OHA Sustains Status Protest: Self-Proclaimed SDVOSB Awardee Not Certified by VetCert, Not Eligible For SBA’s Grace Period, And Not Veteran Owned or Controlled

In Mckenna Brytan Indus. LLC, SBA No. VSBC-334, 2023 (Feb. 8, 2024), the U.S. Small Business Administration (SBA) Office of Hearings and Appeals (OHA) sustained the Service-Disabled Small Business (SDVOSB) status protest of BTNG Enterprises, LLC (BTNG). In its decision, OHA reiterated the two current regulatory options for calling yourself an “SDVOSB” concern: the first, is having your SDVOSB application officially approved by the SBA and your company listed in the SBA’s Veteran Small Business Certification Program (VetCert) data base; and the second, is having submitted your complete application to SBA through VetCert prior to December 31, 2023, and be currently waiting for approval or denial. Here, OHA was unable to conclude that BTNG had done either of those things–despite looking for evidence of eligibility from the SBA and from BTNG itself.

McKenna Brytan is a significant protest. It is one of the first OHA decisions to discuss enforcement of SBA’s regulatory SDVOSB grace period that began January 1, 2024 (actually it appears it may be the first protest). McKenna Brytan concerned a Defense Logistics Agency (DLA) Request for Quotations (RFQ) for portable dehumidifiers, set aside for SDVOSBs under North American Industry Classification System (NAICS) code 333415, Air-Conditioning and Warm Air Heating Equipment and Commercial and Industrial Refrigeration Equipment Manufacturing. It had a corresponding size standard of 1,250 employees. The RFQ specifically stated: “[i]f no qualified SDVOSB offers are received, it is possible other small businesses can be considered.” And

DLA announced the award to BTNG on December 6, 2023. In its proposal, BTNG offered a fixed unit price of $330 per unit and represented to DLA that it was a WOSB concern and an SDVOSB concern.

McKenna Brytan filed a timely SDVOSB status protest of the awardee with DLA’s Contracting Officer for the RFQ. It alleged: its quotation should have been found superior to BTNG’s; and its quotation would more likely have been awarded if BTNG had not falsely claimed SDVOSB status. As required, the Contracting Officer forwarded the status protest on to OHA requesting: “a formal SDVOSB status determination be accomplished for BTNG.” Along with the referral letter, DLA also told OHA that BTNG was only the lowest quote among those representing SDVOSB status and “was not the lowest quote in relation to the quotes submitted by [non-SDVOSBs].”

To investigate BTNG’s represented SDVOSB status and eligibility, OHA issued a Notice and Order for the Director of SBA’s Office of Government Contracting (D/GC) to submit a BTNG Case File to OHA. But after “a comprehensive search,” the D/GC told OHA there was no record of BTNG being SDVOSB certified by SBA–and in fact, no record of BTNG even applying for SDVOSB certification with SBA. So, without an SBA case file, OHA issued an Order to BTNG itself to prove its qualification as an SDVOSB, noting: “As the protested firm, BTNG has the burden of proving its eligibility as an SDVOSB by a preponderance of the evidence. 13 C.F.R. § 134.1010.”

In perhaps one of the most interesting parts of this protest, BTNG’s response to the protest and OHA’s Order openly admitted that BTNG was not 51% owned nor fully controlled by one or more service-disabled veterans. Rather, in OHA’s words:

BTNG maintains that it was selected for the instant award because it is a small business. BTNG asserts that it expects to “partner” with an SDVOSB through a post-award “teaming agreement”. BTNG concludes that “the [CO] awarded this contract with full authority and the protest is without merit.”

OHA’s analysis of this protest rightfully began with an explanation of the relevant date for determining SDVOSB eligibility, noting, “In an SDVOSB status protest pertaining to a procurement, OHA determines the eligibility of the protested concern as of the date of its initial offer or response which includes price. 13 C.F.R. § 134.1003(e)(1).” OHA therefore determined it would analyze BTNG’s eligibility as of the date it submitted its quotation to DLA.

OHA then turned to the question of BTNG’s SDVOSB eligibility as of the date it submitted its proposal. Because there was no debate that BTNG was not a VetCert registered SDVOSB, OHA focused on SBA’s regulatory option for previously self-certified SDVOSBs to continue to self-certify if they qualify for SBA’s SDVOSB grace period. OHA said:

SBA regulations generally permit that a concern may self-certify as an SDVOSB, so long as the concern submitted “a complete SDVOSB certification application to SBA on or before December 31, 2023”, until such time as “SBA declines or approves the concern’s application.” 13 C.F.R. § 128.401(a).

OHA then said, although BTNG represented it was an SDVOSB in its quotation, OHA and SBA found no record of BTNG ever applying for SDVOSB certification before December 31, 2023. And as noted above, OHA even gave BTNG the chance to prove its eligibility regardless of this finding. But BTNG didn’t even argue that it was service-disabled veteran owned or run.

If you’re familiar with the Veteran Certification Programs’ rules–both SBA’s and, previously, the Department of Veterans Affairs (VA) Center for Verification and Evaluation’s (CVE)–you likely know that two of the main requirements are:

  1. “To qualify as a SDVOSB, one or more service-disabled veterans must unconditionally and directly own at least 51 percent of the concern[,]” (13 C.F.R. § 128.202); and
  2. “To be an eligible SDVOSB, the management and daily business operations of the concern must be controlled by one or more service-disabled veterans . . . [which] means that one or more qualifying veterans controls both the long-term decision-making and the day-to-day operations of the Applicant or Participant.”13 C.F.R. § 128.203.

But no worries if you are not familiar with the Veteran Certification Program or rules, you can read more about them here.

So, because BTNG wasn’t officially SDVOSB certified, allowed to self-certify under the grace period, or even eligible under the SDVOSB rules, OHA found:

BTNG’s self-certification as an SDVOSB thus was improper under 13 C.F.R. § 128.401(a). [And] BTNG has produced no evidence to substantiate its claimed SDVOSB status. Nor does BTNG even argue that it is at least 51% owned, and fully controlled, by one or more service-disabled veterans. Accordingly, BTNG has not carried its burden of proving that it is an SDVOSB.

Finally, OHA briefly addressed BTNG’s argument that offerors on the RFQ were not required to be SDVOSBs. On that front, OHA said:

It is true that the RFQ indicated that “[i]f no qualified SDVOSB offers are received, it is possible other small businesses can be considered.” BTNG, though, did represent itself as an SDVOSB in its quotation, and DLA evaluated BTNG’s quotation as if it had been submitted by an SDVOSB. Contrary to BTNG’s suggestions, then, BTNG’s status as an SDVOSB (or lack thereof) was directly relevant to the underlying procurement.

As a result of BTNG’s misrepresentation of SDVOSB eligibility–deemed relevant to DLA’s selection of an awardee for the RFQ, as the RFQ gave clear priority to SDVOSBs over small business offerors–OHA sustained the protest.

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This post updates an earlier post on SmallGovCon.