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Valentine’s Day Victory Creates Confusion in Analyzing SDVOSB Status

Valentine’s Day marked a sweet victory for Pennsylvania company Miles Construction, LLC (“Miles”), when the United States Court of Federal Claims (“CoFC”) reinstated Miles’ service-disabled veteran-owned small business (“SDVOSB”) verified status in the Department of Veterans’ Affairs (“VA’s”) Vendor Information Pages. (CoFC No. 12-597C, February 14, 2013).

In this case, Miles had been verified as an SDVOSB by the VA’s Center for Veterans Enterprise (“CVE”). Its status was protested when it was awarded a VA contract for storm sewer repairs. The second low bidder alleged that Miles and a non-SDVOSB had common ownership and control, thus rendering Miles ineligible for SDVOSB status (due to affiliation issues). Interestingly, while the OSDBU rejected the basis of the protest, it sustained it on other grounds: unlawful transfer restrictions. Miles’ corporate documents contained a right of first refusal transfer restriction.

In finding that the right of first refusal provision was permitted under the VA regulations governing the Veterans First Contracting Program, the CoFC noted that “it is presently executory, is a standard provision used in normal commercial dealings, and does not burden the veteran’s ownership interest until he or she chooses to sell some of his or her stake.”

While this is certainly a triumph for Miles in this instance, the end result is confusion: as the CoFC noted in its decision, the operative VA rule (38 CFR Part 74.3)  is materially different from the text in the operative Small Business Administration rule (13 CFR Part 125.9). This means that if this contract had not been awarded as a set-aside under the Veterans First Contracting Program, the protest may have been sustained due to the right of first refusal provision. Because of the differences in the regulations, Miles may be an eligible SDVOSB for VA procurements, but not for solicitations issued by other federal agencies.

As many veteran businesses are aware, the ultimate goal is for the CVE’s verification process to apply government-wide. As a recent Government Accountability Office report pointed out, the system is still undergoing growing pains. This decision illustrates one such growing pain: working to ensure that the regulations governing eligibility are uniform across all federal agencies.

For further reading, access the Miles decision here.  Also, if you found this article informative, please sign up for my weekly blog on veterans issues. Remember to click the link sent to your email to activate your subscription!






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