8(a) joint ventures are not 8(a) program participants, according to a recent (and commonsense) decision of the SBA Office of Hearings and Appeals.
In its decision, SBA rejected a joint venture’s argument that its 8(a) joint venture agreement was essentially an 8(a) program application, drawing a jurisdictional decision between 8(a) program certification and 8(a) joint venture agreement approval.
A participant in the SBA’s 8(a) Program was appropriately terminated because the company’s disadvantaged owner took another full-time job without the SBA’s permission.
The recent SBA Office of Hearings and Appeals decision upholding the termination is an important reminder of the limitations on outside employment for 8(a) owners–as well as a reminder of the importance to 8(a) firms of ongoing honesty and forthrightness with the SBA.
A contractor was recently terminated from the SBA’s 8(a) Program for failing to comply with the subcontracting limits applicable to its 8(a) contracts.
The SBA Office of Hearings and Appeals upheld the termination, writing that the SBA had properly terminated the 8(a) contractor for “willfully violating SBA regulations.” SBA OHA rejected the contractor’s argument that it was exempt from the subcontracting limits under the so-called non-manufacturer rule.
Last month, I wrote about the successful 8(a) program appeal filed by Gearhart Construction Services. In its decision, SBA OHA held that the SBA had misevaluated Gearhart on the “social disadvantage” factor, including by holding Gearhart to a too-high standard of proof. SBA OHA ordered the SBA to correct its errors and take another look at Gearhart’s application.
Now I can report that Gearhart’s story has a happy ending. On April 11, the SBA notified Gearhart that it had been admitted to the 8(a) program. SBA OHA then dismissed Gearhart’s appeal as moot, because Gearhart and achieved its goal.
Sometimes, gaining admission to the 8(a) program requires tenacity and a continued belief in one’s case, even when the SBA’s 8(a) office has repeatedly denied the application. Gearhart’s perseverance paid off, and the company now has nine years to reap the rewards.
A contractor’s economic dependence on another company can cause affiliation under the SBA affiliation rules, but economic dependence can also be a major problem when a company applies for 8(a) program certification.
As demonstrated in a recent decision of the SBA Office of Hearings and Appeals, if an 8(a) program applicant has received most of its revenues from another company, the SBA may find that the applicant is economically dependent on the other company–and therefore, ineligible for admission to the 8(a) program.
In the 1990s comedy Groundhog Day, Bill Murray played a weatherman who found himself living the same day over and over again. I am having the same feeling reading SBA Office of Hearings and Appeals cases these days (yes, this is what qualifies as my reading material of choice; don’t judge).
As it has at least five other times since December, SBA OHA has shot down the SBA’s rejection of an 8(a) application under the “social disadvantage” factor. As was the case in several other recent decisions, the latest volley from SBA OHA states that the SBA failed to properly consider the evidence and explain its rationale for denying an 8(a) applicant.
The SBA’s Office of Hearings and Appeals has overturned yet another SBA 8(a) Program denial decision–at least the fifth such instance since December 2012.
As with the four previous cases, SBA OHA’s most recent 8(a) appeal decision indicates that the SBA improperly evaluated the applicant’s evidence of social disadvantage, both by misapplying the regulatory test for social disadvantage and by requiring the applicant to meet a higher standard of proof than called for by law.