Legal Meets Practical

At first glance, a new proposed rule published in the Federal Register on September 28, 2017 sounds like great news for businesses that have been denied verification as veteran-owned small businesses (“VOSBs”). “Verification” is the term for approval as a VOSB or SD (“Service-Disabled”) VOSB in the VA’s VetBiz registry, where a firm must be listed to pursue a VOSB or SDVOSB set-aside opportunity listed by the VA.

In a nutshell, the rule establishes that the Small Business Administration’s Office of Hearings and Appeals (“OHA”) will have jurisdiction over such denials, just as it has jurisdiction over size and socioeconomic status appeals. However, there are two big takeaways from this rule: one, it is a proposed rule, meaning that nothing may come from it; and two, it requires an appellant to include a statement as to “why the cancellation or denial is in error.”

Let’s break down this requirement. First of all, it relates to a cancellation or a denial. Cancellations are simple – that’s when you get booted from the program because you no longer meet the eligibility requirements. A “denial,” however, is an ambiguous term. The VA currently boasts of a near-100% verification rate, because it does not count any business that withdraws in its denial rate. (Businesses receive a letter if they are found ineligible, which states that they may either receive a denial, or withdraw their application and reapply when they are ready). Because the proposed regulation at 13 C.F.R. 134.1103 provides specifically that only “denials” can be appealed, this means that a business has to accept the denial and then fight it at the appeal level. And if they lose, a six-month wait period applies to reapply.

Because the VA is accepting comments, the comment to make here is that appeals should not be limited to businesses that choose to accept denials, but to any business that receives a pre-decision or pre-determination letter finding it is ineligible for the VetBiz program.

Also, the appeals process doesn’t address the bigger problems with the VetBiz process. For example, if a business cannot begin the process because a 1% shareholder refuses to sign a form (To start the process, all business owners must sign a form called the 0877; and if someone refuses to do so, the veteran owner is out of luck. This is ironic considering that the VA is so fixed on ensuring the veteran owner controls his company, yet requires a form that enables a non-veteran owner to call the shots by refusing to sign and preventing the company from even starting the process).  Also, some businesses have to withdraw because the VA won’t budge on the provision of a “required” document, despite the availability of other documents containing the same information.

Those folks caught in limbo can’t appeal. Also, by giving standing only to those who have been flat-out denied, the six-month wait period if one loses the appeal deters businesses from accepting the denial and fighting it at the higher level. They’re more inclined to withdraw and then get back on the CVE-level merry-go-round.

Further, because the standard to win is showing “a clear error of fact of law” (a high bar), this automatically presents an uphill challenge given that the regulations for assessing verification eligibility are written so generally. In fact, the VA has been attempting to rewrite these regulations for years. Due to the adverse nature of comments to the rule, the VA recently withdrew the rule.

If you are a veteran-owned business and have an interest in the establishment of an appellate process for denials for VetBiz applications, please comment on this new rule. (Comments close on October 30). Keep in mind that this blog only highlights a few aspects of the rule – you may find another element you want to offer insight on based on a personal experience with verification. And, you owe it to yourself and to other veterans to speak up.

Instructions for commenting and the complete proposed rule may be accessed here.

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Everyone who deals with the federal government encounters red tape. It exists in every form – from the paperwork veterans complete to receive the benefits to which they are entitled, to the hoops we have to jump through to obtain federal certifications for our business. But I have to say – today it’s the small stuff that’s getting to me.

Many of those who follow this blog have been doing so for quite some time, so I feel comfortable in disclosing a fact that’s personal – I had a baby girl last November. Brooke has just begun to crawl, and everything goes in the mouth, so this legal blog has not been posted every week. It’s a matter of prioritizing, although I do enjoy writing this blog.

As a busy working mother, today I was annoyed to see that my email is having server issues. It has nothing to do with my account, which I suspected upon multiple calls to Godaddy, all of which were answered with a busy signal to indicate a widespread issue. I then went on their Twitter account and found this:

Thank you! I’m not happy that my email is down, but considering this has happened once before, a year ago, I can live with the minor inconvenience today. And by posting this message front and center, Godaddy has saved probably thousands of its clients from calling in, stressing about whether this malfunction is their unique problem.

Meanwhile, there’s the U.S. Department of Veterans’ Affairs’ (VA) Center for Verification and Evaluation (CVE). The CVE issues the verifications (certifications) for veteran-owned companies to pursue set-aside work with the VA, and I deal with these folks a lot.

Two weekends ago, I was on my computer, and I received ten emails from the CVE in succession. All of them contained a boilerplate message that someone had been removed as a representative from the business’ account. (Since I help with verifications, I’m listed on a number of accounts). It wasn’t me – it was the business owner, who would have received the same message. Immediately, I forwarded the message to each owner to tell them it was surely a glitch and that I hadn’t done this but would check on it for them. (I did this right away because I didn’t want them thinking I’d taken them off their own account!).

That week, I ended up talking to the help desk and realized that the message was sent in error – hundreds had been sent (that’s probably a conservative estimate), but no one had actually been removed from their VA account. Of course, no one would know this unless they tried logging in, and why would they do so if they thought they’d been removed? The CVE Helpdesk person noted that “most business owners had already called in” by that point.

If the CVE knew that hundreds of business owners would think they’d been removed from their own accounts, and would inevitably be calling in about this, jamming up the Helpdesk line (and making the VA’s life harder, too), why on earth couldn’t they put a note of the error on the wesbite? This isn’t as bad as the time a huge glitch sent out emails telling businesses they’d been booted from the program, but it’s still a stressful experience. And unnecessary too, given that the business owners hadn’t even been removed! Instead, the CVE did nothing, and likely collective days were wasted when adding up all the time spent by veterans trying to figure out what happened and Helpdesk folk fielding their phone calls.

I understand this is the government we’re talking about, but what kind of red tape has to be cut through to post something simple on the website? And if not the website, on Twitter or LinkedIn? (I checked both and did not see anything about the emails sent in error). Small business owners, myself included, have many tasks cluttering their day, and it’s frustrating to see how many hours were wasted when a quick post (or what about a follow-up boilerplate email?) could have saved so much time.

I know we’re dealing with the government, but is it red tape causing issues like these, or something else?

What is a frustrating, avoidable (but not) experience you’ve had with the government?

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On September 1, 2017, the U.S. Court of Federal Claims (“CoFC”) granted an AbilityOne vendor’s request to stay the relief granted in a landmark case confirming that veteran-owned businesses take priority over AbilityOne vendors at the U.S. Department of Veterans Affairs (“VA”). As such, the VA may not procure eyewear products or services in VISNs 2 or 7 outside of the AbilityOne Procurement List until the appeal is resolved. (PDS Consultants, Inc. v. U.S., No. 16-1063C).

As many veteran-owned businesses competing in federal space are aware, a recent CoFC decision issued on June 30, 2017 held that at the VA, veteran-owned small businesses (“VOSBs”) and service-disabled veteran-owned small businesses (“SDVOSBs”) trump AbilityOne vendors (employers of those who are blind or have other significant disabilities). Even if a product or service is on the AbilityOne Procurement list, the “Rule of Two” (i.e., that the VA must set aside the procurement for VOSBs or SDVOSBs when a contracting officer had a reasonable expectation that he will receive offers from two or more qualified VOSBs at fair market prices) still applies.

In the case at issue, the VA had decided to procure eyewear products and services from an AbilityOne nonprofit for four Veterans Integrated Service Networks (“VISNs”) without performing a Rule of Two analysis. Eyewear products and services for VISNs 2 and 7 were added to the AbilityOne Procurement List before 2010. VISNs 6 and 8 were added to the AbilityOne Procurement List after 2010. In its protest PDS, a SDVOSB, argued based on the plain language of the Veteran Benefits Act (“VBA”) and the broad reading to the language of the VBA given by the Supreme Court in Kingdomware, that the VA’s decision to continue to enter into new purchasing agreements for eyewear products and services with AbilityOne nonprofits for VISNs 2, 6, 7 and 8 before performing a Rule of Two analysis was inconsistent with the VA’s obligations under the VBA. PDS argued in its bid protest that before the VA could continue to procure eyewear products and services through new agreements with AbilityOne nonprofits for VISNs 2, 6, 7 and 8, the VA had to first apply the Rule of Two to see if the opportunity should be a VOSB/SDVOSB set-aside.

The court entered judgment in favor of PDS and denied the government and the AbilityOne contractor’s (Wilson-Salem Industries for the Blind, Inc., DBA “IFB”) motion for judgment upon the administrative record on June 30, 2017. Before fashioning injunctive relief, the court learned that a bridge contract with IFB for VISN 2 was set to expire on September 30, 2017 and that the Blanket Purchase Agreement with IFB for VISN 7 would expire in July 2017, but that there were several option periods available under the agreement with IFB for VISN 7. In its judgment, the CoFC stated that the VA would be required to perform a Rule of Two analysis with regard to VISN 2 before the bridge contract with IFB expired on September 30, 2017. With regard to VISN 7, the court determined that the VA would be required to perform a Rule of Two analysis before December 2017, and, if the Rule of Two is satisfied, award a contract before January 31, 2018.

With a reported 52 jobs and $15.4 million in avenue revenue on the line, IFB filed an appeal before the U.S. Appeals Court of the Federal Circuit on July 31, 2017. It then asked the CoFC to stay its decision, meaning that the VA may not procure eyewear products or services in VISN 2 or 7 outside of the AbilityOne Procurement List until the appeal is resolved. As this motion was granted on September 1, this means that so long as the appeal is up in the air, IFB’s jobs and revenue from the contracts at issue are protected. Also, the VA may extend its contract as permissible under option years.

It’s as if PDS has won an Olympic medal but doesn’t yet get the glory because a competitor cried foul. Until the referees are done recalculating and reevaluating, second place keeps the trophy cup for now.

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