VA SDVOSB Protests: New Rule Allows Appeals

The VA SDVOSB protest process has been criticized by some (including a certain Kansas-based government contracts attorney) for failing to offer a right of appeal.  Under the VA’s rules, if a protested company was found to be ineligible as a SDVOSB, its only option was to sue the VA in federal court–an expensive and time-consuming proposition.

Until now.

Today, the VA published an interim final rule, under which a protested SDVOSB has the right to an appeal within the VA.  The new system isn’t perfect, but it’s a step in the right direction.

When the VA first established its SDVOSB program, it contemplated entering into an interagency agreement with the SBA, under which the SBA would consider and decide SDVOSB protests.  Pending the negotiation of the interagency agreement, the VA’s regulations provided that the Executive Director of the Office of Small and Disadvantaged Business Utilization would decide SDVOSB protests.  No appeals were permitted from the OSDBU’s SDVOSB protest decisions.

After nearly four years, the VA and SBA had not entered into the interagency agreement.  Meanwhile, a number of protested SDVOSBs complained about the lack of an appeal right within the VA’s SDVOSB protest system.  The absence of an appeal right was all the more striking when compared to the SBA’s SDVOSB program, which provides a right of appeal to the judges of the SBA Office of Hearings and Appeals.

In the new rule, the VA formally scrapped the plan to refer protests to the SBA.  According to the rule, the VA has “reconsidered” the arrangement and “determined that SDVOSB and VOSB status protest adjudication shall remain within VA.”  The VA states that its decision was based on the “unique” nature of its SDVOSB program, as well as the experience that the VA has developed in adjudicating such protests.

As part of its decision to maintain jurisdiction over SDVOSB protests, the VA has adopted a new right of appeal.  Under the VA’s new procedures, initial protests will be decided by the Director of the CVE.  If a protest is sustained, the protested company may then appeal the decision to the Executive Director of the OSDBU.

A SDVOSB appeal must be received by the Executive Director of the OSDBU within five business days after the appellant receives the initial decision.  According to the rule, an appeal “may be filed by hand delivery, mail, commercial carrier, or facsimile transmission.”   Once a timely appeal is filed, the Executive Director will make a decision within 10 business days “if practicable.”

The VA’s new rule is effective immediately.  However, because it is an “interim” final rule, the VA will receive public comments and may make changes to be published in a subsequent final rule.

In my mind, the interim rule is an important step forward for the VA.  Until Congress gets its act together and puts an end to the ridiculousness of two separate SDVOSB programs, it is important for SDVOSBs to have commonsense due process protections within each of the government’s SDVOSB programs.  By adopting an internal right of appeal, the VA has increased the fairness of the SDVOSB protest process, and should be commended for it.

However, the VA’s proposal is not without flaws.  Three immediately jump to mind.

First, unlike under the SBA’s program, VA SDVOSB appeals will not be decided by independent judges.  That’s not to say that the Executive Director won’t endeavor to reach fair rulings, but assigning an independent judge to hear appeals would strengthen the process.

Second, nothing in the proposed rule indicates that appeal decisions will be published.  That is unfortunate, because written appeal decisions can provide an important window into how an agency is interpreting its rules. SBA OHA’s published decisions have helped many small businesses better understand the nuances in the SBA’s size and SDVOSB rules, and the VA would better serve its own constituency by publishing its appeal decisions.

Third, the VA apparently does not intend to allow appeals to be filed by email.  In an era of smart phones and broadband, SDVOSBs should not have to seek out the neighborhood UPS Store to file appeals using that awful, unnecessary holdover technology of the 1980s, the fax machine. Although the rules allow filing by mail and common carrier, it will be tough for SDVOSBs to rely on those options with only a five-day appeal window.  The absence of an email option is especially strange because the VetBiz system is electronic.  Hopefully, the VA will add an email option in the final rule.

Initial flaws aside, the new rule is another sign of progress for the CVE. Perhaps Congress won’t need to transfer the verification program to the SBA, after all.

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