On November 3, 2018, Alpha4 Solutions LLC (Protester) protested the Service-Disabled Veteran-Owned Small Business (SDVOSB) status of Veterans Medical Transcription Services, Inc. (VMTS) in connection with a U.S. Department of Veterans Affairs (VA) Request for Quotations. CVE Protest of Alpha4 Solutions LLC d/b/a Alpha Transcription, SBA No. CVE-103-P (2019). Protester contended that VMTS is not owned and controlled by one or more service-disabled veterans, and that VMTS therefore should be excluded from the VA Center for Verification and Evaluation (CVE) database of eligible SDVOSBs.

On September 21, 2018, quotes were accepted. On November 2, 2018, Protester was informed that it would not be awarded the contract. Protester filed this protest on November 3, 2018, challenging VMTS’ SDVOSB status and VMTS’s size. The contracting officer only forwarded the status portion of the protest to OHA on December 17, 2018. At this point, no formal size determination had been issued.

Protester argued that VMTS provided misleading information to CVE to receive its verification and that it is affiliated with another company called Stone Network, Inc. (“Stone”) through common management, identity of interest, and the newly-organized concern rule.

Specifically, both VMTS and Stone were, at one time, owned and controlled by the same individuals through a company known as Digital Transcription Services, Inc. (DTS). Although VMTS has subsequently undergone change of ownership, Protester argued that VMTS and Stone continue to share an address as well as staff, utilities, intellectual, physical, and informational resources.

Burden: On The Protested Concern

The protested firm has the burden of proving its eligibility as an SDVOSB by a preponderance of the evidence. 13. C.F.R. 134.1010.

Eligibility Dates: Date Of Bid And Date Of Protest

In a CVE Protest pertaining to a procurement, OHA determines the eligibility of the protested concern as of two dates: (1) the date of the bid or initial offer including price, and (2) the date the CVE Protest was filed. But in this case, VMTS’s eligibility was governed by two rules: (1) VA’s ownership and control rules for SDVOSBs, set forth at 38 C.F.R. part 74; and (2) newly-issued SBA rules governing ownership and control of SDVOSBs at 13 C.F.R. part 125 (effective October 1, 2018).

SDVOSB Status

To be considered an eligible SDVOSB, a concern must be a small business that is unconditionally owned and controlled by one or more service-disabled veterans.

  1. Ownership: Two Service-Disabled Veterans Owned At Least 51% of VMTS

An eligible SDVOSB must be at least 51% unconditionally and directly owned by one or more service-disabled veterans. Referring to VMTS’ By-Laws and sworn declarations, OHA concluded that, of three owners, two individuals (Mr. Rose and Mr. Dortch) unconditionally own VMTS and their share add up to more than 51%. Notwithstanding previous ownership of VMTS by two officers of Stone, OHA’s review of eligibility was limited to the dates of bid and protest.

  1. Control: Two Service-Disabled Veterans Controlled VMTS

To be an eligible SDVOSB, one or more service-disabled veterans must control both the long-term decision-making and the day-to-day management of the concern. In addition, a service-disabled veteran must hold the highest officer position in the concern and must have managerial experience of the extent and complexity needed to run the concern. Further, if the concern is a corporation, one or more service-disabled veterans must control its board of directors. Again, referring to VMTS’ By-Laws and sworn declarations pertaining to decision-making, voting, and management within VMTS, OHA found that VMTS is at least 51% controlled by a service-disabled veteran. Notwithstanding

  1. Non-Veteran Control Rules Inapplicable Here

Referring to the sworn statements, OHA concluded, neither the VA nor the SBA non-veteran control rules apply here.

 

  1. VA: Control Determined By Weighing Factors

Control by non-service-disabled veteran may arise if such individual provides critical financial or bonding support or a critical license; through loan arrangements; or through business relationships that cause such dependence that the SDVOSB cannot exercise independent business judgment without great economic risk.

 

  1. SBA: Control Presumed If Equity And Either Co-Located Or Sharing Resources

SBA regulations create a rebuttable presumption of control by non-service-disabled individuals where the concern is co-located with another firm in the same or similar line of business, and that firm or an owner, director, officer, or manager, or a direct relative of an owner, director, officer, or manager of that firm owns an equity interest in the concern.

A presumption of control also arises if situations where the concern shares employees, resources, equipment, or any type of services, whether by oral or written agreement with another firm in the same or similar line of business, and that firm or an owner, director, officer, or manager, or a direct relative of an owner, director, officer, or manager of that firm owns an equity interest in the concern.

Ryan Bradel

Author Ryan Bradel

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