Even if the VA Center for Verification and Evaluation has found that a service-disabled veteran “unconditionally” controls a SDVOSB, the SBA may nonetheless determine that other individuals or entities also control the company within the meaning of the SBA’s affiliation rules.
As demonstrated by a recent decision of the SBA’s Office of Hearings and Appeals, VA CVE verification does not shield a SDVOSB from an adverse SBA affiliation determination, even if that determination is based on a finding that non-veterans control the company.
OHA’s decision in Size Appeals of G&C Fab-Con, LLC, SBA No. SIZ-5649 (2015) involved three VA RFPs for construction projects at national cemeteries. All three RFPs were set aside for SDVOSBs under NAICS codes designated with $33.5 million receipts-based size standards.
In September and October 2014, the VA announced that G&C Fab-Con, LLC was the apparent awardee under all three RFPs. Unsuccessful competitors filed SBA size protests, challenging G&C’s eligibility for the awards.
The SBA Area Office found that Dr. James Carter Griffith owned 51% of G&C and served as its Managing Member. The remaining 49% was owned by three members of the Creter family. The Creters also served as officers of G&C, holding the positions of Vice President of Construction, Vice President of Operations, Quality Assurance/Quality Control Manager, Senior Project Manager, Secretary, and Treasurer. The Creters controlled other businesses, collectively referred to as the “Creter companies” in OHA’s redacted decision.
The SBA Area Office determined that G&C was affiliated with the Creter companies under the “common management” affiliation rule. The Area Office emphasized that the Creters held key positions with G&C and therefore “have critical influence or the ability to substantively control” G&C. The Area Office concluded that G&C’s average annual receipts, when combined with those of the Creter companies, exceeded the $33.5 million size standard.
G&C filed a size appeal with OHA. Among its arguments, G&C contended that the Area Office’s holding was inconsistent with the findings of the CVE. G&C noted that, under the VA’s regulations, a company cannot be verified as a SDVOSB unless the CVE finds that service-disabled veterans “unconditionally control” the company. Because the CVE had verified G&C as a SDVOSB, the verification meant that Dr. Griffith unconditionally controlled the company–necessarily meaning that the Creters did not exercise control.
OHA rejected this argument. “VA reviews eligibility for VA’s programs, not questions of size or affiliation,” OHA wrote. “Accordingly, VA’s determinations have no bearing on the Area Office’s analysis.” OHA denied G&C’s size appeal.
When a company is verified by the CVE, it can be tempting for that company to assume that the verification will carry weight in other settings, such as in SBA size determinations. Not so. As the G&C Fab-Con decision demonstrates, the SBA is free, as part of a size determination, to determine that a SDVOSB is “controlled” by non-veterans–even if the VA has reached a different conclusion.