Protest challenging awardee’s status as an SDVOSB is granted. The protester alleged the protester was ineligible for an SDVOSB set aside because the company was not fully controlled by a service-disabled veteran. SBA’s Office of Hearing and Appeals agreed with the protester. The awardee had an agreement with another large business which required the putative SDVOSB to (1) buy supplies from the large business, and (2) obtain consent from the large business for any change in control. OHA reasoned that these types of restrictions on the small business’s activities were incompatible with the economic independence required for SDVOSB status.
The Department of Veterans Affairs an RFP seeking prescription eyeglasses services. The procurements was set aside for service-disabled veteran-owned small businesses. After reviewing proposals, the VA announced that Superior Optical Labs, Inc. was the apparent awardee.
An unsuccessful offeror, PDS Consultants, Inc,. filed a protest challenging Superior’s status as an SDVOSB. PDS alleged, in various ways, that Superior was not controlled by a service-disabled veteran. PDS alleged that Superior shared resources and was partially owned by another large business, referred to as Business Concern I. PDS alleged that Business Concern I controlled Superior through loan agreements. PDS alleged that Superior was unduly reliant on Business Concern I, using equipment and software furnished by the larger company.
PDS also noted that the service-disabled veteran that putatively controlled Superior, Mr. Bodart, lived 500 miles away from the company’s headquarters. There is a rebuttable presumption that a service-disabled veteran does not control a company when they do not reside within a reasonable commute of the company’s headquarters. PDS further contended Mr. Bodart lacked the experience needed to run the company because he had no experience in eyeglass manufacturing.
Additionally, PDS contended that Superior had an agreement with Business Concern I, which inhibited its independence. Several years before the issuance of the solicitation, Business Concern I had agreed to sell its interest in Superior to another company owned by Mr. Bodart. As part of that sale, the parties had executed an agreement that required Superior to purchase it supplies and equipment from Business Concern I. Moreover, that agreement provided that Superior had to obtain Business Concern I’s approval for any “ “change of control”
The SBA’s Office of Hearing and Appeals determined that Superior had sufficiently rebutted most of PDS contentions. Contrary to PDS’s allegations, Business Concern I did not own any Superior stock and had not owned an interest in the company since 2017. Also, while Superior had loan agreements with Business Concern I, OHA reasoned that merely being indebted to Business Concern I did not mean that Business Concern I had the power to control the day-to-day operations of Superior.
OHA further found that Superior was not unduly reliant Business Concern I. To be sure, Superior leased a machine from Business Concern I for lenses. But leasing a single machine did not demonstrate undue reliance. Indeed, Superior had explained that it could provide lenses by itself without the uses of this machine.
OHA also found the allegations concerning Mr. Bodart’s commute and experience meritless. While Bodart had a house 500 miles away from Superior’s headquarters, he also had an apartment within a 15-minute commute of the company’s headquarters. The presumption that he did not control the firm did not apply. Additionally, while Bodart did not have specific eyeglasses experience, a service-disabled veteran need not personally have technical experience so long as he has managerial and supervisory control over those with technical experience. Bodart’s resume showed that he had years of experience in roles with managerial responsibilities.
But OHA found that the agreement which Superior had executed with Business Concern I as part of a 2017 stock sale problematic. That agreement required Superior to obtain approval from Business Concern I for any change in control. This plainly interfered with Mr. Bodart’s ability to make business decisions and exercise complete control over the company. Mr. Bodart would have to obtain Business Concern I’s permission to for any sale of assets or for a merger. This restriction on his control was incompatible with status as an SDVOSB.
What’s more, OHA reasoned, the agreement required Superior to purchase large amounts of optical supplies and services from Business Concern I. This requirement clearly interfered with Mr. Bodart’s ability to make independent business decisions and thus was also incompatible with Superior’s status as an SDVOSB.
PDS is represented by David S. Gallacher, Emily S. Theriault, and Adam A. Bartolanzo of Sheppard, Mullin, Richter & Hampton LLP. Superior is represented by John E. McCarthy Jr. and Zachary M. Schroeder of Crowell & Moring LLP.
