Protest challenging an awardee’s status as a service-disabled veteran-owned small business is denied, where the company’s former ownership had no bearing on whether the company was an eligible SDVOSB at the time it was accepted into VA’s CVE database, when it submitted its offer, or when it was awarded the contract. OHA found that service-disabled veterans owned a majority of the company, and that the company’s by-laws unequivocally gave service-disabled veterans the ability to control both the long-term and day-to-day decisions and operations.
Alpha4 Solutions LLC d/b/a Alpha Transcription protested the service-disabled veteran-owned small business (SDVOSB) status of Veterans Medical Transcription Services Inc., arguing that VMTS is not owned or controlled by one or more service-disabled veterans and therefore should be excluded from the VA Center for Verification and Evaluation database of eligible SDVOSBs.
After VA identified VMTS as the awardee of a contract for dictation and transcription services, which had been set aside entirely for SDVOSBs, Alpha4 protested with the agency, challenging the VMTS’s size and status. The protester argued the awardee provided misleading information to VA and never should have been listed in the CVE database.
The protester alleged that several years ago, VMTS was affiliated with Stone Network Inc. through common ownership, as both companies were owned and controlled by Timothy Nicholls and Mr. Sinnappan Mani through a company called Digital Transcription Services Inc. According to the protester, despite a change in ownership, the companies continued to share an address, as well as staff and resources. The protester argued that VMTS operates in office space leased by Stone and that the facility itself is owned by Mani, who is a part owner of Stone.
The protester argued that Nicholls, who is currently president of Stone and a former owner of VMTS, was serving as VMTS’s secretary as of the end of 2017. Further, Mani had represented VMTS in other proceedings as late as February 2018. According to the protester, these facts showed that Stone continued to control VMTS even after the ownership change. The protester also argued that Stone’s Transcription Supervisor and Quality Control Supervisor is related to VMTS’s current co-owner, Steven Rose, and therefore the firms share an identity of interest and are affiliated.
The protester also alleged that when Nicholls and Mani divested their interest in VMTS, provisions may have been included in the sales contract whereby they would continue to control VMTS. Finally, the protester noted that VMTS was administratively dissolved by the state of Missouri in February 2018, so it was improper for VMTS to have been awarded a different VA contract in 2018.
In response, VMTS explained that it shares neighboring suites in the same building as Stone but has no other connection. VMTS explained that three individuals have ownership shares in the company, two of whom are service-disabled veterans who together own a majority interest. VMTS noted that CVE confirmed this ownership arrangement and that the two service-disabled veterans unconditionally control VMTS. The company’s by-laws require the approval of all service-disabled veteran shareholders and shareholders that together hold more than 50 percent of stock. The by-laws further require that all service-disabled veteran shareholders be present in order to establish a quorum for a shareholder vote to take place. The by-laws also state that the business is controlled and managed by the board of directors, which is comprised solely of the two service-disabled shareholders. Finally, a service-disabled veteran holds the title of company president.
To the extent the protester challenged VMTS’ size and ability to administer the contract, VMTS argued these questions were outside OHA’s jurisdiction for CVE protests. Alternatively, VMTS insisted it has no affiliation with Stone and that the protester’s allegations that other individuals served as secretary and president were erroneous.
Finally, VMTS disputed the allegation that VMTS and Stone are affiliated through a shared identity of interest based on the relation of a Stone employee to VMTS’s current co-owner. VMTS noted that it receives no revenues from Stone and that Nicholls and Mani have had no involvement since the sale of the company. Further, the company’s owner held no prior position at Stone or DTS when he purchased VMTS from DTS, and Stone has not furnished VMTS with contacts, any kind of assistance, indemnification, or facilities.
OHA denied the protest, finding that VMTS had persuasively rebutted the allegations. OHA found no dispute of the fact that two of VMTS’s owners are service-disabled veterans and that together they own more than half of the company, without condition. While VMTS was previously owned by non-service-disabled veterans, OHA focused solely on the company’s present ownership and whether VMTS was an eligible small business at the time it submitted its offer and at the time of award. Any previous ownership question was irrelevant to this determination.
OHA also found the company’s by-laws clearly established that service-disabled veterans—in this case, two service-disabled veteran owners—control the company’s operations and make both long-term and day-to-day decisions. Further, a service-disabled veteran holds the highest officer position in the company and service-disabled veterans control the board of directors. Further, the non-service disabled veteran owner has no ability to block decisions made by the board. OHA found that VMTS convincingly presented that it meets these requirements.
OHA found no evidence that the non-service-disabled veteran owner had tacit control of the company through financial or loan arrangements, the possession of a critical bond, or other business relationships that created dependence between VMTS and any other company. The board also found no reason to conclude VMTS was controlled by Stone based solely on the proximity of their office space.
Alpha4 Solutions LLC d/b/a Alpha Transcription is represented by Thomas Bailey, President. Veterans Medical Transcription Services Inc. is represented by Steven J. Koprince, Shane J. McCall, Haley E. Claxton and Robert D. Kampen of Koprince Law LLC. The government is represented by Marshand Boone, Contracting Officer, Department of Veterans Affairs, Veterans Health Administration.
