The procedures for Service-Disabled Veteran-Owned Small Business Concerns (“SDVO SBCs”) to challenge the qualifications of their competitors to receive awards of SDVO SBC set-aside government contracts are too complex. This is one of the reasons that unqualified firms continue to receive SDVO SBC contract awards. Despite admonitions that the U. S. Small Business Administration (“SBA”) and the U. S. Department of Veterans Affairs (“VA”) should step up their enforcement of regulatory standards and should impose more severe consequences on unqualified firms, the responsibility for policing the system continues to fall on the shoulders of purchasing agency Contracting Officers (“COs”) and SDVO SBCs whose time and resources are limited. See “Service-Disabled Veteran-Owned Small Business Program: Case Studies Show Fraud and Abuse Allowed Ineligible Firms to Obtain Millions of Dollars in Contracts,” U. S. Government Accountability Office Report GAO-10-108 (Oct. 23, 2009). This Alert provides a brief summary of the current protest procedures and an update based on a recent groundbreaking decision of the SBA’s Office of Hearings and Appeals (“OHA”).

A protest against an SDVO SBC’s qualifications falls into either or both of two categories: (1) a Protest alleging that the purported SDVO SBC is not small (a “Size Protest”); and (2) a Protest alleging that the purported SDVO SBC is not owned and controlled by service-disabled veterans (a “Status Protest”). The responsible SBA Government Contracting Area Director will make a size determination in response to a Size Protest. 13 C.F.R. § 121.1002; Veterans Affairs Acquisition Regulations (“VAAR” codified at Title 48 C.F.R.) § 819.307(a). The protest must be filed with the CO, who must forward it to the SBA Government Contracting Area Office. 13 C.F.R. § 121.1003. The CO must receive the protest prior to the close of business on the fifth business day after bid opening or, in a negotiated procurement, after the CO has notified the protester of the identity of the prospective awardee. 13 C.F.R. § 121.1004(a)(1) & (2). If a protester challenges both the size of the SDVO SBC and whether the concern is a qualified SDVO SBC, the Size Protest and the Status Protest will be processed concurrently. 13 C.F.R. § 125.25(a) & VAAR 819.307(a).

The SBA Government Contracting Area Director will adjudicate all Size Protests, but according to recent OHA decisions, jurisdiction over Status Protests is divided between the SBA and the VA. The SBA Director, Office of Government Contracting (“D/GC”) determines the SDVO SBC status of a protested concern for procurements conducted under the Small Business Act, but the Executive Director of the VA Office of Small and Disadvantaged Business Utilization (“OSDBU”) has exclusive jurisdiction to hear Status Protests in procurements conducted by the VA under the Veterans Benefits, Health Care, and Information Technology Act of 2006. 13 C.F.R. § § 125.25 & 125.26; VAAR § 819.307(c). Status Protests must be filed with the CO within the same time frame as Size Protests. 13 C.F.R. § 125.25(d); VAAR § 819.307(c)(2). The CO is responsible for forwarding the protest to the appropriate adjudicating authority.

In a recent groundbreaking decision, the OHA held that it has jurisdiction to hear appeals from the D/GC’s decisions, but that it has no jurisdiction to review determinations made by the OSDBU.1 See Airborne Construction Services LLC, SBA Nos. VET-203 & 204 (Nov. 17, 2010). Decisions of the OSDBU Executive Director are not reviewable by the OHA and are final. VAAR 819.307(c). In Airborne, in response to Size and Status Protests by a competitor SDVO SBC, the SBA ruled that Airborne was small, but the OSDBU ruled that Airborne was not controlled by service-disabled veterans and therefore was not eligible to receive an award of either of two contracts. Airborne appealed the OSDBU's decisions to the OHA. Partially overruling its prior precedent, the OHA dismissed Airborne’s appeals because it lacked jurisdiction to review a decision of the OSDBU. The OSDBU’s decision that Airborne was ineligible for award was not disturbed.

SDVO SBCs continue to shoulder primary responsibility for policing the acquisition process through Size and Status Protests. To be effective and efficient, these protests must be filed timely, must be submitted to the CO, and must be transmitted promptly by the CO to the appropriate adjudicating official. Protesters are well-advised to state clearly the legal and factual grounds of their protests and include in their protests a road map for the CO to follow to ensure that the CO forwards the protest to the appropriate authority. SDVO SBCs that find themselves defending a contract award against a Protest should seek dismissal of protests that fail to comply with procedural requirements, but also should be mindful of their limited opportunities for appeal.