When it comes to the regulations governing small government contractors, lateness can lead to tough consequences. For instance, responding late to a small business size protest might cause the SBA to conclude that the contractor is a large business, and a late proposal submission can get a bid tossed out.
Lateness can also lead to severe consequences within the SBA 8(a) program. In a recent decision, the SBA Office of Hearings and Appeals held that the SBA properly terminated an 8(a) program participant because the participant had failed to submit a complete 8(a) annual report–months after the deadline had passed.
SBA OHA’s decision in Milleniumsoft, Inc., SBA No. BDPT-502 (2013) involved the 8(a) status of Milleniumsoft, Inc., which had previously been admitted to the 8(a) program. On June 27, 2012, the SBA notified Millenniumsoft that its 8(a) program annual report was due by July 28, 2012.
The July 28 deadline came and went, and Milleniumsoft did not submit its 8(a) annual report. On August 9, the SBA again contacted Millenniumsoft to request the 8(a) annual report. On August 27, the SBA received an annual report, but it was incomplete. Specifically, the 8(a) annual report submitted by Millenniumsoft was missing the business plan update, corporate and individual tax returns, and the most recent year-end financial statement.
This time, apparently, the SBA did not offer any further requests or warnings. Instead, on September 7, the SBA notified Millenniumsoft of the SBA’s intent to terminate the company from the 8(a) program. The SBA’s letter stated that the SBA’s action was based on Millenniumsoft’s failure to timely submit a complete 8(a) annual report.
On March 28, 2013, the SBA formally terminated Millenniumsoft from the 8(a) program. As of that date, the SBA indicated that it had still not received a complete 8(a) annual report for the previous year.
On May 2, 2013, Millenniumsoft responded by acknowledging the termination letter. Millenniumsoft stated that it had submitted the documents by FedEx but could not find its tracking number. Millenniumsoft did not follow up with the tracking number or resubmit the 8(a) annual report. Millenniumsoft then filed an 8(a) appeal with SBA OHA, contesting the termination.
SBA OHA noted that the SBA provided Millenniumsoft with “several opportunities” to submit a complete 8(a) annual report, even after the initial deadline passed, but Millenniumsoft “did not comply.” SBA OHA found that Millenniumsoft had engaged in a “pattern of failing to make required submissions or responses to SBA” in violation of its obligations under the 8(a) program’s regulations. SBA OHA denied Millenniumsoft’s appeal, and upheld the SBA’s decision terminating Millenniumsoft from the 8(a) program.
Reading this case, I couldn’t help but notice that Milleniumsoft took the trouble to file a timely 8(a) appeal, but couldn’t be bothered to timely submit its 8(a) annual report. Talk about misplaced priorities. Had Millenniumsoft taken its 8(a) annual report obligations seriously, it wouldn’t have needed to file an 8(a) appeal in the first place, and might still be an 8(a) participant today.
The Millenniumsoft case stands as an important warning that the SBA considers it important that 8(a) participants timely submit their annual reports–and may severely penalize a participant for failing to do so.