How Can You Protect Your SDVOSB Certification ?

Every business needs a strong foundation to survive the rat race. So, if you do not structure it right from the beginning, it’s never going to pay off. The same is true for the service-disabled veterans starting a small business, it is important to know the checklist of what is necessary to show service-disabled veteran-owned small business (SDVOSB) status. The veteran must always have 51% interest, he must always be the president or CEO (ie, hold the highest position), and he must always exercise managerial authority over his business. If these provisions are not clearly set forth in corporate documents, SDVOSBs leave themselves vulnerable to protests and the loss of their SDVOSB status. For that, all they need is a protection of their sdvosb certification.

Let’s talk about the family-owned business that won a set-aside for constructing a parking garage last year. But, unfortunately their SDVOSB status was challenged by a disappointed bidder. It was a father and son team, and the father was the service-disabled veteran upon whom certification as an SDVOSB was based. Hence it’s important to document your sdvosb certification, because that’s what prevents your certification from getting lost.

SDVOSB program and its Criteria

To participate in the SDVOSB program, an LLC must be "unconditionally owned" by the service-disabled veteran upon whom the sdvosb certification is based. It means that the veteran must own 51% of the interest. Now if a father who is a service-disabled veteran and runs a business, where 51% of the LLC is owned by him and his son owns 49%, there must not be any problem.

An LLC must also be "unconditionally controlled" by the service-disabled veteran, which means that the veteran must control "the management and daily operations" of the business, and he must also hold the highest position in the company. This is where the family business in this context ran into trouble. The father was in fact the president of the Company. However, in the company's operating agreement, no managing member was named. Also, they mentioned the son as chief executive officer (CEO) in its proposal for the awarded contract; and the company's Articles of Organization gave him enumerated managerial powers and authority.

Based on all of the evidence, both the Small Business Administration (SBA) Acting Director of the Office of Government Contracting (AD/GC) and the SBA Office of Hearings and Appeals agreed with the protestor. Since they did not meet the control requirements of the sdvosb certification program, the protest was sustained and the contract slipped off.

What could be the Possible Issue

In my perspective, the heart of the problem was bad drafting. It was ineligible for the SDVOSB program likely only in a paper sense - its corporate documents and other records were not up to snuff under SDVOSB program standards. While the purpose of the SDVOSB program is to provide contracting opportunities to service-disabled veteran-owned businesses, they could not do so for this company since they did not meet the program criteria.

If corporate documents were aptly drafted for the company, and it had been adequately informed of how to demonstrate SDVOSB status, it likely would not have endured legal challenges and contract loss. This is a lesson learned for all SDVOSBS indeed. Make sure your corporate documents are airtight, or suffer the consequences later. It's not enough to be an SDVOSB in practice. To play the game, your sba sdvosb certification process status should be on paper, and match the criteria.