To qualify as a service-disabled veteran-owned small business (SDVOSB), the business must be unconditionally owned by a service-disabled veteran. In this case, OHA found that a company was not an SDVOSB because it was unconditionally owned by a veteran. But the business filed a protest at the COFC challenging OHA’s conclusions. The court sided, in part, with the protester, finding OHA’s reasoning unpersuasive. In 2018, the SBA issued a new rule defining unconditional ownership. But OHA had applied a definition from a 2006 case, reasoning that the new rule had not disturbed the definition set forth in the case. The court did not believe that 2006 case was still valid; it remanded the case so OHA could explain itself.
E&L Construction Group, LLC v. United States, COFC NO. 21-1765C
Background
The Department of Veterans Affairs awarded E&L Construction a contract. The contract was set aside for SDVOSBs. A disappointed bidder, Randy Kinder Excavating, challenged E&L’s status as an SDVOSB. The VA referred the matter to SBA’s Office of Hearing and Appeals.
OHA determined that E&L was not an SDVOSB because the company was not unconditionally owned by a service-disabled veteran. E&L filed a protest with the Court of Federal Claims, alleging that OHA had misapplied the definition of unconditional ownership.
Legal Analysis
Prior to 2018, SBA and the VA had separate definitions of unconditional ownership of an SDVOSB. The SBA regulations did not expressly define unconditional ownership. Instead, the SBA applied an OHA case, Wexford Grp. Int’l, Inc., SBA No. SDV-105 (2006), which basically held that unconditional ownership means that the owner has the absolute right to do anything they want with their ownership interest, whenever they want. The VA, on the other hand, had a regulation with a more circumscribed definition.
In 2018, however, pursuant to a Congressional mandate, the VA and SBA issued new regulations adopting the same definition for unconditional ownership. The new standard rule was identical to the VA’s pre-2018 rule.
In its decision in this case, OHA essentially applied the SBA’s old Wexford rule, reasoning that the 2018 standardization of the unconditional ownership rule had not disturbed the Wexford definition.
The court found OHA reasoning unpersuasive. OHA had not explained why the new definition left the Wexford rule untouched. Indeed, the Federal Circuit had noted that the SBA’s new rule had effectively overturned the Wexford rule. The court found that it was appropriate to remand the case to give OHA an opportunity to explain its reasoning.
E&L is represented by John B. Dunlap, II, Jennifer A. Fiore, and Alexis M. Breedlove. The intervenor, Randy Kinder Excavating, is represented by Meghan F. Leemon, Peter B. Ford, Samuel S. Finnerty, and Anna R. Wright. The government is represented by Miles K. Karson, Brian M. Boynton, Patricia M. McCarthy, and Elizabeth M. Hosford of the Department of Justice as well as Nathan Menard of the Department of Veterans Affairs along with Beverly Hazlewood of the Small Business Administration.
