A service-disabled veteran-owned small business was awarded its attorneys’ fees for successfully appealing the SBA’s decision that the company was not an eligible SDVOSB.

In what seems to be the first decision of its kind, the SBA Office of Hearings and Appeals held that the prevailing party in a SDVOSB appeal may be entitled to recover attorneys’ fees under the Equal Access to Justice Act.

SBA OHA’s decision in Alpha Terra Engineering, Inc., SBA No. EAJA-1108 (2014) arose out of a previous SBA OHA case involving Alpha Terra Engineering, Inc.  As I recounted in an October 2013 SmallGovCon post, Alpha Terra was the apparent successful offeror of an Army SDVOSB set-aside solicitation.  The SBA’s Director of Government Contracting sustained a competitor’s SDVOSB protest because Alpha Terra had four directors, only one of whom was a service-disabled veteran.  SBA OHA reversed the decision, holding that the service-disabled veteran, as the company’s 79% owner, had the power to remove any director who disagreed with him.

After Alpha Terra won its SDVOSB appeal, it filed a request for attorneys’ fees and expenses under the Equal Access to Justice Act  EAJA is a federal statute that authorizes the payment of attorneys’ fees to a prevailing party in certain actions against the United States, except in cases where the government can show that its position was “substantially justified.”  Net worth and other requirements (which are not relevant to this post) also apply.

The SBA opposed the EAJA motion on several technical and procedural grounds.  Among other things, the SBA pointed out that the SBA’s regulation at 13 C.F.R. 134.603 specifically excludes size appeals and NAICS code appeals from the class of proceedings covered by EAJA, and suggested that a SDVOSB appeal should be treated no differently.  The SBA also argued that the same regulation requires a proceeding to have been conducted by an Administrative Law Judge to qualify for EAJA coverage–and SDVOSB appeals are not decided by Administrative Law Judges.

SBA OHA rejected the SBA’s arguments.  SBA OHA wrote that SDVOSB appeals are “not of the class of proceedings specifically excluded from EAJA claims by SBA regulation.”  Further, limiting the scope of covered proceedings to those decided by Administrative Law Judges was contrary to EAJA itself, which does not impose such a requirement.  Accordingly, SBA OHA wrote, it would “disregard 134.603 to the extent that the regulation requires adjudication by an administrative law judge.”

After determining that the prevailing party in a SDVOSB appeal may be awarded costs and attorneys’ fees under EAJA, SBA OHA turned to Alpha Terra’s specific request.  SBA OHA first found that the SBA had not presented “any argument that its position was reasonable in fact or law,” or otherwise rebutted Alpha Terra’s claim that the SBA’s position in the underlying SDVOSB case had not been substantially justified.

SBA OHA then determined that the amount of fees and costs Alpha Terra claimed was reasonable under the circumstances, and adequately supported.  SBA OHA granted the EAJA petition.

The Alpha Terra Engineering decision is good news for service-disabled veterans.  Pursuing a SDVOSB appeal with SBA OHA can be an expensive endeavor, but the possibility of an EAJA recovery might make life a little easier for SDVOSBs.