small at initial offer → small for life of the contract absent exceptions” structure creates a predictable playbook: qualify at the right time, win a long-running vehicle, then scale through acquisition while the label retains procurement utility.
2) Protests can fail without facts being tested
The By Light dispute shows how eligibility fights can collapse on procedural grounds rather than a full size determination. That’s a systemic blind spot: affiliation and headcount data is often hard to access in time to meet technical pleading standards.
3) The advantage is not just capital; it’s legal-industrial precision
Procurement is an adversarial bureaucracy. Sophisticated actors can navigate timing rules, recertification triggers, and affiliation definitions with precision. That doesn’t prove wrongdoing; it explains why the paper trail “breaks” so often before accountability can lock in.
What would make this solvable (instead of a recurring scandal)
The reform menu is not mysterious. The hard part is political will.
Reset size at award (for long-duration set-asides)
Move the measurement moment closer to where value is actually captured.
Expand recertification triggers—and make them auditable
Make timing-based qualification less gameable and more transparent.
Disclose control + affiliation trees for set-aside recipients
Basic ownership/control mapping and affiliate counts updated after acquisitions.
Disclose how “small” awards are counted after firms grow
If the label persists, the public should see the mechanics and the exceptions used.
Unresolved investigative questions (the next receipts to pull)
- DISA contract file for HC101319C0005 (certification timing, acquisition communications, recertification issues)
- SBA Area Office file for Size Determination No. 02-2019-076 (what was submitted; what “non-specific” meant in practice)
- SAM.gov entity history snapshots + recertification dates (verify alleged entity record changes during the protest window)
- Acquisition documents (closing dates, control rights, affiliation impacts, covenants tied to eligibility)
- DHA UBO & DQMC award docs (task order structure, performance allocation, and any recertification events over time)
