Georgia Tech Procurement Assistance Center

A reminder regarding the importance of SDVOSB control rules

By

The recent decision in CVE Appeal of Valor Construction, Inc, SBA No CVE-121-A (June 3, 2019) provides a useful reminder to contractors regarding the difference between unconditional ownership and unconditional control, and the importance of assessing both when analyzing service-disabled veteran owned small business (“SDVOSB”) eligibility.  Specifically, the decision in Valor – which was issued by the Small Business Administration’s (“SBA”) Office of Hearings and Appeals (“OHA”) – demonstrates that an individual’s majority ownership of a SDVOSB, alone, does not vest that individual with unconditional control over the SDVOSB.  The Valor decision further reflects how the revised control regulations may cause eligibility problems for contractors.  Avoiding these pitfalls requires some background knowledge regarding the dual SDVOSB programs and the revision of the applicable regulations, a thorough understanding of the revised regulations themselves, and an awareness of the most common eligibility problems that contractors can face under these regulations.

Continue reading at:  Obermayer

SBA OHA: Owners did not have enough managerial experience to qualify concern as a WOSB

By

SBA’s socio-economic set-aside programs mandate compliance with multiple control requirements.  An important one stipulates that a woman owner of a WOSB (or a veteran for a SDVOSB or a disadvantaged owner for an 8(a) business) must have the “managerial experience of the extent and complexity to run the concern.”

But what, exactly, does this requirement entail?  A recent OHA case provides some important guidance.

In C & E Industrial Service, Inc., SBA No. WOSB-112 (Apr. 8, 2019), a WOSB was awarded a contract for rebuilding four parking lots at the White Sands Missile Range in New Mexico.  An unsuccessful offeror filed a protest alleging that the women owners did not, in fact, own C&E.  It also alleged that the women owners were not qualified to lead a construction firm.  (Although the protest and subsequent proceedings at SBA and OHA discussed ownership and control issues, here we’ll focus solely on the control issues.)

Continue reading at:  SmallGovCon blog

New decisions clarify small business minority shareholder protections

By

One of the easiest small business affiliation rules to apply is that a person that owns “50 percent or more of a concern’s voting stock … controls or has the power to control the concern.” (13 C.F.R. § 121.103(c)(1))

It is far more difficult, however, for minority owners that own less than 50 percent of a concern’s voting stock to determine what, if any, controls they can have over a small government contractor without jeopardizing their small business status.

The Small Business Administration (SBA) has long held that minority owners may have negative controls to protect their investment without creating affiliation as long as the negative controls do not create control over day-to-day business operations.

In recent cases, SBA’s Office of Hearings and Appeals (OHA) has further clarified what specific arrangements may comply with that rule.

Generally, a minority owner will be found to control a concern if it can veto or block important business actions.

Keep reading this article at: http://www.mondaq.com/article.asp?articleid=759238

SBA is deleting ‘direct’ ownership requirement from HUBZone program

By

HUBZone companies owned by U.S. citizens will no longer be required to demonstrate that the ownership is “direct.”

The SBA’s HUBZone program rules have long required that a HUBZone company owned by U.S. citizens be at least 51% directly owned by those citizens – as opposed to allowing the qualifying citizens to own those interests through legal vehicles like holding companies.  But the SBA has had second thoughts, and effective May 25, 2018, the direct ownership requirement will be eliminated.

In a direct final rule issued on March 26, the SBA writes that “[d]irect ownership is not statutorily mandated” by the portion of the Small Business Act governing the HUBZone program.  The SBA has concluded that “the purposes of the HUBZone program – capital infusion in underutilized geographic areas and employment of individuals living in those areas – may be achieved whether ownership by U.S. citizens is direct or indirect.”

Keep reading this article at: http://smallgovcon.com/hubzone-program/hubzone-program-sba-will-delete-direct-ownership-requirement/

COFC rejects SBA decision that future conditions on stock ownership destroy ‘unconditional ownership’

By

Veteran-owned small businesses have long grappled with seemingly benign drafting inconsistencies between Small Business Administration (SBA) and Department of Veterans Affairs (VA) regulations that can leave a business qualified as a Service-Disabled Veteran-Owned Small Business (SDVOSB) by VA standards, but not at the SBA (or vice versa).

One such puzzler is the requirement for unconditional ownership by a service-disabled veteran, a requirement that is common to both SBA and the VA, but for which the VA provides a substantially more detailed definition.

  • Compare: 13 C.F.R. § 125.12 (“A concern must be at least 51% unconditionally and directly owned by one or more service-disabled veterans.”)
  • With: 38 C.F.R. § 74.3(b) (adding that “[o]wnership must not be subject to conditions precedent, conditions subsequent, executory agreements, voting trusts, restrictions on assignments of voting rights, or other arrangements causing or potentially causing ownership benefits to go to another (other than after death or incapacity)”).

This additional detail has created some conflicting results, which is not helped by divergent interpretations of unconditional at SBA and the Court of Federal Claims, all of which has left many a veteran business owner (and more than a few legal practitioners) scratching their heads.

Keep reading this article at: http://www.mondaq.com/article.asp?articleid=655422

Veteran-owned small businesses: 5 things you should know

By

You’ve served your country with pride.  Now, as a government contractor, it’s only fair that you get your piece of the pie.

Here are five things you should know about the government’s contracting programs for veteran-owned small businesses and service-disabled veteran-owned small businesses:

  1. What is a veteran-owned small business?
  2. Who “controls” the business?
  3. What’s the benefit?
  4. Can a business challenge my status?
  5. How can your business apply?

Keep reading this article at: http://smallgovcon.com/five-things/sdvosbs-and-vosbs/

Federal court interprets SDVOSB “unconditional ownership” less strictly than SBA

By

The Court of Federal Claims recently issued an opinion that defines “unconditional ownership” of an SDVOSB in a more relaxed manner than the SBA, creating a split of authority on the issue.

The Court, rejecting SBA precedent, held that certain restrictions on ownership of an SDVOSB by a service-disabled veteran are acceptable under the SBA’s unconditional ownership regulations. In particular, the SDVOSB company can retain a right of first refusal that would allow it to purchase the shares of the veteran upon death, incompetency, or insolvency, and that right does not result in a violation of the unconditional ownership requirement.

With the Court and the SBA’s administrative judges staking out different positions, what should SDVOSBs do?

In Veterans Contracting Group, Inc. v. United States, No. 17-1015C, (Fed. Cl. Aug. 22, 2017), the Court examined the same facts that the SBA Office of Hearings and Appeals did in a recent decision addressed in the SmallGovCon blog post of September 19, 2017.  And, examining the very same facts, the Court reached the opposite conclusion.

Keep reading this article at: http://smallgovcon.com/service-disabled-veteran-owned-small-businesses/federal-court-interprets-sdvosb-unconditional-ownership-less-strictly-than-sba/

WOSB program: Company ineligible because husband managed business

By

A self-certified woman-owned small business was ineligible for a WOSB set-aside contract because the woman owner’s husband held the company’s highest officer position and appeared to manage its day-to-day operations.

A recent SBA Office of Hearings and Appeals decision highlights the importance of ensuring that a woman be responsible for managing the day-to-day business of a WOSB–and that the woman’s role be reflected both in the corporate paperwork and in practice.

OHA’s decision in Yard Masters, Inc., SBA No. WOSB-109 (2017) involved an Army solicitation for grounds maintenance services.  The solicitation was issued as a WOSB set-aside under NAICS code 561730 (Landscaping Services), with a corresponding $7 million size standard.

Keep reading this article at: http://smallgovcon.com/women-owned-small-business-program/wosb-program-company-ineligible-because-husband-managed-business/

Defense contractor to pay $16 million to settle false claims allegations over small business contracts

By

Virginia-based contractor ADS Inc. and its subsidiaries have agreed to pay $16 million to settle allegations that they violated the False Claims Act by knowingly conspiring with and causing purported small businesses to submit false claims for payment in connection with fraudulently obtained small business contracts, the Department of Justice announced last week.

The settlement also resolves allegations that ADS engaged in improper bid rigging relating to certain of the fraudulently obtained contracts. The settlement with ADS ranks as one of the largest recoveries involving alleged fraud in connection with small business contracting eligibility.

In order to qualify as a small business, companies must meet defined eligibility criteria, including requirements concerning size, ownership, and operational control.  The settlement with ADS resolves allegations that ADS, together with several purported small businesses that it controlled, fraudulently induced the government to award certain small business set-aside contracts by misrepresenting eligibility requirements. The purported small businesses affiliated with ADS include Mythics Inc., London Bridge Trading Co. Ltd., as well as MJL Enterprises LLC, which falsely claimed to be an eligible service-disabled veteran-owned company, and SEK Solutions LLC and Karda Systems LLC, both of which falsely claimed to qualify as socially or economically disadvantaged businesses under the Small Business Administration’s 8(a) Business Development Program. ADS and its affiliates allegedly concealed the companies’ affiliations with ADS and knowingly made misrepresentations concerning the size of the businesses and their eligibility as service-disabled or 8(a) qualified businesses. Finally, the settlement resolves allegations that ADS engaged in illegal bid rigging schemes that inflated or distorted prices charged to the government under certain contracts.

The settlement with ADS resolves a lawsuit filed under the whistleblower provision of the False Claims Act, which permits private parties to file suit on behalf of the United States for false claims and share in a portion of the government’s recovery. The civil lawsuit was filed in federal district court in the District of Columbia by Ameliorate Partners LLP. As part of today’s resolution, the whistleblower will receive approximately $2.9 million.

The settlement is the result of a coordinated effort among the Civil Division’s Commercial Litigation Branch, the U.S. Attorneys’ Offices for the District of Columbia and the Eastern District of Virginia, the Small Business Administration’s Office of Inspector General, and the General Services Administration’s Office of Inspector General.  The claims resolved by the settlement are allegations only, and there has been no determination of liability.

Source: https://www.justice.gov/opa/pr/defense-contractor-ads-inc-agrees-pay-16-million-settle-false-claims-act-allegations

Here’s a summary of the changes in government contracting provisions of the NDAA

By

Steve Koprince is the author of the book entitled "The Small-Business Guide to Government Contracts."
Steve Koprince is the author of the book entitled “The Small-Business Guide to Government Contracts.”

The 2017 National Defense Authorization Act (NDAA), signed into law on Dec. 23, 2016, contains at least 16 changes to federal procurement policy, many directly affecting the interests of small businesses.

Ever since the NDAA was finalized, attorney Steve Koprince and his team at Koprince Law LLC have been analyzing and summarizing each of the changes.  Here’s s list of their blog posts, each one hyperlinked to the article:

 

For more information, visit: http://smallgovcon.com 

 

Contracting News

Read More

Contracting Tips

Read More

GTPAC News

Read More

Georgia Tech News

Read More