Legal Meets Practical

by Sarah Schauerte

In a classic case reminding us not to count our chickens before they hatch, a joint venture under the Small Business Administration’s (SBA) 8(a) Business Development (BD) program lost a size determination protest because it submitted a proposal a mere two days before receiving the SBA’s official stamp of approval (Lukos-VATC JV, LLC, Appellant, SBA No. SIZ-5532, February 6, 2014).

Rules exist for a reason, and I understand why this determination was reached, but talk about a technicality…

This size determination involved a joint venture between two companies: Lukos, LLC (Lukos) and Visual Awareness Technologies and Consulting, Inc. (VATC). Lukos is a participant in the SBA’s 8(a) program, and the two companies executed a mentor-protege agreement where VATC agreed to act as Lukos’ mentor. If the SBA were to approve the mentor-protege relationship, this meant the companies could joint venture as a “small” business for government contracts because such arrangements are an exception to the SBA’s rules on affiliation. (Generally, even if a business is small, if it has affiliates, the receipts/number of employees of its affiliates are also counted to determine whether the business still qualifies as “small.”).

The Lukos-VATC joint venture submitted its mentor-protege application and supporting documentation to the SBA on March 18, 2013. While waiting for approval, the U.S. Special Operations Command issued an 8(a) BD set-aside solicitation seeking training and exercise support services.

It had already been waiting three months for approval, and the joint venture wanted to pursue this opportunity. It contacted the SBA on June 10, 2013 to check on the status of its application. It was told by an SBA business operations specialist  that it had been approved. Hurrah! The joint venture raced to get its proposal submitted by June 17th, 2013, and lo and behold, it was the successful offeror.

But what’s this? A size protest by an unsuccessful offeror? “Oh no,” says the Lukos-VATC joint venture. “We’re in an SBA-approved mentor-protege relationship. We fall under the exception to affiliation so we’re still ‘small.'”

“Nope,” says the SBA Area Office. It found the two separate companies affiliated, and not qualifying under the mentor-protege exception to affiliation, because the SBA had not approved the mentor-protege agreement until June 19, 2013…two days after the joint venture submitted its proposal.

In upholding this decision on appeal, the SBA Office of Hearings and Appeals (OHA) noted that there are several recognized exceptions to the rules on affiliation. One of these is joint ventures formed by 8(a) BD program mentor and protege firms. However, since the paperwork did not go through until June 19, that meant that until that time, the two companies were considered to be affiliated. Under the SBA’s rules, affiliates’ receipts are counted together when making a size determination (which is based on size at the time of the offer), and together, the two businesses were not “small.”

The Lukos-VATC joint venture tried to argue an estoppel theory – that it relied on the representations of an SBA employee. However, this argument failed for two reasons: 1) because that employee did not have the authority to approve the application; and 2) because estoppel is very, very hard to prove – a business have to show “affirmative misconduct” or “intentional misbehavior” by a government official. In this case, while very unfortunate that the Lukos-VATC joint venture was given incorrect information, the specialist’s acts didn’t rise to the level to estop the SBA from applying its regulations to find the two companies affiliated as of the time of the contract offer.

In the end, the Lukos-VATC joint venture walked away empty-handed, despite having what looked to be a very strong start to its mentor-protege relationship.

This is a hard, infuriating lesson, but it reinforces an old axiom in government contracting: always get the official word, and get it in writing.

If you’re interested in learning more about the SBA’s 8(a) BD mentor-protege program, click here.

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by Sarah Schauerte

A checklist to get sued:

1) Don’t train your employees about the Americans with Disabilities Act (ADA).

2) When you violate the ADA, make sure it’s by barring entry to your business to a veteran with an obvious disability.

3) Make sure the service dog you’re banning is an adorable yellow Labrador.

4) Do it in Texas, an extremely veteran-friendly state.

Check, check, check and check! Although Starbucks hasn’t gotten sued…yet. It has merely gotten some really, really bad press.

According to the different accounts of a story that was posted around the country earlier last week, Mr. Yancy Baer, a veteran of the Iraq war, tried to pop into a Starbucks on Memorial Drive in San Antonio. Mr. Baer had the lower half of his left leg amputated due to bone cancer, and he uses a yellow Labrador, Verbena, as his service dog. A Starbucks employee stopped him, and told him he couldn’t bring his dog into the store.

Mr. Baer is missing part of his left leg. I’d like to stress that again.

Embarrassed by the confrontation, which was in front of a store full of customers, Mr. Baer started shaking. He tried to explain to the sassy barista that Verbena is his service dog. When pressed, he described what Verbena does to assist him.

The response?

“Why can’t you do that for yourself?”

Adding to the terrible nature of this story is the reason Mr. Baer was in San Antonio – to give a speech on behalf of the service dog organization where he obtained Verbena – Canine Companions for Independence, a California-based non-profit organization that is the largest provider of assistance dogs in the United States.

In the end, another employee intervened and helped Mr. Baer, but I doubt he was able to enjoy his coffee. I’m willing to bet he took it to go, just to get the heck away from that barista.

The story didn’t end there for Starbucks. Somehow, it was repeated and picked up by the local television station, and then national channels. I personally found the story on a LinkedIn forum (U.S. Military Veterans Network). San Antonio is a very pro-veteran area, and I wouldn’t be surprised if there weren’t picketers outside that particular store. (News stories helpfully shared that it is a Starbucks on Memorial Drive).

Last summer, I blogged about a man who was denied entry to the Texas state legislature with his service dog, Piggy, a pug used to help him with his post-traumatic stress disorder. In that article, I discussed how important it is for businesses to know that when it comes to service dogs, under the ADA a private business is only allowed to ask two questions: 1) Is the animal required because of a disability? and 2) What work or task has the animal been trained to perform? An employee of a private business may not ask about the nature or extent of an individual’s disabilities, and he may not ask for documentation proving that the animal is in fact a service dog. If an employee crosses this line, the business risks a lawsuit.

In this instance, while Mr. Baer has publicly stated that he has “no hard feelings” towards Starbucks, the fact of the matter is that he had to have spoken up to someone, or the story never would have gotten press. And that press has surely led to a lot of customers boycotting that particular Starbucks. All because of one employee’s nasty faux pas.

Well, folks. One faux pas can cost you.

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by Sarah Schauerte

[Update on February 18, 2014 – It’s official! Obama signed the bill to reverse the pension cuts for our nation’s veterans. Access the full story at: http://www.cbsnews.com/news/obama-signs-debt-ceiling-military-pension-bills/].

On Wednesday, February 12, the United States Senate sent legislation to President Obama’s desk that would repeal the over $6 billion cut to military pensions. Someone, hand that man a pen!

This move comes as a great relief to veterans organizations such as the Iraq and Afghanistan Veterans of America (IAVA), who lobbied tirelessly to undo this aspect of the December budget deal. It doesn’t seem like Congress needed much persuading, however, as the bill passed overwhelmingly in the Senate in a 95-3 vote. The day before, it swept through the House at 326-90.

So what was at stake here? The December budget deal reduced the cost of living adjustment (COLA) to non-service-disabled military retirees under age 62 by one percentage point below inflation. While one percentage point might not seem like a lot, the cut matters to a veteran who struggles to make ends meet with pension as his sole source of income. A cut would mean he couldn’t buy a load of groceries each month, or might fall short on his mortgage. In all, 750,000 of our nation’s veterans would have been impacted. Thankfully, this is now no longer the case.

But as the saying goes, there ain’t nothing for free. The cost of this reversal is offset by extending the sequester on Medicare spending by one additional year, to 2024. Also, some veterans advocates criticize the bill because only current service members and veterans will see the reversal – the cut still applies to service members entering the military after January 1, 2014. 750,000 veterans who receive pensions, however, can finally breathe a sigh of relief.

It’s unfortunate our veterans even had to worry about the reduction, but that’s fodder for another blog.

To learn more about the COLA for military members, visit Military.com’s website here. Military.com is a great go-to website for news, information, and resources affecting military members, and it provides many helpful articles relating to military pay.

Did you find this article informative? If so, sign up for my weekly blog on veterans issues at: https://legalmeetspractical.com. Remember to click the link sent to your email to activate your subscription!

by Sarah Schauerte

Last week I blogged about the Center for Verification and Evaluation’s (CVE) decision to remove all “fee-based” counselors from its website, arguing that the regulation they referred to in support of this move was inapplicable. This topic was also covered in the Washington Business Journal, and I understand from various sources that Tom Leney addressed it in the Tuesday VetForce meeting in Washington, D.C.

I completely agree that veterans need to be shielded from “experts” who are predatory. If you are charging four grand to put together a VetBiz application, you one hundred percent should not be listed as a counselor on the CVE’s website. (You should also be shipped off to an island, with a lampshade on your head). However, the CVE is removing not only those folks, but also individuals who are helping with VetBiz applications on a cradle-to-grave basis.

There’s also a disconnect with what qualifies as “counselor services.” The CVE is removing anyone who they say is charging for “counselor services.” I submit that preparing and submitting an entire application for a business – which can take a very considerable amount of time – is well out of the purview of what qualifies as “counselor services.” If you as the veteran business owner call someone listed on the counselor site and ask them to rewrite your operating agreement, prepare your Letters of Explanation, act as your representative, and interface with the CVE – all for free – they will politely and quickly get off the phone with you.

To protect these veteran businesses, rather than cite to an inapplicable provision and remove anyone who charges a fee in any context, the CVE should borrow from the Small Business Administration (SBA). After all, the Department of Veterans’ Affairs (VA) already gleaned some of its VetBiz provisions from the SBA regulations.

If an applicant applies to the SBA’s 8(a) program and hires someone to help with the application, there are provisions intact to make sure that individual is not being taken advantage of. Under 13 CFR 124.4, the SBA imposes restrictions on fees charged for assistance with an 8(a) package, holding that the fee must be reasonable in light of the services performed. In addition, with the package, a form must be included that discloses how much that representative is paid and what the services included. Why not impose the same requirement for VetBiz services?

Also, the VA already requires such disclosures as it relates to its disability compensation claims. Fee-based attorneys and agents must file a copy of the fee agreement with both the regional office and the Office of General Counsel. This way, it can be reviewed for reasonableness. Then, when a claim is granted, the claimant has the opportunity to contest the fee.

These are checks and balances that are already in place to help protect business owners and veterans from being taken advantage of. If the CVE has the same concerns – which it should – it should require that anyone receiving fees for assisting with a particular VetBiz application disclose the fee agreement to the CVE. Also, it should consider adopting a regulation similar to the SBA’s 13 CFR 124.4, which outlines the limitations of fee-based representation. Protect our vets!

Right now, however, the CVE isn’t doing that. Technically speaking, a veteran business owner who doesn’t know any better can still go online and hire a company that will happily take an exorbitant fee for assisting with a VetBiz package. There’s no accountability because no fee agreement has to be approved by the CVE.

Instead, the CVE has taken the route of removing all “fee-based” counselors from the website, never mind that counselors such as myself never charged for questions or calls – even if the issue was nuanced or took a bit of legwork to research. I was happy to do that – I got into this business because my dad was a veteran and a small business owner – and now I don’t have that visibility.

This topic has received considerable attention in recent weeks, so change may actually be effected. Stay tuned….

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by Sarah Schauerte

Fifteen years ago, Bill Clinton amused millions with his carefully worded phrase, “it all depends on what the meaning of the word ‘is,’ is.” Well, this year the Department of Veterans Affairs (VA) is trying a similar shtick. Only in this situation, no one’s laughing.

A few months ago, the VA announced its initiative to end its disability claims backlog. This included giving priority to older claims and requiring claims adjusters to work overtime. This was in response to the heated criticism levied by organizations and individuals across the board, including highly publicized stories about veterans facing foreclosure, bankruptcy, and even committing suicide while waiting to receive their benefits.

“We’re taking care of it,” the VA claimed. “No more backlog. Full speed ahead!”

Here’s what a lot of people don’t know. The VA defines “backlog” as any claim where an initial decision has not been reached within 125 days . The VA disability claims backlog does not include any claim where a denial has been rendered, and the veteran is waiting in one of two lines: for review by his Regional Office, or for his claim to make its way up to the Board of Veterans’ Appeals. It also does not include aid and attendance claims, spousal claims, and claims for increases or total disability based on individual unemployability (TDIU).

When the VA began its initiative, the  disability backlog had reached over 600,00 claims, with over 900,000 total claims pending in the system. Now the backlog has decreased by over 36.5%. That’s a great statistic to release to the public, but the fact of the matter is that the focus on the backlog has diverted resources to resolve the hundreds of thousands of claims that are not categorized as “initial” claims for purposes of the backlog. For example, in a recent call to the Roanoke Regional Office, I was told that it is now taking approximately one year to resolve a claim for total disability based on individual unemployability, and two years to resolve an appeal once a notice of disagreement is received. The wait times were considerably lower prior to the commencement of the backlog initiative.

In general, while the VA disability claims backlog initiative is a positive development, the statistics released are misleading because they don’t shine the light on the bigger picture. Pending initial claims are going down, but the line for the appeals process is growing longer.

There’s also the point that the focus on quantity may come at the cost of quality. Those veterans join the long appeals queue.

Also, research by veterans organizations such as the Iraq and Afghanistan Veterans of America (IAVA) show that the backlog initiative is falling short of its long-term mission. The VA is unable to determine which elements of its backlog initiative are working (and which aren’t), and there isn’t a concrete plan for further progress after 2015. In fact, IAVA compiled a report that: defines the VA disability compensation system and its backlog; considers the challenges to the VA disability compensation system; and provides recommendations on how to move the system forward to prevent future backlogs. I highly recommend that every veteran or veteran family member in the claims process read this report. Not only does it suggest recommendations with “teeth” for ending the backlog, but it provides extremely helpful information related to the claims process. This includes relevant statistics and a comprehensive overview of the timeline.

Reducing the backlog by 36.5% sounds impressive. But this progress doesn’t help the veterans who are in the appeals process, waiting for compensation they need to maintain a quality of life. And with so many soldiers leaving the military and filing claims, claims adjusters will continue to be overburdened. IAVA is right. For the VA’s initiative to truly make an impact, mechanisms for a long-term solution must be in place. The question is whether the VA is capable or equipped to implement such mechanisms.

Access IAVA’s report on the VA disability claims backlog online at: http://issuu.com/iava/docs/2014battletoendthevabacklog_print.

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