SBA Proposes Rules For SDVOSB/VOSB CVE Protests & Appeals

The SBA has proposed rules to enable contractors to file protests with the SBA Office of Hearings and Appeals challenging the SDVOSB or VOSB status of a company included in the VA’s CVE VetBiz database.  The same set of proposed rules would allow a contractor to appeal to OHA if the VA denies the contractor’s application for inclusion in the CVE database, or cancels an existing verification.

The proposed rules, once finalized, will offer important new protections for SDVOSBs and VOSBs and are the first official step in implementing Congress’s mandate that the SBA and VA consolidate their SDVOSB eligibility requirements.

The SBA’s proposed regulations were published in the Federal Register on September 28, 2017.  The proposed rules fall into two broad categories: CVE protests and CVE appeals.

CVE Protests – Proposed Rules

The SBA proposes to give OHA jurisdiction to decide SDVOSB and VOSB eligibility protests for VA procurements.  These rules don’t apply to SDVOSB protests for non-VA procurements, which will continue to be evaluated under the SBA’s existing rules.

Here are some of the highlights of the SBA’s proposed rules governing CVE Protests:

  • Who can file CVE Protests?  The proposed rules allow “the Secretary of the VA, or his/her designee” to file what the SBA calls a “CVE Protest.”  Additionally, if a small business is awarded a VA contract, “the contracting officer or an offeror” can file a CVE Protest.
  • When are CVE Protests due?  The VA can file a CVE Protest at any time.  If a protest is filed in connection with a VA contract, “[a]n offeror must file a CVE Protest within five business days of notification of the apparent awardee’s identity.”  A contracting officer, on the other hand, “may file a CVE Protest at any time during the life of the VA contract.”
  • Where are CVE Protests filed?  Protests by private parties must be filed with the appropriate contracting officer, who will refer the protest to OHA.  Contracting officers and the VA may file protests directly with OHA.
  • What are the contents of a CVE Protest? A CVE Protest “must be in writing.”  While there is no required format, the protest must contain the solicitation or contract number, if applicable, the name and contact information and signature of the protester and/or its attorney, and [s]pecific allegations supported by credible evidence that the [protested] concern does not meet the eligibility requirements for inclusion in the CVE database.”  OHA will dismiss a protest that fails to meet this “specificity” threshold.
  • When must the protested company respond?  The protested concern, the VA, the contracting officer and “any other interested party” may respond to a protest or supplemental protest.  The response is due “no later than 15 days from the date the protest or supplemental protest was filed with OHA.”
  • What is the burden of proof?  Once OHA has determined that the protest is timely, specific and within OHA’s jurisdiction, “[t]he protested concern has the burden of proving its eligibility, by a preponderance of the evidence.”
  • What about discovery?  Nope.  “Discovery will not be permitted in CVE Protest proceedings.”  However, “the Judge may investigate issues beyond those raised in the protest and may use other information or make requests for additional information to the protester, the protested concern, or VA.”  OHA will only hold an oral hearing in “extraordinary” circumstances.
  • What happens if OHA sustains a CVE Protest?  If OHA sustains a protest before award of a contract, the contracting officer cannot follow through with the award.  If the protest is sustained after award, “the contracting officer shall either terminate the contract or not exercise the next option.”  Additionally, the VA must immediately remove the company from the CVE database, and the company “may not submit an offer on a future VA procurement until the protested concern reapplies to the Vendor Information Pages Verification Program and has been reentered into the CVE database.”
  • Can OHA’s decision be appealed?  No.  OHA’s decision is “final agency action,” and can only be formally challenged in federal court.  However, there is a process to request reconsideration of the decision.  A request for reconsideration “must clearly show an error of fact or law in the decision.”  An OHA judge “may also reconsider a decision on his or her own initiative.”

For those familiar with the SBA’s size, SDVOSB and WOSB protest processes, these rules will look rather familiar.  Most of the proposed rules for the CVE Protest process don’t vary too much from that of SBA’s other protest processes.  Perhaps the most significant difference is that CVE Protests will be decided directly by OHA rather than another SBA office.  Under current law, size protests are decided by SBA Area Offices; WOSB and non-VA SDVOSB protests are decided by the SBA’s Director of Government Contracting.  OHA serves an appellate function for these protests but will decide CVE Protests directly.

CVE Database Appeals – Proposed Rules

For years, veteran-owned firms have complained that they cannot appeal to an administrative judge if their CVE application is denied or cancelled.  The SBA’s proposed rules would allow those companies to appeal directly to OHA.

Here are some highlights of the SBA’s proposal for CVE Appeals:

  • Who can file a CVE Appeal?  According to the proposed rule, “[a] concern that has been denied verification of its CVE status or has had its CVE status cancelled may appeal the denial or cancellation to OHA.”
  • When are CVE Appeals due?  A CVE Appeal must bee filed “within 10 business days of receipt of the denial or cancellation.”  OHA will dismiss an untimely CVE Appeal.
  • Where are CVE Appeals Filed?  CVE Appeals are filed directly with OHA.  (The proposed rule, oddly, doesn’t seem to explicitly say so, but instead refers to another OHA regulation, 13 C.F.R. 134.204, regarding filing).  Copies of the appeal must be served on the VA.
  • What are the contents of a CVE Appeal?  Like a CVE Protest, a CVE appeal must be in writing, but there is “no required format.”  However, the CVE appeal must contain: (1) a copy of the denial or cancellation and the date the appellant received it; (2) a statement of why the denial or cancellation is in error; (3) “any other pertinent information the Judge should consider,” and the contract information and signature of the appellant and/or its attorney.
  • Who can respond to a CVE Appeal?  The VA may respond to a CVE Appeal.  The VA has 15 days after OHA files a “notice and order” acknowledging the appeal in which to file a response.
  • What is the burden of proof?  To win a CVE Appeal, the appellant has the burden of proving, by a preponderance of the evidence, that the denial or cancellation “was based on clear error of fact or law.”
  • What about discovery?  Like CVE Protests, there is no discovery in CVE Appeals.  OHA will not hold oral hearings.
  • When is the decision due?  OHA “shall decide a CVE Appeal, insofar as practicable, within 60 calendar days after close of the record.”  The record closes on the date the VA’s response is due, meaning that OHA judges will attempt to issue their decisions within 75 days of acknowledging the appeal.  But this isn’t a hard deadline.
  • What happens if OHA grants a CVE Appeal?  If OHA grants a CVE Appeal, the VA “must immediately reinstate or include the appellant, as the case may be, in the CVE database.”
  • Can OHA’s decision be appealed?  No.  As is the case for CVE Protests, OHA’s decision is “final agency action,” and can only be formally challenged in federal court.  However, there is a process to request reconsideration of the decision.  A request for reconsideration “must clearly show an error of fact or law in the decision.”  An OHA judge “may also reconsider a decision on his or her own initiative.”

What Happens Next

Don’t lose sight of the fact that these are proposed rules, not final rules.  Until the rules become final, contractors won’t be able to file CVE Protests or CVE Appeals with OHA.  And, of course, the final rules may vary from the proposed versions.

The public is invited to comment on the proposed rules.  Comments are due by October 30, 2017.  To comment, follow the instructions at the beginning of the Federal Register entry.