8(a) Program: OHA Judge Slams SBA For Claim It Cannot Play DVDs

The SBA’s claim that it could not access information provided by an 8(a) program applicant in DVD format was “not credible,” according to a recent 8(a) program appeal ruling issued by the SBA Office of Hearings and Appeals.

In Sunrise Staffing, SBA No. BDPE-499 (2013), the SBA OHA–in an unusually sharply-worded opinion–rejected the SBA’s excuses for not reviewing relevant information provided by the 8(a) program applicant, and granted the applicant’s 8(a) appeal.

The Sunrise Staffing decision involved the 8(a) application of Sunrise Staffing, a company owned by Jean Guillaume.  The SBA denied Sunrise’s application after determining that Mr. Guillaume did not control the company on a full-time basis during normal working hours, as required under the 8(a) program’s regulations.

The SBA’s decision was based on the fact that in addition to his work at Sunrise, Mr. Guillaume worked a 14-hour overnight shift three days a week at a nearby hospital.  The SBA concluded that this schedule made it extremely improbable that Mr. Guillaume could meet the full-time requirement, because he would be largely unable to sleep during that three-day period if he worked both jobs.

Sunrise filed an 8(a) appeal with SBA OHA.  Sunrise contended, in part that the SBA had disregarded or otherwise ignored evidence that Mr. Guillaume did, in fact, manage the company on a full-time basis during normal working hours.  Sunrise stated that it had submitted some 14,000 documents with the SBA.  These documents included video evidence in DVD format, showing Mr. Guillaume managing the company during ordinary working hours.

In response, the SBA conceded that it had not reviewed the DVDs.  The SBA claimed that it could not access evidence in video format.  In addition, the SBA suggested that it was SBA policy not to accept video evidence in connection with 8(a) applications.

Both contentions drew the ire of SBA OHA.

First, SBA OHA stated that it was “not credible” for the SBA to claim that it could not access DVDs.  SBA OHA continued:

The SBA cannot legitimately suggest that, in 2012, it did not have a single computer with a DVD drive, or did not have access to a DVD player. If the Agency can be tripped up by this minimal technological hurdle, it essentially limits a petitioner to filing only textual evidence. This would be supremely ironic because an 8(a) BD Program application “must generally be filed in an electronic format,” i.e., e-mail, which is a newer and more advanced technology than DVD. 

SBA OHA then turned to the SBA’s suggestion that it does not accept video evidence in connection with 8(a) applications:

Moreover, the SBA suggests that it is Agency policy not to accept video evidence. In other words, the Agency is not just unable to review such evidence; it is unwilling to do so. If such a policy exists, it has never been published or explained. This is particularly worrisome because an anti-video policy would seem to run counter to 13 C.F.R. 124.203, which does not place any limits on the style or format of submitted evidence. The existence of a secret internal policy raises several troubling questions. Does the policy only apply to DVDs? Did the Agency rely on this policy to justify ignoring Petitioner’s online videos? Why is video-based evidence disfavored over other forms of evidence? Are there other kinds of evidence the SBA habitually rejects? What authority does the SBA have to invent an evidentiary restriction when the regulation has no such prohibition? The SBA offers no explanation on any of these points.

The potential application of such a policy is also troubling. Being that the policy is unpublished, a potential applicant will only be aware of it if someone at the SBA affirmatively informs them of the policy’s existence. The Agency could thus pick and choose which applicants are subjected to the policy. This is inherently arbitrary.

The policy is also fundamentally unreasonable, as the case at bar demonstrates. Petitioner’s videos allegedly depict Mr. Guillaume working on-site at Petitioner’s office during normal business hours. The evidence is thus directly relevant to determining Petitioner’s eligibility. And yet the policy renders this evidence impermissible. However, if Mr. Guillaume were to submit a written affidavit declaring that he is at the office at those times, the affidavit would be allowed. A photo of Mr. Guillaume, taken while the video was being filmed, would also be admissible. This is nonsensical. If a picture is worth 1,000 words, how many words is a video worth? The policy unfairly prohibits an applicant from submitted the most persuasive evidence at its disposal. As a result, the SBA dilutes the application’s strength, thereby jeopardizing the applicant’s chances of securing a place in the 8(a) BD Program.

As regular SmallGovCon readers know, I do not ordinarily quote at such length from the decisions I discuss on the blog.  In this case, however, I cannot do justice to SBA OHA’s deep skepticism without quoting SBA OHA’s words directly.

It should come as no surprise that SBA OHA granted Sunrise’s appeal.  SBA OHA gave the SBA 90 days to re-examine Sunrise’s 8(a) application and make a new determination.

To veer onto a slight tangent, cases like Sunrise Staffing are a prime example of why I have not joined the drumbeat in favor of legislation to transfer SDVOSB VetBiz verification from the VA to the SBA.  Many companies have positive experiences with the 8(a) application process, but others–like Sunrise–run into inexplicable difficulties.  Yes, it was certainly reasonable for the SBA to question whether Mr. Guillaume’s schedule was feasible–but there was nothing reasonable about claiming to be unable to read DVDs, or denying an application by citing an unpublished and illogical “no video” policy.  Those who imagine that transferring the VetBiz program to the SBA would immediately cure that program of its ills might want to study Sunrise Staffing.

On the other hand, Sunrise Staffing demonstrates the critical importance of another piece of this same SDVOSB legislation–the ability of companies to appeal adverse VetBiz eligibility determinations to an independent administrative judge.  Sunrise will get another bite at the apple thanks to the 8(a) program’s built in appeals process, but no such process currently exists for SDVOSBs seeking VetBiz verification.  That is an omission that Congress should correct as soon as possible.

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