SBA: Full-Time Devotion Still Matters for SDVOSBs

SBA’s Service-Disabled Veteran-Owned Small Business (SDVOSB) rules include one particular component dealing with the working hours of a service-disabled veteran owner of an SDVOSB business, often called the full-time devotion rule. SBA has recently reviewed its full-time devotion requirement in an SDVOSB protest, and found that the company in question did not establish that a service-disabled veteran met the requirement.

In Marathon Indus. Equip., LLC, SBA No. VSBC-342-P (Mar. 14, 2024), a protester challenged the SDVOSB status of Gilk and Sons, LLC (Gilk and Sons) in connection with a DLA solicitation set aside for SDVOSBs. A competitor can challenge the SDVOSB status of a proposed awardee on SDVOSB set-aside contracts. In this case, the protester argued that the veteran owner (Mr. Gilkison) worked at a different company (PacTec) that was the supplier of the products under the Solicitation.

As part of the initial SDVOSB application, Gilk and Sons explained that Mr. Gilkison “works for Gilk and Sons Monday to Friday from 8:00am to 5:00pm” and he is “finishing up some consulting work with PacTec that will be completed by the end of the year … [w]hen I consult it is outside of the business hours for Gilk and Sons … [t]his does not conflict with my normal working hours.”

SBA regulations prohibit the key service-disabled veteran for SDVOSB status from being engaged “in outside employment that prevent[s] [him or her] from devoting the time and attention to the concern necessary to control its management and daily business operations.” 13 C.F.R. § 128.203(i). Normally, the service-disabled veteran “must devote full-time during the business’s normal hours of operations”. Id.

As part of the protest, OHA (which processes these sort of protests) “required Gilk and Sons to clearly state Mr. Gilkison’s current working hours at both Gilk and Sons and PacTec. The Order also required Gilk and Sons to specify Mr. Gilkison’s duties at Gilk and Sons and at PacTec.” OHA then reviewed the response and determined that Gilk and Sons had not met the full-time devotion requirement.

SBA OHA pointed out that Gilk and Sons did not properly respond to the request for more information. The response to OHA fails to clearly state just what Mr. Gilkerson’s working hours are both at Gilk and Sons and at PacTec. The Response fails to describe what Mr. Gilkerson’s duties are at Gilk and Sons and at PacTec. It does not describe how Mr. Gilkerson handles his duties at Gilk and Sons while also performing his duties at PacTec. 

Because of the failure to respond, OHA assumed “that disclosure would be contrary to the interests of the party failing to make disclosure.” 13 C.F.R. § 134.1011. So, OHA assumed that Gilk and Sons “failed to establish that Mr. Gilkison devotes himself to the concern full time during normal business hours.”

The big takeaway from this case is that SBA is still enforcing the full-time devotion requirement for SDVOSBs (and the rule is also present in the 8(a) Program regulations). If an SDVOSB company veteran owner works a second job, pains must be taken to explain (1) current working hours at both companies, (2) the duties at each job, and (3) how the veteran owner devotes sufficient time to the SDVOSB necessary to control its management and daily business operations. As a side note, it is always important to fully respond to questions from SBA or other federal government agencies.

As we noted on the blog, SBA made some comments that it wanted to introduce more flexibility into some of these rules, including the full-time devotion requirement. However, we have yet to see a published decision where SBA has demonstrated this flexibility. Should you face a similar situation, reach out to our firm.

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