by Sarah Schauerte
I truly want the Veterans First Contracting Program to fulfill its mission of helping veteran-owned small businesses. But protests like this one worry me that the program is sinking instead of swimming.
On January 5th, the second-lowest bidder for a VA contract appealed the Center for Verification and Evaluation’s (“CVE”) denial of its status protest to the Executive Director of the Office of Small and Disadvantaged Business Utilization (“OSBDU”). Harbor Services, Inc. was relying on a determination made by the Small Business Administration (“SBA”) on December 12, 2013. The SBA had concluded that the awardee (Nacci Construction Services, Inc., or “Nacci”) and another corporation, Coleman Construction, Inc. (“CCI”) were affiliated. Even so, the CVE denied the initial status protest, deciding that the evidence showed that the veteran still controlled Nacci (ie, that no undue dependence on CCI by Nacci existed).
In affirming the initial decision of the CVE, the Executive Director again found that Nacci’s and CCI’s relationship did not make Nacci ineligible for the Veterans First Contracting Program. It found no issues with Nacci’s corporate documents (which enabled the veteran to control the business decisions), and it also found it acceptable that a non-veteran (Mr. Coleman, the owner of CCI) possessed a critical license required for Nacci to perform jobs. Also, it did not find undue reliance despite the fact that CCI had served as a subcontractor on 12 of Nacci’s last 32 jobs.
Again, this is all despite the fact that the SBA had already determined that the two corporations were affiliated for purposes of determining size. Keep in mind that in determining affiliation, the CVE has adopted the same definition used by the SBA. So how was this affiliation not enough to disqualify Nacci from the Veterans First Contracting Program and the solicitation?
This isn’t a rhetorical question. I really want to know. Under the CVE’s own regulations at 38 CFR 74.2(e), any firm found ineligible due to an SBA protest decision is to be immediately removed from the VetBiz VIP database, unless that protest is overturned or the CVE receives official notification that the firm has successfully overcome the grounds for the negative determination.
In addition to the frustration the affiliation inconsistency creates, the CVE’s analysis is hard to read because I am a verification counselor. By far and away, the largest issue for mom-and-pop companies seeking verification is the lack of meat and detail to explain bright line rules. CVE found that the critical license wasn’t an issue here, but meanwhile a small company seeking verification might be denied because a non-veteran uses a license under the veteran’s direction. There’s no guidance for how the CVE determines that a non-veteran holding a license isn’t grounds for denial, other than a very, very generally-phrased regulation.
And why was it fine for CCI to serve as a subcontractor on 12 out of 32 jobs? What’s the cutoff or the criteria? Does the length of the period of performance and the contract dollar value factor in?
This decision reflects a much bigger problem with the Veterans First Contracting Program. There is a disconnect with the SBA, and the CVE’s regulations are hard to understand for lack of detailed guidance to give them actual meaning.
For years, veterans advocates have complained that this ship is sinking instead of sailing, and these kinds of decisions further their point. So when this Titanic sinks, who will it take down with it?
Did you find this article informative? If so, sign up for my weekly blog at https://legalmeetspractical.com. Remember to click on the link sent to your email to activate your subscription!
