SDVOSB Eligibility Update: SBA Issues New Rule

Earlier this week, Steve updated SmallGovCon readers on a very important SDVOSB eligibility change: beginning October 1, the VA will begin using the SBA’s eligibility rules to verify SDVOSBs and VOSBs.

The SBA has now followed suit—in a final rule published today, the SBA has amended its eligibility rules for SDVOSBs. These rules provide important clarity into SDVOSB eligibility going forward.

Let’s take a look at some of the most important changes.

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SBA CVE Protests and Appeals: Coming October 1

The SBA will begin hearing protests and appeals related to inclusion in the VA’s SDVOSB/VOSB CVE database on October 1, 2018.

On March 30, the SBA published a final rule, which responded to public comments made on the proposed rule issued last year.  SBA’s Office of Hearings and Appeals will begin deciding these cases in the fall.

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Court Upholds “Draconian and Perverse” SBA SDVOSB Ownership Rules

The SBA’s strict SDVOSB ownership rules can produce “draconian and perverse” results, but are nonetheless legal, according to a federal judge.

In a recent decision, the U.S. Court of Federal Claims condemned the SBA’s SDVOSB unconditional ownership requirements, while holding that the SBA was within its legal rights to impose those requirements on the company in question.

The Court’s decision emphasizes the important differences between the SBA and VA SDVOSB programs, because the Court held that although the company in question didn’t qualify as an SDVOSB under the SBA’s strict rules, it was eligible for VA SDVOSB verification under the VA’s separate eligibility rules.

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SDVOSB Task Order Eligibility: SBA OHA Provides Some Clarity

If an SDVOSB was eligible at the time of its initial offer for a multiple-award contract, the SDVOSB ordinarily retains its eligibility for task and delivery orders issued under that contract, unless a contracting officer requests a new SDVOSB certification in connection with a particular order.

In a recent SDVOSB appeal decision, the SBA Office of Hearings and Appeals confirmed that regulatory changes adopted by the SBA in 2013 allow an SDVOSB to retain its eligibility for task and delivery orders issued under a multiple-award contract, absent a request for recertification.

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SBA Required To Dismiss Unspecific SDVOSB Status Protest

A protester’s failure to be specific enough in an SDVOSB status protest will result in dismissal of the protest.

The decision of the SBA Office of Hearings and Appeals in Jamaica Bearings Company, SBA No. VET-257 (Aug. 9, 2016), reinforces the SBA’s rule concerning specificity in filing a service disabled veteran-owned status protest. The rule provides, “[p]rotests must be in writing and must specify all the grounds upon which the protest is based. A protest merely asserting that the protested concern is not an eligible SDVOSB, without setting forth specific facts or allegations is insufficient.”

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SDVOSB Protests Versus Bid Protests: SBA OHA Provides Some Clarity

A protest challenging a company’s status as a service-disabled veteran-owned small business is not the same as a protest challenging other aspects of an agency’s award decision (such as the evaluation of the protester’s proposal)–and these differences can determine whether a protest is timely and correctly filed.

In a recent case, the SBA Office of Hearings and Appeals provided some clarity on key differences between SDVOSB protests and bid protests, including important limits on the SBA’s jurisdiction.

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SDVOSB’s ESOP Caused Ineligibility, Says SBA OHA

A SDVOSB’s Employee Stock Ownership Plan caused the company to be ineligible under the SBA’s SDVOSB rules because the service-disabled veteran did not own 51% of the ESOP class of stock.

A recent SBA Office of Hearings and Appeals decision should serve as a cautionary tale to any SDVOSB contemplating establishing an ESOP–or any other ownership structure consisting of multiple classes of stock.

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