Legal Meets Practical

For anyone following this blog, you know there hasn’t been a post in a while, and I apologize for that. Our family welcomed its fourth member this September, and, silly me, I thought I could keep the blog going with two kids under two in addition to a busy law practice. But I’m back, and expect to see weekly updates as usual!

Here are two big ticket items I flagged in my absence. Both of these may affect you as a veteran small business owner, especially if you hold a schedule contract with the VA:

Are You Still An “SDVOSB?”

If you are a service-disabled veteran-owned small business (“SDVOSB”) competing in the federal marketplace, you have self-certified in Sam.gov as an SDVOSB, and you may have also undergone the VA’s official certification (“verification”) process to be included in its VetBiz registry. (The former certification renders you eligible for SDVOSB set-aside work for all agencies but the VA, and the latter certification renders you eligible for SDVOSB set-aside work for the VA). For years, the VA and the SBA have been collaborating on establishing a uniform set of rules applicable to both programs, and this finally went into effect as of October 1. Also, the VA has implemented regulations amending its process for verifying firms, providing for appellate review of its verification decisions, and adopting the SBA’s new rules on eligibility.

Here’s the rub for firms already taking advantage of SDVOSB status, particularly those in the VetBiz registry: the rules have changed. It is possible for a firm to be verified, but for a rule change to put that verification status in jeopardy (i.e., new eligibility specifications may require tweaks to the business in order to protect SDVOSB status). It is also possible that these rule changes positively affect SDVOSBs, such as by allowing flexibilities that did not exist before. (For instance, the rule changes allow for “first right of refusal” in transfer provisions across the board, when this was previously only permitted by the VA’s regulations). These changes can be taken advantage of by amending corporate documents, if one so desires.

Take a look at these eligibility changes. Do they affect you? 

Huge Win for VOSBs is Also Huge Defeat

I have covered the Kingdomware decision and its implications in at least four blogs, so I’m not going to beat a dead horse by going over it yet again. In short, in 2016 the Supreme Court affirmed that the VA must set aside FSS contracts for VOSBs/SDVOSBs when certain conditions are met. Recently, however, a federal judge criticized the Kingdomware mandate, hinting that Congress can (and should) correct the law due to the strain it places on the VA.

In Electa-Med Corp. v. U.S., COFC No. 18-927C (2018), a contractor protested the VA’s choice to outsource the selection of certain medical supplies to prime vendors participating in the Medical-Surgical Prime Vendor Next Generation (“MSPV”), requesting an injunction to stop the VA from doing so. In response, the VA cited difficulty in finding items necessary to support its healthcare network while also complying with Kingdomware.

In his opinion, Judge Bruggink of the CoFC ruled that under the law, the veteran plaintiffs were right on the merits. Not only had the VA violated the Kingdomware mandate, but also the Competition in Contracting Act (due to its failure to follow required procedures in issuing a Class Justification and Approval). However, Judge Bruggink declined to enter an injunction to prohibit the VA from its chosen practice, citing the public interest in ensuring high quality healthcare to veterans. He also stated:

The bevy of protests filed in this court and at the GAO since the Supreme Court’s decision in Kingdomware are evidence enough that these requirements are strict and difficult to follow in the mean and no doubt doubly so when the law requires that they be applied without fail or exception.  And yet the law remains. Only Congress has the kill switch.

This case is a huge blow because although the veteran plaintiffs won, they lost in a big way: even though Kingdomware was not followed, no corrective action was mandated because the court did not want to stand in the way of the VA’s ability to provide quality healthcare to veterans. While obviously there is a strong public interest in this concern, the issue this presents is that in the future, the VA may violate Kingdomware, and by the time the case/protest is decided, the court or GAO may decline to intervene due to similar public interest reasons. In other words, the protestor will win on the merits, but get nothing from it.

Since the Kindomware ruling in 2016, the VA has cited difficulty in complying with its mandate: having to resolicit contracts for failure to find two responsible SDVOSB offerors, the strain of performing market research to determine who will bid, and issues in implementing processes to comply (such as tiered evaluation). Meanwhile, the VOSB community continues to fight to hold the VA to the law.

After a Supreme Court victory, you would think the VOSB community would have the chance to rest. Who knew the battle was just beginning?

That’s it for now! See you next week!

*Did you find this article informative? If so, sign up for Sarah Schauerte’s weekly blog for veteran business owners at: https://legalmeetspractical.com. Remember to click the link sent to your email to activate your subscription!

A recent federal court ruling opens up the possibility for veterans to bring class action lawsuits against the U.S. Department of Veterans’ Affairs. This means that, when certain conditions are met, veterans need not go it alone when contesting the denial (or handling) of their disability benefits claims.

“This is a watershed decision, and its importance should not be diminished merely because the court declined to certify this proposed class,” Chief Judge Robert Davis wrote in the opinion. “On the contrary, the court’s decision will shape our jurisprudence for years to come and, I hope, bring about positive change for our nation’s veterans.”

In Monk, Jr., Et. Al., v. Robert L. Wilkie, the Court of Appeals for Veterans Claims (CAVC) reviewed a motion for class certification made on behalf of veterans with medical and financial hardship. (No. 15-1280). The petition alleged that the VA’s delay in adjudicating disability compensation benefits constituted a violation of the right to due process under the Fifth Amendment, and sought an order from the CAVC directing the VA to decide appeals within one year after a Notice of Disagreement is filed.

In order to certify the class under the applicable Federal Rule of Civil Procedure (Rule 23), the court needed to find that four requirements were met:

• Commonality – That there were questions of law or fact common to the class.
• Adequacy – That the representative parties would fairly and adequately protect the interests of the class.
• Numerosity – That the class was so numerous that joinder of all members was impracticable.
• Typicality – That the claims or defenses of the representative parties were typical of the claims or defenses of the class.

(Note that these four requirements spell out “CAN’T.” If each isn’t met, you can’t certify).

In this case, the CAVC rejected the petitioners’ argument that commonality was satisfied because all the class members have suffered the same injury – delay – due to the VA’s broken appeals system. The CAVC examined whether the delay in all the appeals was “unreasonable,” finding that certain factors stood in the way of finding such unreasonableness across the board (for example, some veterans experienced delays due to the VA’s duty to provide hearings, which slows the process). There was not a specific practice or policy resulting in delay set forth by the petitioners, which prevented them from meeting the commonality requirement. Accordingly, the CAVC denied the motion for certification (and did not proceed to address the other three requirements).

This case, while disappointing for the petitioners, is extremely important for veteran claimants going forward. It not only raises the possibility of class certification, but it provides a framework for those who may be contemplating pursuing similar relief. As we know, thousands of veterans are suffering the same issues across the board, and this case raises the possibility of them seeking relief as a united front.

And there’s power in numbers.

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I understand that working with the government comes with its ups and downs. Still, there should at least be a semblance of rules and order for that government, right?

I suppose not. Here are a few of the recent issues coming out of the VA’s Center for Verification and Evaluation, which evaluates business eligibility for the Veterans First Contracting Program. That program is designed specifically to give veteran business owners set-aside opportunities through the VA.

As I blogged about several weeks ago, some businesses have experienced removal of their NAICS codes from their VetBiz profile, which potentially jeopardized their eligibility for contracts (i.e., if they submitted a proposal where it was required that the NAICS code was listed, and they had no idea it had been removed due to a technical glitch, they might be out of the running). After that blog posted, I received a call from Chanel Bankston-Carter, who is the Director of Strategic Outreach and Communications of the VA OSDBU. I asked her whether the CVE was planning on sending out an email blast to alert business owners to the issue, and she said it was, as well as planning to post to the VA’s homepage. That was on August 10, and three weeks later it still hasn’t happened. 

Also, the CVE has recently decided to (secretly and without notification to veteran owners in any way whatsoever except for a denial letter) revise its own definition of “full-time.” I learned this very recently, and only through a conversation with a CVE examiner. I have been assisting with VA VetBiz applications for six years now (almost since the inception of the program), and this might be the biggest shock I’ve had yet.

Here’s the gist: as part of the eligibility requirements for the Veterans First Contracting Program (38 CFR Part 74), veteran business owners must devote “full-time to the business.” There is nothing in the regulation that distinguishes between startups and established businesses. However, apparently examiners are being told that owners of start-ups must show 15 hours of work per week, and owners of established businesses must show 40. There is no written guidance  provided for this, nor is it supported in the VA’s regulations. Nor is it on the CVE’s website, or in the Verification Assistance Briefs. Etc., etc. (Here is the current Verification Assistance Brief on full-time control posted to the CVE’s website. This does not provide for a specific number of hours to be devoted by veteran owners).

Has anyone heard the term “arbitrary and capricious?” An agency is not permitted to interpret its regulations in a way that is arbitrary and capricious, meaning that it has no reasonable basis. Here, there is no basis for the VA’s random (and unwritten) determination of the number of hours that qualify as veteran owner “full-time” involvement. If a company undergoing the verification process were to sue the VA for denying its application on this basis, I daresay they’d win.

Why does the CVE do this to itself? If it wants to develop a more robust definition of “full-time” and hold veteran owners to it in order to ensure the spirit and purpose of the program is protected, fine. But for there to be no written notice or justification to it – that’s not acceptable on a number of levels.

I hope I’m wrong on this. I hope I have been told incorrect information, and someone at the CVE can provide clarification or correction. (I am aware of several higher-ups involved with the CVE who read this blog). I’m asking them to do this, and if so, I will happily incorporate any feedback they offer. If it is true, however, veteran owners need to know about this requirement before they attempt to navigate the VetBiz maze and find that they are subject to literally invisible rules.

These developments remind me of a very old Saturday Night Live skit starring Lily Tomlin. She’s a phone operator, gleefully playing with the switchboard (“Uh, oh! We just lost Peoria. Oh, well.”) and repeating the mantra, “We don’t care! We don’t have to. We’re the phone company.”

The CVE appears to have the same mentality. It can do whatever it wants because it is the sole means to verify veteran business owners as eligible for set-aside work from the VA. Lately, it’s become much more difficult, and for reasons that aren’t justified. And that new website – goodness.

I have always seen the VA’s mission of helping veteran business owners as one of the most important in our government, and veteran owners are struggling because of problems that don’t have to be there. But what are we to do?

It was funny when Lily Tomlin said it, but not when the CVE does. Veteran businesses are on the line here.

*Did you find this article informative? If so, sign up for Sarah Schauerte’s legal blog on veteran business issues at: https://legalmeetspractical.com.

Today I attended a town hall on sole source contracts hosted by the VA’s Office of Small and Disadvantaged Business Utilization (OSDBU) and presented by Tom Leney (Executive Director of VA OSDBU). (This is part of a series of presentations intended to educate veteran business owners on federal procurement issues, others including VetBiz verification and tiered evaluation under Kingdomware).

While sole sourcing is a hot topic for veteran business owners, and I appreciate the effort of the town hall, the fact of the matter is that half an hour (including the time for questions) is simply not enough to provide significant value. I will say, however, that if one is interested in learning more about how to obtain a sole source award, the slides and the presentation provide good tools for independent research and effort. And we all like to believe that hard work is rewarded.

Sole sourcing is what it sounds like: awarding a contract to one contractor without conducting competition. As pointed out by Mr. Leney, there are two major requirements for sole sourcing to an SDVOSB or VOSB by the VA: 1) the contractor is a responsible source with respect to performance; and 2) the award can be made at a fair and reasonable price at the best value to the VA. While a determination that only one SDVOSB or VOSB can perform the work is not required, a written justification and approval must support the award. (See VAAR Parts 819.7007 and 7008 for further details). Sole sourcing by the VA versus other agencies also has a lower ceiling to permit a sole source contract ($5 million versus $6.5 million); and you have to be VetBiz-verified to be eligible.

Mr. Leney also noted that the sole source program is not a business development program, or otherwise tied to a business plan. In other words, unlike with the 8(a) program, where the government aims to grow and develop those businesses, a veteran-owned business must obtain a sole source contract solely by offering quality performance at a fair and reasonable price. As a business owner, he advises you to engage with a contracting officer to show him that you’re procurement-ready and thus a viable contender for a sole source award. **However, see the below comment from Mr. Miller regarding the appropriate point of contact.

This is a particularly useful approach at the end of the fiscal year, where the contracting officer might be looking for reasons to award a sole source contract. Know which factors to meet to play the game: your ability to offer a fair and reasonable price, and proof of your responsibility.

Consider: do you have evidence that your price is fair and reasonable (i.e., are you on a schedule, are you the incumbent for the work)? Also, what evidence do you have to show you can do the work (i.e., relevant past performance)? Don’t be afraid to respectfully educate your contracting officer/project manager as to what you bring to the table. 

VA sole sourcing – use tools at your disposal to show your business is a viable contender for an award.

As a note, Mr. Leney provided his office contact information for purposes of reaching out in the instance a contracting officer claims that it’s too much work to demonstrate that one business is the only one capable of doing the work (which is an incorrect justification for not sole sourcing a contract). His office number is 202-461-4600. Please comment below to share any stories of your experience in reaching out to Mr. Leney and his responsiveness/the help you received from his office.  (Also, upon request, I can render your comment anonymous before it is approved for publication).

Access the full recording of the town hall presentation here.

*Did you find this article informative? If so, sign up for Sarah Schauerte’s blog on veteran business issues at: https://legalmeetspractical.com. Remember to click the link sent to your email to activate your subscription!

If you know of a company listed in the VA’s VetBiz registry for service-disabled veteran-owned small businesses (“SDVOSBs”) and veteran-owned small businesses (“VOSBs”), please take a moment to forward this article. It may make a difference when they are bidding on set-aside contracts issued by the U.S. Department of Veterans Affairs (“VA”) in the near future.

Unbeknownst to business owners, some NAICS codes have been removed from public (or contracting officer) view. Even if a company properly added its NAICS codes, and even checked them recently in anticipation of responding to a solicitation, it might now search for itself in the VetBiz database and find no NAICS codes listed. This means that when bidding on the solicitation at issue, it might get booted for failure to have the applicable NAICS code listed at the time of offer.

This also has Kingdomware implications – contracting officers conducting their necessary market research under the Rule of Two will search the VetBiz registry for veteran-owned businesses and then not set aside the opportunity because there will be no search results! (For folks who don’t know what Kingdomware is, the very quick summary is that it’s a Supreme Court case that held that when awarding contracts off federal schedules, the VA has to set aside the opportunity for veteran-owned businesses when there is the reasonable expectation that two or more such businesses will bid, and the award can be made at a fair and reasonable price that offers the best value to the government).

I’ve been told by the poor folks at the CVE help desk that this issue has been caused by problems with SAM.gov syncing with the VetBiz system. It certainly isn’t the veteran business owner’s fault, as anyone in VetBiz knows they have to add at least one NAICS code to have a complete profile.

It is unclear how many businesses have been affected, but take a moment to search for your business and make sure that if a contracting officer is viewing your profile, everything is as it should be. Here’s the link. If your NAICS code is gone and you’re responding to a solicitation, inform the contracting officer and also submit a Help Desk support ticket (though if the CVE is aware of this issue, it should be frantically correcting this system-wide malfunction already).

Why has the VA not sent out an alert about this? Someone at the VA’s CVE needs to take a moment to put this exact same information into a quick blurb and blast it out to veteran business owners. As proud as I am of this blog, it can’t reach everyone.

I take no pleasure in another negative article about the VA’s VetBiz verification system. If there were an improvement to report, I would happily do so. (In fact, the Director of the VA’s Office of Small Disadvantaged Business Utilization’s Strategic Outreach Communications and Training contacted me today about sharing information regarding the new VetBiz verification system, and I look forward to reporting positive changes to expect). Right now, however, these changes affect our veteran business owners, and it’s important they be informed.

*Did you find this article informative? If so, sign up for Sarah Schauerte’s legal blog on veteran small business issues at: https://legalmeetspractical.com.

One price of doing business with the federal government is having to deal with inconvenience: bid protests, registering on federal sites, interfacing with government folks who have enormous discretion in fulfilling their official duties. We accept this as federal contractors, deciding it’s worth it in order to go after federal opportunities.

But did we really sign up for losing all our hair? I ask because the VA’s new website for registration of veteran-owned small businesses for set-aside work with the VA (the VetBiz registry) is beyond incomprehensible and riddled with glitches. Without a major overhaul, as someone who assists with this process on a very regular basis I cannot imagine how much time I will waste spinning my wheels and receiving errors like his one:

“You’re welcome,” says the CVE.

I had no real complaints with the old website. The worst issue I ever encountered was not being able to upload a document because of size issues. But in early May, the VA announced that it was going to revamp the VetBiz portal, warning that it would shut down on May 21 for approximately 30 days. If you wanted to submit your business for verification or reverification, you had to do it before the system went off the grid.

I could bore you with a lot more stories and details, but here are some of the issues I’ve encountered once the system went back up (which was much later than after the projected thirty days):

• My old account did not merge with the new account I was required to create. For weeks, when I accessed the new account, it was completely empty. Not a single business was listed. (I have a master account including all businesses where I am a representative). The help desk informed me that to be added, every single individual veteran owner would have to not only figure out how to access his/her account, but to add me as a representative (neither an easy feat). They also informed me that my old “legacy” account no longer existed so I wouldn’t get alerts. Both of these statements were incorrect, because just last week my new account suddenly has all businesses listed, and the entire time I couldn’t access it, I received alerts I could do nothing about (presumably coming from the phantom legacy system).
• Every time I log in to the new system, I have to enter a text code sent to my phone. I also understand that my password must be changed every thirty days. Thirty days! For veteran owners who don’t access their account often, I’m betting this means that every time they do, they’ll have to call the Help Desk to reset their password since it will have expired.
• The new system no longer provides ANY information in the email alerts sent to veterans. For instance, when you’re going through the verification process, the CVE sends out document requests. I used to be able to forward these to the veteran and give them the skinny on exactly what was being asked and let them know what not to worry about because I’d do a Letter of Explanation. Now, veteran owners receive a vague notice about a document request and have to log in to their account (good luck with that, in and of itself), to actually view the document request.
• It is not uncommon to receive an error message when navigating the new system or to encounter requests that are literally impossible to address. For instance, I was assisting a company that was told it needed to re-sign a form (the 8077). There was no mechanism to do that, and when I attempted to fill out a Help Desk ticket, I got the lovely message pictured above.

To save itself from. . . itself. . . the CVE recently sent out a Verification Extension Notification to everyone in the VetBiz system. This extends the verification period of everyone affected by these “upgrades” by 60 days. (Anyone going through the process to be verified, not re-verified, is out of luck). Great, but I have to think about the poor guy who told me about the twenty help desk tickets he submitted in trying to respond to document requests during the verification process. And I have to think about the longer-term problem. Even if the glitches in the system are fixed, the new system itself is. . . I have no words. And I consider myself quite verbose.

As we all know, the SBA is supposed to be taking over the VetBiz process soon. Sure, this has been in the works since at least 2013, but given the VA’s valiant attempts to dig its own grave in demonstrating its ability to improve the VetBiz process, maybe this will speed things up. Did you find this article informative? If so, sign up for Sarah Schauerte’s legal blog on veteran small business issues at: https://legalmeetspractical.com. Remember to click the link sent to your email to activate your subscription!

In the dwindling hours of Friday, here are three news items of note for veteran-owned small business owners:

VA Releases More Info On National Veteran Small Business Engagement (NVSBE) – Every year, the VA holds a conference for veteran-owned small businesses that seek to do work with the agency. This year, the focus of the NVSBE is on the Architecture, Engineering, Construction, and Facilities Maintenance (AECFM) industry. As cited on the website, the basis for the focused theme of the Engagement is to address VA’s most critical needs and performance gaps that are listed in VA’s Strategic Capital Investment Planning (SCIP) Process Project List. Access additional information regarding the conference, which takes place in New Orleans from October 31 through November 2, here.

CVE Website Working Again – After literally months of hiatus, it appears that the VetBiz portal, which businesses access in order to register to do set-aside work with the VA, is somewhat functional again. If you were waiting on the system upgrades in order to apply for verification or re-verification, now is the time to try again. Access the new VetBiz portal here. Also, here’s the VA’s fact sheet on how to get an account with the new system, as old accounts are now defunct.

VA to Hold Another Townhall on Tiered Evaluation – I covered tiered evaluation in detail last week. This is the VA’s means to complying with the Kingdomware mandate of setting aside schedule work for SVOSBs and VOSBs. If you have additional questions or concerns about this process, take advantage of the Q&A portion of the townhall that will be held on August 7 from 1:00 – 1:30 PM ET. Register here. (Do it soon, if you’re interested – the alert I received was for July 31, but when I tried to register, that time/date was gone).

That’s it and that’s all. Enjoy your weekend!

*Did you find this article informative? If so, sign up for Sarah Schauerte’s legal blog on veteran business issues at: https://legalmeetspractical.com. Remember to click the link sent to your email to activate your subscription!

The Small Business Administration’s (“SBA”) Boots to Business (“B2B”) program, established in 2014, is an entrepreneurial training program offered by the SBA as part of the Department of Defense’s Transition Assistance Program. It provides transitioning service members interested in exploring business ownership or other self-employment opportunities with the information to develop business plans, and it also connects service members to SBA resources partners and start-up capital.

Just yesterday (July 19), the SBA’s Office of Inspector General released an audit report that examined: 1) the efficiency of the program; 2) its achievement of goals and objectives; and 3) recipients’ compliance with agreement requirements.

To complete the audit, the SBA selected three cooperative agreement recipients with awards totaling $6.7 million, then interviewed SBA program officials and recipients (referring to resource centers, not individual veterans), as well as conducted site visits and phone interviews (of both program resources and participants) and attended day courses run by the program.

In a nutshell, while the SBA noted improvements, it also found several areas where the B2B program could be improved: the SBA did not meet established performance goals for the number of participants or the graduation rate from the 8-week course; the SBA did not ensure that recipients measured and reported performance outcomes; and the SBA was unable to determine what one recipient spent on the B2B program or to assess the validity of reimbursement requests (resulting in the OIG finding $419,912 in unsupported questioned costs).

To correct these issues, the OIG made seven recommendations. While SBA management concurred with six of seven of them, its planned actions resolved only three out of the seven. For additional detail, access the report here. Further details and planned actions are sure to follow, which is exciting given the important purpose of this program. We need more resources like this for our veteran entrepreneurs!

For those of you who are small business owners (or prospective small business owners), consider attending a two-day B2B program on your military installation. These are open to all transitioning service members and their spouses. Although this is a fairly new program that still needs to have the kinks worked out, that doesn’t mean that YOU as a veteran business owner can’t take advantage of the resources it has to offer. Access more information and the schedule of courses here. You can also email the program at [email protected] or call 202-205-VET1 (202-205-8381).

Did you find this article informative? If so, sign up for Sarah Schauerte’s blog on veteran small business issues at https://legalmeetspractical.com. Remember to click the link sent to your email to activate your subscription!