By Brian Wilbourn

The United States Court of Federal Claims recently issued an important decision affirming the due process rights of Service-Disabled, Veteran-Owned Small Businesses (“SDVOSBs”). The case, AmBuild Company, LLC v. United States (Fed. Cl., Oct. 2014), involved an SDVOSB that had been decertified without first giving the company notice and an opportunity to respond to the specific compliance issue on which the decertification was based.

AmBuild Company, LLC (“AmBuild”) was the awardee under a SDVOSB set-aside solicitation issued by the Department of Veteran Affairs (“VA”). The second-lowest bidder filed an administrative protest, challenging AmBuild’s status as a SDVOSB.  

The protest alleged that the service-disabled veteran majority owner of AmBuild did not control the company. The protest further suggested that AmBuild did not meet the applicable size standard, and that it was affiliated with its owner’s former employer, which allegedly provided financial assistance to AmBuild. The protest was forwarded to both the Small Business Administration (“SBA”) and the VA’s Office of Small and Disadvantaged Business Utilization (“OSDBU”).

AmBuild was provided with notice of the protest and AmBuild thereafter submitted the company’s response to the protest allegations and provided documentation in support of its SDVOSB status and eligibility.

Based on AmBuild’s submissions, both the SBA and VA’s Center for Verification and Evaluation (“CVE”) rejected the contentions of the protestor. CVE, however, initiated consideration of a completely different issue, of which was not raised in the protest.  Specifically, after examining AmBuild’s operating agreement, CVE concluded that based on the “Involuntary withdrawal” provisions of the agreement, AmBuild’s service-disabled veteran majority owner was not an “unconditional owner” as required by applicable regulations.  AmBuild was never informed that CVE was investigating this additional issue. Rather, AmBuild learned of CVE’s action for the first time when CVE issued a final determination decertifying AmBuild as an SDVOSB, declaring it ineligible for award under the solicitation.

AmBuild appealed CVE’s final determination to the Executive Director of OSDBU.  The Executive Director denied AmBuild’s appeal, asserting that based on amendments to SDVOSB regulations adopted in September 2013, CVE was no longer limited to resolving only issues specifically raised in a protest. Rather the Executive Director concluded that based on the September 2013 amendments, CVE had authority to determine AmBuild’s SDVOSB status based on the “totality of circumstances.”

The Court of Federal Claims rejected this argument, holding that the September 2013 amendments to the SDVOSB regulations provided no such authority to CVE. Rather, the Court explained that AmBuild was entitled to notice and an opportunity to respond the unconditional ownership issue and, that by not providing AmBuild with such opportunity, CVE had violated AmBuild’s procedural due process rights.

About the Author: Brian Wilbourn is an associate with PilieroMazza in the Government Contracts Group.  He may be reached at [email protected].