Friday, May 24, 2013
COFC Confirms that SDVOSBs Are Entitled to Due Process Notice and Opportunity to Respond to Adverse Ownership and Control Findings Made During Bid Protest; COFC Decision Causes Veterans Affairs to Review Unconditional Ownership Procedures
The Court of Federal Claims recently affirmed that due process requirements apply with equal force to SDVO determinations made by the Department of Veterans Affairs Office of Small and Disadvantaged Business Utilization (“OSDBU”) as to other Government determinations. In Miles Construction, LLC v. United States, the Court of Federal Claims held that an SDVO must receive notice and an opportunity to be heard when the OSDBU reviews a veteran’s unconditional ownership of a SDVOSB as part of a bid protest.
While the decision is significant, it falls in line with other cases regarding the substantive and procedural due process rights of contractors. Veteran owners at risk of being de-certified should be afforded at least the opportunity to rebut the Government’s findings before receiving an adverse determination that has a significant impact on the livelihood of the owners and employees.
Most notably, Miles Construction also seems to pave the way for resolution of the recent uncertainty about restrictions on ownership and control for purposes of SDVOSB program eligibility verification by way of future OSDBU decisions. The decision prompted DVA to change its prior policy that the presence of transfer restrictions, specifically first right of refusal provisions, on a service-disabled veteran’s ownership interest constitutes the “absence of unconditional ownership” for DVA SDVOSB verification purposes. Now, DVA permits verification of SDVOSB’s even if their service-disabled veteran owners hold ownership interests subject first right of refusal provisions.
Since Miles Construction, DVA has tried to clarify what constitutes “unconditional ownership” while making it easier for more SDVOSB’s to become verified. DVA has requested comments about whether to have a list of “what constitutes ownership and control and what constitutes lack of control or ownership.” DVA also has updated its Verification Assistance Program to provide additional guidance on what effect transfer restrictions might have on DVA SDVOSB verification. As of yet, however, it remains unclear exactly which transfer restrictions amount to an “absence of unconditional ownership,” and so SDVOSB’s must remain wary of pitfalls associated with ownership interests subject to transfer restrictions.
The application of the APA’s procedural due process safeguards to “unconditional ownership examinations” should help provide guidance on these ownership and control issues. Since protested concerns will have an opportunity to respond to OSDBU’s ownership examination, OSDBU will inevitably have to address which types of transfer restrictions do or do not constitute unconditional ownership and control. Thus, the application of basic due process requirements to “unconditional ownership examinations” promises future guidance on this critical issue.