The VA Center for Verification and Evaluation unreasonably decertified an SDVOSB based on the results of an SBA SDVOSB decision.
According to the U.S. Court of Federal Claims, it was improper for the VA to remove the SDVOSB from the VA’s database without evaluating whether the SBA’s determination was consistent with the VA’s separate SDVOSB requirements.
The Court’s decision in Veterans Contracting Group, Inc. v.
All four cases involved an Army Corps of Engineers IFB for the removal of hazardous materials and the demolition of buildings at the St. Albans Community Living Center in New York. The Corps set aside the IFB for SDVOSBs under NAICS code 238910 (Site Preparation Contractors).
After opening bids, the Corps announced that Veterans Contracting Group, Inc. was the lowest bidder. An unsuccessful competitor subsequently filed a protest challenging
DoD procurements fall under the SBA’s SDVOSB regulations, not the VA’s separate rules. (As I’ve discussed many times on this blog, contrary to common misconception the government currently runs two separate SDVOSB programs: one under SBA rules; the other under VA rules). The protest was referred to the SBA’s Director of Government Contracting for resolution.
The SBA determined that Ronald Montano, a service-disabled veteran, owned a 51% interest in
The SBA then evaluated
When the SBA issues an adverse SDVOSB decision, the SBA forwards its findings to the VA Center for Verification and Evaluation. After receiving the SBA’s findings, the VA CVE decertified
The Court and OHA reached different conclusions.
As my colleague Shane McCall wrote in this post, the Court concluded that the VA should not have removed
The Court cited with approval two cases dealing with the VA’s SDVOSB regulations, AmBuild Co., LLC v.
Things turned out far differently at OHA. As I wrote in a September post, OHA held that the restrictions in
That brings us (finally) to the fourth
The Court explained, in some detail, the background behind the separate SBA and VA SDVOSB programs. The Court then wrote that the regulation at issue
“This provision is not remarkable in isolation,” the Court wrote, “but due to the differences in the VA and SBA regulations . . . it can create anomalous results.” This is because “protest decisions by SBA, presumably applying SBA’s own regulations, could potentially displace VA’s cancellation and removal process without accounting for the differences between the two agencies’ underlying regulatory eligibility criteria.”
The Court held that it “disagrees with the government that Subsection 74.2(e) relieves CVE of any obligation to look beyond the fact that SBA has issued an adverse determination before removing an SDVOSB from the VetBiz VIP database.” The Court continued:
[T]he eligibility requirements in the VA and SBA SDVOSB set-aside programs are similar in some respects but
The Court wrote that it was “arbitrary for VA to mechanistically apply Subsection 74.2(e) without examining the basis for SBA’s ruling.” Rather, “[i]n light of the distinct definitions of ‘unconditional ownership’ in the two programs, CVE must look beyond the fact of a ruling by SBA, to determine whether it was based on grounds consistent with or contrary to VA’s eligibility regulations.” Because VA failed to undertake such an analysis, “there was no rational connection between the facts found and the choice made, thus rendering CVE’s action arbitrary and capricious.”
The Court granted
In my last post on the Veterans Contracting Group saga, I got a few things off my chest regarding the mess the “two SDVOSB programs” system creates for well-meaning veterans like Mr. Montano. I’ll spare you another soapbox moment, but I hate seeing small businesses (and particularly SDVOSBs) harmed by the legal complexities, interpretations
Sometime in 2018, the SBA and VA should unveil their proposed joint regulation to consolidate the SDVOSB eligibility requirements. As the Veterans Contracting Group cases make clear, a unified set of rules is sorely needed. Stay tuned.
This content originally appeared on SmallGovCon.
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