SBA Improperly Denied Woman’s Gender-Based 8(a) Application, Says SBA OHA

Anyone who works with SBA 8(a) program applications will tell you that it can be very difficult for a woman to demonstrate gender bias to the extent necessary to gain admission to the program.

But for a woman-owned small business business, the road to SBA 8(a) program admission may have just gotten a little easier, as the result of a recent decision by the SBA Office of Hearings and Appeals.  In Strategygen Co., SBA No. BDPE-460 (2012), SBA OHA held that the SBA’s 8(a) admissions office had repeatedly erred in evaluating a woman’s claims of gender bias, and ordered the woman-owned firm admitted to the 8(a) program.

The Strategygen case began in October 2010, when Strategygen Co.  applied for admission to the 8(a) program.  Strategygen admitted that its owner,  Marsha Killen, was not a member of one of the groups presumed to be socially disadvantaged under the SBA’s 8(a) regulations.  However, Strategygen stated that Ms. Killen had personally experienced substantial and chronic social disadvantage in the United States because of her gender.

In August 2011–ten months after Strategygen first applied–the SBA denied Strategygen’s application, stating that Ms. Killen was not socially disadvantaged.

Strategygen appealed to SBA OHA.  In February 2012, SBA OHA concluded that the SBA had not addressed some of Strategygen’s claims or otherwise sufficiently explained its decision, and remanded the matter to the SBA for further consideration.

In May 2012, the SBA again denied Strategygen’s application.  Once again, the SBA found that Ms. Killen had not demonstrated social disadvantage due to her gender.  And once again, Strategygen appealed to SBA OHA.

This time, there was no remand.  Instead, SBA OHA concluded that the SBA had made at least five significant errors in evaluating Strategygen’s 8(a) program application.

First, SBA OHA held that in evaluating Ms. Killen’s claims of social disadvantage, the SBA had “misappl[ied] the regulation by misstating the relevant test.”  The SBA had repeatedly faulted Strategygen for failing to prove “gender bias of a chronic and substantial nature.”  However, the test for social disadvantage “is not chronic and substantial gender bias . . . but rather chronic and substantial social disadvantage brought about by the gender bias.”

SBA OHA explained, “a relatively benign act could have profound consequences.  By emphasizing the act instead of the result, the [SBA] consistently undervalues the weight of [Strategygen’s] evidence.  This is error.”

Second, SBA OHA held that the SBA had erred by requiring each discreet experience recounted by Ms. Killen to show evidence of substantial and chronic social disadvantage.  Instead, the proper test is whether the total narrative as a whole demonstrates such disadvantage.

“A requirement that every discreet incident show chronic and substantial injury is implausible,” SBA OHA said, “as a one-time event can almost never be considered ‘chronic.'”  SBA OHA continued, “[f]or the [SBA] to demand that a single event must also be a chronic event creates an analytical paradox.”

Third, SBA OHA found that the SBA erred by applying a too-high standard of proof.  In the 8(a) program, a so-called “preponderance” standard is to be used to evaluate claims of bias, meaning that “[t]he applicant must only officer evidence sufficient to convince the fact -finder that it is more likely than not that such bias was present.”  However, contrary to this standard, “the SBA seeks definitive proof that the incidents Ms. Killen describes were the result of gender bias rather than some other reason.”

Fourth, the SBA rejected many of Ms. Killen’s statements with the conclusion that the statements were insufficiently specific.  Contrary to the SBA’s finding, SBA OHA determined that the details Ms. Killen provided were “more than sufficient” for the SBA to determine whether Ms.  Killen satisfied the social disadvantage criteria, and the SBA should not have rejected Ms. Killen for failing to provide even more specific details.

According to SBA OHA, this quest for “ultra-specific details” was part of a “general air of skepticism” pervading the evaluation of Ms. Killen’s claims of gender bias.  Instead of citing any evidence for disbelieving Ms. Killen’s accounts, the SBA “manifested its skepticism by claiming the evidence provided was insufficiently detailed.”

Fifth, “[w]here the SBA specifically addresses [Strategygen’s] evidence, it often does so in a dismissive or inaccurate manner.”  For example, SBA OHA determined that the SBA misstated letters corroborating Ms. Killen’s accounts and committed a “gross mischaracterization” of one part of Ms. Killen’s social disadvantage narrative.

Summing up its conclusions, SBA OHA wrote:

“In denying [Strategygen’s] application for entry into the 8(a) BD Program, the SBA consistently misapplied the chronic and substantial element, either by searching for the wrong thing or searching at the wrong time.  It also applied an unreasonably burdensome standard of proof,and reached conclusions that were at odds with evidence in the record.”

SBA OHA granted Strategygen’s appeal, and ordered the SBA to admit Strategygen to the 8(a) program within 30 days.

The Strategygen case is heartening for women-owned businesses thinking about applying to the 8(a) program.  Marsha Killen was not the first woman to experience general skepticism over her account of bias, to be asked for “ultra specific details” or otherwise held to an almost impossible standard of proof.  Hopefully, the SBA will take good note of the result in Strategygen, and evaluate future claims of gender bias accordingly.

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