It doesn’t take too long to find a blog post where we’ve discussed SBA’s Service-Disabled Veteran-Owned Small Business (SDVOSB) full-time devotion requirement. For a service-disabled veteran (SDV) to meet the SDVOSB control requirements, the SDV must control “the management and daily business operations” of the SDVOSB. This requires the SDV to be fully devoted to the SDVOSB. As a quick refresher on the full-time devotion requirement, a qualifying veteran “may not engage in outside employment that prevents [them] from devoting the time and attention to the concern necessary to control its management and daily business operations.” Further, the veteran must be able to “devote full-time during the business’s normal hours of operation” or SBA will assume lack of control. 13 C.F.R. 128.203(i). The same rule applies for the WOSB and 8(a) programs. In past decisions, SBA was OK with a veteran juggling multiple jobs as long as the hours didn’t overlap. But a recent decision shows that it may be possible to overcome this assumption.
In the past, SBA has primarily focused on “normal hours of operation” to satisfy full-time devotion. We’ve touched on a few of these cases in our blog. In one decision, the full-time devotion was met when SDV’s second job did not overlap with the SDVOSB’s normal operation hours. And here, the SDV’s second full-time job at a brewery was allowed because he worked there only on nights and weekends, not during the SDVOSB’s normal business hours.
Based on these cases, it’s safe to assume that SBA will find the full-time devotion requirement satisfied when SDVOSB’s normal business hours do not overlap with the second job. However, recently, OHA considered an awardee’s assertion that its qualifying veterans were fully devoted to the SDVOSB, even though the second job had the same normal hours of operation as the SDVOSB.
In Data Monitor Systems, Inc., SBA No. VSBC-423-P (Jan. 16, 2025), the protestor challenged the SDVOSB status of ELK Solutions, Inc. (ELK) in connection with DLA solicitations set aside for SDVOSBs. Relevant here is the protestor’s argument that ELK’s qualifying veterans could not devote full-time work to the SDVOSB.
The protestor alleged that ELK’s involvement with a subcontractor company (Subcontractor) prevented ELK’s SDVs from the management and daily business operations that the SDVOSB required. The protestor argued that the qualifying veterans could not possibly devote full-time to ELK because of their commitments working at Subcontractor. ELK and Subcontractor were in the same line of business and had the same primary NAICS code. Thus, the protestor alleged that the two companies likely had the same normal hours of operation, meaning the qualifying veterans could not devote full-time to the SDVOSB during the normal operating hours, while also managing the day-to-day operations as Subcontractor.
In response, ELK pointed out that even though the two firms shared a NAICS code, the business operations of the two were different. Subcontractor was formed in 2007, while ELK formed in 2024. This set of solicitations was the first for ELK in the federal contracting industry. Subcontractor’s experience, ELK argued, showed that Subcontractor was not dependent on the SDVs’ ongoing involvement in Subcontractor’s operations.
Unlike the cases touched on in previous blogs, the normal hours of operation for the SDVOSB and Subcontract do overlap here. However, the full-time devotion rule is a rebuttable presumption (or assumption in SBA’s current wording) that can be challenged.
“When a qualifying veteran claiming to control a business concern devotes fewer hours to the business than its normal hours of operation, SBA will assume that the qualifying veteran does not control the business concern, unless the concern demonstrates that the qualifying veteran has ultimate managerial and supervisory control over both the long-term decision making and day-to-day management of the business.”
13 C.F.R. § 128.203(i)(2) (emphasis added).
The normal hours of operation presumption can be rebutted if the SDVOSB “demonstrates that the qualifying veteran has ultimate managerial and supervisory control over both the long-term decision making and day-to-day management of the business.” Further, because ELK was a new business, ELK argued it was reasonable to conclude the SDVOSB required less than full-time attention. Additionally, one of ELK’s SDVs had since resigned from Subcontractor and worked full-time for ELK.
OHA agreed with ELK, noting that the regulation does provide that even if the SDVOSB devotes fewer hours to a business than its normal hours of operation, the SDVOSB can still meet the control requirement if the “concern demonstrates that the qualifying veteran has ultimate managerial and supervisory control over both the long-term decision making and day-to-day management of the business.” Here, “the record establishes that the SDVs have ultimate managerial authority under the Operating Agreement and have control over both the long-term decision making and day-to-day management of ELK, and so their other employment does not disqualify ELK as an SDVOSB.”
ELK’s Operating Agreement established that the SDVs had ultimate managerial authority and control over both the long-term decision making and day-to-day management of the SDVOSB. Therefore, OHA concluded that their other employment with Subcontractor did not disqualify ELK as an SDVOSB.
This case is a good reminder that, in some cases, the full-time devotion rule can still be met even when there is outside employment. It suggest SBA may look more kindly on SDVOSBs that are startups where other work is required to keep the business afloat. Considering the similar language, this concept should also apply to the 8(a) and WOSB programs. It also highlights the importance of providing SBA with documentation that clearly demonstrates the qualifying veteran has control over the SDVOSB.
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