GAO: Successful Reconsideration Request Does Not Save VA SDVOSB Contract

Here’s a piece of music trivia: apparently, “Get It Right the First Time” is both a song by Billy Joel and a 1997 live album by Canadian punk band SNFU.  Somehow, I’m guessing there aren’t too many people who own both The Stranger (the classic Joel album featuring the song), and the SNFU opus, which offers decidedly un-Joel like song titles, such as “Drunk on a Bike” and “Cannibal Café.”

Billy Joel and SNFU might not have much else in common, but “Get It Right the First Time” is a good mantra when it comes to service-disabled veteran-owned small businesses.  When a service-disabled veteran-owned small business submits a verification application to the VA Center for Veterans Enterprise, it is important to get the application right from the start.  As a recent GAO bid protest decision shows, even a successful second bite at the apple might mean lost contacts in the interim.

Government Contracting Services, LLC, B-405996 (Jan. 17, 2012), involved a VA SDVOSB set-aside procurement for renovation of a patient waiting area at a VA medical center.  The solicitation was issued on August 17, 2011.  The solicitation called for offerors to be verified in the VA CVE’s Vendor Information Pages (VIP) database as of the date of their bid submission.  More than a month before the solicitation was issued, the VA CVE had denied GCS’s SDVOSB verification application, and GCS had filed a request for reconsideration on July 12, 2011.

The VA opened bids on September 23, 2011, and GCS’s bid was the lowest.  However, the VA CVE had not yet reached a decision on the reconsideration request, so GCS was not verified in the VIP database.  The VA rejected GCS’s bid and awarded the contract to another bidder.

Six days later, on September 29, 2011, the VA CVE granted GCS’s request for reconsideration and verified GCS as a service-disabled veteran-owned small business.  The letter granting GCS’s request stated that GCS had demonstrated its eligibility by submitting new documents amended after its original VA CVE application, including a revised Operating Agreement dated August 31, 2011.  GCS then filed a GAO bid protest, arguing that when its bid was submitted, it was “merely awaiting an overdue ruling on our request for reconsideration,” and should have been awarded the contract as the low bidder.

The GAO denied the protest.  It held that “while GCS ultimately prevailed on its request for reconsideration, its status as a valid SDVOSB, as determined by CVE, became effective on September 29 when it received the letter from CVE resolving its reconsideration request.”  Since the VA CVE’s decision was received after bid closing, GCS was not eligible for award, despite its low bid.

The GAO also rejected GCS’s argument that it should have been deemed eligible because the VA CVE had taken too long processing the request for reconsideration.  The GAO noted that the regulations call for the VA CVE to process reconsideration requests in 60 days “when practicable.”  Though the VA CVE took longer than 60 days to process the reconsideration request, the “when practicable” language meant that an applicant like GCS has no legally enforceable right to receive a reconsideration request within 60 days.

From my perspective, perhaps the most notable part of the decision is the fact that GCS had to amend its operating agreement to comply with the VA’s SDVOSB eligibility rules.  Unfortunately, the GAO didn’t go into detail as to what amendments were required, but chances are that the original operating agreement contained unanimity or supermajority voting provisions, or right-of-first-refusal or similar restrictions, causing the VA CVE to determine that service-disabled veterans did not “unconditionally” own and control the company.

Had GCS understood how the VA CVE analyzes a SDVOSB applicant’s governing documents, it could have amended it operating agreement before submitting its original request, and would have been verified long before bid closing for this procurement.  The VA’s SDVOSB eligibility rules can be a little tricky to work with, but taking the time to thoroughly understand them—and thoroughly audit the company’s governing documents for compliance—before submitting a VA CVE SDVOSB application can save a SDVOSB the time and expense of requesting reconsideration, as well as the risk of losing contracts awarded in the interim.

As Billy Joel and SNFU would say, when it comes to VA CVE verification, get it right the first time.


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