In federal procurement law, it is often the case that decisions on protests and other cases come down to tough questions of law that could go either way, requiring the judge to carefully weigh the reasons for making ruling one way or another. Unfortunately, there are also cases where the decision can rest entirely on responding to a request, even one that gives the contractor little time to respond. Regardless of the situation, it can’t be overstated how crucial it is to respond timely to any requests, and make sure your company’s agents and representatives make the response their priority. In this case, this lesson was learned the hard way by one contractor.
In July 2022, the Army issued a solicitation under NAICS code 236220, Commercial and Industrial Building Construction, which had a receipts-based size standard of $39.5 million. VMJR Companies LLC, SBA No. SIZ-6184, 2023 (Jan. 12, 2023). VMJR Companies, LLC (“VMJR”) made a successful bid for award and was quickly thereafter the subject of a size protest from one of the other offerors on September 9, 2022.
On September 14, 2022, the Area Office asked VMJR to submit, among other documents, its tax returns for the preceding three years. VMJR did submit its own tax returns as requested. However, on September 20, 2022, the Area Office, noting a number of potential affiliates for VMJR, asked for the tax returns from 2017 through 2021 for VMJR and these other potentially affiliated companies. VMJR was given until September 22, 2022 (only two days) to submit these documents, and reminded that failure to do so might result in a finding that VMJR was not a small business. VMJR stated it would provide these returns once it received them from its accountant.
On September 22, 2022, the Area Office reminded VMJR that the requested returns were due. That same day, after the Area Office’s business hours, VMJR responded, explaining that, among other things, that a number of the companies did not have individual tax returns, and that it would provide the returns as soon as it got them from its accountant. The Area Office responded that same evening asking VMJR to provide the tax returns by noon the next day. VMJR ended up not providing the returns.
On September 26, the Area Office issued its determination finding that VMJR was not a small business. The Area Office explained that it had asked VMJR to provide tax returns for 2017 through 2021 for several entities. VMJR had not provided these tax returns, even with the extension of time the Area Office gave it. Therefore, the Area Office applied an adverse inference that the missing information would have shown that VMJR was not small. 13 C.F.R. §§ 121.1008(d) and 121.1009(d). The adverse inference rule, by the way, is that if a company does not send requested documents, SBA will presume that the documents would contain information that is adverse to the company’s position. Elite Construction Management Corp., SBA No. SIZ-5565 (June 10, 2014).
VMJR appealed, stating that it was only given two business days to provide the tax returns and that it “was at the mercy of the accounting firm’s response time.” VMJR noted it repeatedly requested the tax returns from its accountant and besides, it was not given enough time to respond, even with the extension. It also noted that its point of contact had limited access to email on the 23rd, and so he did not see the extension email.
OHA rejected VMJR’s arguments. First, it noted that an adverse inference in this situation was proper, as the tax returns were vital to the size determination, were something that VMJR could have acquired, and that the Area Office’s request was clear and understandable. As for VMJR’s arguments, OHA observed “it was Appellant who failed to check this email on September 23, 2022 and failed to request an extension of time to submit them before or thereafter” and that VMJR’s “neglect in monitoring its own email communications does not excuse him for failing to provide the requested information, nor can it be said to be the source of error on the part of the Area Office.” As for the argument that the Area Office’s demand was unreasonable:
“While Appellant argues that the deadline to respond to such a demand was unreasonable and inadequate, and the untimely submission was due to the accountant’s delay, I cannot find the Area Office committed error, when the Area Office communicated to Appellant the information sought, the deadline to submit them, and the consequences when failing to do so. As the regulations require the Area Office to issue a formal size determination within 15 business days after receipt of a protest, if possible, I cannot find that the Area Office was acting capriciously or unreasonably.”
The decision in this case reemphasizes a point that can’t be stressed enough: Always respond in a timely manner to requests from SBA. While the Area Office’s deadline for responding was quite short, even considering its own deadline for issuance of a size determination, the agency did at least give an extension. Certainly, VMJR should have at least tried to make a request for an extension itself. When the agency itself didn’t make a mistake, the onus generally is going to be entirely on the contractor to meet the response deadline.
What also stands out is an important practical lesson. VMJR’s accountant quite simply failed VMJR. We can’t speak to the specifics of the accountant’s situation, but there is no mention of the accountant responding to VMJR or reaching out to SBA to try to explain what’s going on. And, frankly, considering electronic storage, we don’t see how it would have been such a challenge for the accountant to simply forward VMJR the requested tax returns. On the other hand, we don’t really know if the companies had actually filed tax returns, or if the accountant was even holding copies of the returns.
The point, in any event, is that who you choose to represent your company matters, be it your accountant, your consultants, and, yes, your attorneys. Never take this decision lightly, and do not let anyone pressure you into making a decision. Your company’s future may very well depend on it.
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