VSBC PROTEST OF: FREEDOM TECHNOLOGY PARTNERS, LLC, PROTESTOR PETITION FOR RECONSIDERATION OF VS...

*1 On December 6, 2023, Freedom Technology Partners, LLC (Petitioner) filed the instant Petition for Reconsideration (PFR) of the U.S. Small Business Administration (SBA) Office of Hearings and Appeals (OHA) decision in VSBC Protest of Freedom Technology Partners, LLC, SBA No. VSBC-321-P (2023) (““Freedom I”). In that decision, OHA dismissed the protest for lack of specificity.

*1 In Freedom I, Protestor protested the following seven (7) joint venture (JV) business concerns: 1TechJV, LLC, ATL-NG LLC, Canopy Health, LLC, NxG Solutions, LLC, RP and Partners, LLC, T4 Designs, LLC, and VCH Partners LLC. OHA found that Protestor failed to establish that its protest complied with SBA's regulations on grounds for a status protest under 13 C.F.R. § 134.1003 and contents of a status protest under 13 C.F.R. § 134.1005(a). (Freedom I, at 2.) OHA held that both SBA regulations and OHA case law provide that “a protest merely asserting that the protested concern is not an eligible [Service Disable Veteran-Owned Small Business concern (SDVOSB)], without setting forth specific facts or allegations, is insufficient.” (Id., citing 13 C.F.R. 134.1005(a)(2); VSBC Protest of Tomahawk Sourcing, LLC, SBA No. VSBC-318-P (2023) (“[M]erely providing documents without specifying the allegations is insufficient.”).)

*1 OHA further noted Protestor failed to bring its allegations in compliance with the SBA regulations governing SDVOSBs. (Freedom I, at 2.) Specifically, Protestor relied on VA Regulation 48 C.F.R. VAAR 819.7003(b)-(c) but failed to “make a valid assertion that the seven [JVs] are non-compliant with any of the SDVOSB eligibility criteria set forth in 13 C.F.R. part 128, nor show how each business concern fails to meet SBA [JV] requirements under 13 C.F.R § 128.402.” (Id.) Because Protestor failed to provide specific allegations against the seven JVs and failed to bring a valid claim under SBA regulations, OHA dismissed the protest.

*1 In its PFR, Petitioner contends that OHA committed several errors in Freedom I. First, Petitioner alleges OHA erred in ruling the protest in Freedom I lacked specificity. Petitioner asserts its allegations and evidence submitted were sufficient. Specifically, the seven JVs' absence from the VetCert database shows these firms are ineligible as SDVOSBs for this procurement. Petitioner further asserts SBA's regulations “incorporate by reference the relevant provisions of the Veterans Affairs Acquisition Regulation [VAAR]”. (PFR, at 2.) Citing VAAR 819.7003(a)-(c), Petitioner asserts “inclusion in the VetCert database is a necessary precondition for award eligibility.” (Id.) Petitioner further relies on OHA case law and asserts “OHA has routinely considered status protests involving VA procurements where, as here, the only initial allegation was the absence of the challenged firm from the VetCert database or its predecessor database ....” (Id. at 3, citing Matter of Advanced Management Strategies Group, Inc./Reefpoint Group, LLC, SBA No. CVE-120-P (2019); Matter of Fidelis Design & Construction, LLC, SBA No. VET-221 (2011); Matter of XtremeConcepts Sys., SBA No. VET-272 (2018).) Petitioner concludes that OHA has dismissed SDVOSB status protests for non-VA procurements where the sole allegation was the awardee's absence from the database, but OHA precedent did not provide any instances where OHA dismissed an SDVOSB status protest for a VA procurement on that basis. (Id. at 4.)

*2 Second, Petitioner asserts OHA erred when it determined Petitioner failed to raise allegations under SBA regulations. (Id.) Petitioner asserts “SBA's regulations incorporate the VAAR by reference and rely on it for eligibility purposes”, citing 13 C.F.R. § 128.400(a). (Id.) Petitioner reasserts its reliance on 13 C.F.R. § 128.401(a) in Freedom I.

*2 On December 22, 2023, Canopy Health, LLC (Canopy), one of the protested concerns, responded to the instant PFR requesting that OHA dismiss the petition. (Canopy Response, at 1.) First, Canopy asserts Petitioner's protest was “not specific, failed to allege any allowable grounds for a status protest, and should be dismissed.” (Id.) Canopy asserts “[t]his regulation does not list ‘lack of certification in the VetCert system’ as a proper ground for a VOSB/SDVOSB status protest”, relying upon 13 CFR § 134.1003. (Id.) Canopy further notes 13 CFR § 134.1005(a)(2) read in conjunction with 13 CFR § 134.1003 clearly shows the intent of the regulations “require a protestor to allege specific deficiencies relating to the substantive eligibility criteria governing the VOSB/SDVOSB program, as those criteria are set forth in 13 CFR Part 128.” (Id. at 3.) Canopy rejects Petitioner's assertion in the PFR that absences from the database is the best evidence to demonstrate and denotes ineligibility, and instead asserts “[t]he lack of a certification - whether or not it can evidence or denote eligibility - does not itself provide grounds to support a status protest challenging such underlying eligibility, as it is not listed as such in the regulations explicitly governing the appropriate and allowable bases for status protests.” (Id. at 3.) (Quotations omitted.) Certification can show eligibility was met but does not make certification itself a requirement of eligibility. Similarly, the absence of certification for a JV does not constitute proof that the JV is ineligible. (Id.)

*2 Canopy further argues Petitioner's reliance on the VAAR is “misplaced”. (Id. at 3.) Specifically, under new VA program rules, “[t]he JV itself need not be a certified VOSB or SDVOSB” so long as the managing member of the JV is certified. (Id. at 4, citing 13 CFR § 128.402(a).) Further, the revised VAAR regulation, read in conjunction with SBA regulations, “no longer requires JVs be designated in the VIP database (or any other database) and instead, incorporates the regulations set forth at 13 CFR Part 128 to determine eligibility.” (Id. at 5, citing VAAR 819.7003(c).) Canopy notes “[t]he crucial thing to remember here is that it is the ‘managing JV partner’ — and NOT the JV itself — that needs to meet these requirements.” (Id.) Canopy further rejects Petitioner's analysis of OHA case law and asserts “all of the decisions cited by protestor were issued prior to the regulatory changes that are central to adjudicating this Protest”. (Id. at 5-6.)

*3 Second, Canopy rejects Petitioner's argument that SBA regulations incorporate the VAAR provisions and contends “[Petitioner] can only assert that the protestor utilized the SBA regulations in a misguided attempt to shoehorn in its outdated interpretation of the VAAR provisions - an interpretation that forms the sole regulatory basis of Freedom Technology's only argument.” (Id. at 7.) Canopy further alleges Petitioner “failed to address OHA's main point” that Petitioner failed to rely on SBA regulations that govern JV eligibility criterion presented in 13 CFR § 128.402. (Id.) Canopy concludes “the Protest does not and indeed cannot rely on SBA regulations pertinent to determining the eligibility of a VOSB or SDVOSB JV, because such reliance would inevitably lead to a dismissal or denial of the protest.” (Id. at 8.)

*3 On December 22, 2023, NxG Solutions, LLC (NxG), one of the protested concerns, filed a response to the PFR and asserts Petitioner failed to “clearly show an error of fact or law material to the decision.” (NxG Response, at 1.) First, NxG asserts Petitioner “misinterprets” SBA and VA certification requirements. According to NxG, the SDVOSB status of a JV's managing venturer determines eligibility under 13 C.F.R. § 128.402(a). (Id. at 2.) Petitioner fails to mention 13 C.F.R. § 128.402(a) in its petition and instead relies on VAAR 819.7003 to assert “SBA's regulations ‘rely on it for eligibility purposes.”’ (Id. at 3, citing PFR at 4.) Further, Petitioner's assertion that a JV must be registered for the VetCert database fails to consider the plain language meaning of VAAR regarding “which entity must be included.” (Id.) Specifically, VAAR 819.7003 “is a supplementation to, not a supplementation of” SBA regulations and must be read “as a whole and in harmony” with SBA regulations. (Id. at 3-4.) According to NxG, VAAR 819.7003(c) mandates that the managing partner of a JV must meet requirements, not the JV itself. NxG notes, VAAR 819.7003(c) was revised in VA's February 2023 deviation “for the purpose of conforming the VAAR to the change in certification authority from the VA to the SBA.” (Id. at 4.)

*3 Second, NxG asserts its interpretation of VAAR 819.7003 and 13 C.F.R. § 128.402 is confirmed in VA's Question & Answer responses. (Id. at 4.) NxG reviews Freedom I records and asserts “Petitioner ignores that in the same Q&A, the VA expressly stated twice that ‘JV's themselves are no longer certified; however, the managing partner for the JV is.”’ (Id.) According to NxG, VA confirmed, in the April 5, 2023 Q&A, that the managing JV partner is required to register in the VetCert database, not the JV itself. NxG asserts Petitioner waived its right to bring its arguments in a post award protest because it fails to assert this challenge before the solicitation's close date.

*4 Lastly, NxG contends the PFR “relies on a number of outdated and inapplicable cases to assert that a challenge to the certification of an SDVOSB awardee is sufficient by itself to survive dismissal.” (Id. at 5.)

*4 On December 22, 2023, RP and Partners, LLC (RP & Partners), one of the protested concerns, filed a response to the PFR and asserts “OHA reasonably determined that FTP's Protest lacked specificity, as [Petitioner] did not raise any ground for filing a status protest.” (RP & Partners, at 1.) First, RP & Partners argues the PFR is based on “a misunderstanding and/or misreading” of Freedom I and SBA regulations. (Id.) According to RP & Partners Protestor “has not filed any viable ground for protest as required under 13 C.F.R. § 134.1003, and OHA appropriately dismissed the Protest as non-specific pursuant to 13 C.F.R. § 134.1007(b).” (Id.) Specifically, SBA regulations state “[a] VOSB or SDVOSB [JV] may be protested regarding the status of the managing VOSB or SDVOSB [JV] partner or for failure to meet the requirements of § 128.402 of this chapter.” (Id., citing 13 C.F.R. § 134.1003(d).) Yet, “nothing in the PFR challenges the status of the managing partner nor the JVs' failure to meet 13 C.F.R. § 128.402. (Id.) While Petitioner argues that the JVs are not registered in the VetCert database, this is not a requirement under applicable SBA regulation. Further, “nothing” under 13 C.F.R. § 128.402 mandates that a JV register in the VetCert database.

*4 Second, RP & Partners argues “VA regulations do not govern an SDVOSB status protest.” (Id. at 4.) RP & Partners point to VAAR regulations which state “[a] ll protests relating to size, status, and/or whether an SDVOSB or VOSB is a “small business' are subject to the [SBA] regulations at 13 CFR part 121 and must be filed in accordance with SBA guidelines at 13 CFR part 134.” (Id. at 4, citing VAAR 819.307-70.) Further, effective January 2023, before the CO issued the solicitation, certification for SDVOSB concerns migrated from VA to SBA. Thus, cases Petitioner relies on in the PFR “are inapposite, as the regulations and requirements changed significantly on January 1, 2023.” (Id. at 4.)

*5 On December 26, 2023, Petitioner filed a motion for leave to reply and asserts good cause as “an opportunity to highlight a misinterpretation of SBA's regulations that is common to several of the opposition briefs and to clarify [[Petitioner's] legal position.” (Petitioner's Motion to Reply, at 1.)

*5 A reply to a response generally is not permitted, unless otherwise directed by OHA. 13 C.F.R. §§ 134.206(e) and 134.309(d). OHA may grant a party leave to file a reply in order to address new issues raised for the first time in an opposing party's pleading. E.g., Size Appeal of Focus Revision Partners, SBA No. SIZ-6188, at 15 (2023). On the contrast, OHA will reject a reply that repeats and reiterates previous advanced arguments. Size Appeal of Federal Performance Management Solutions, LLC, SBA No. SIZ-6246 (2023). In the instant case, OHA did not direct Petitioner to reply. Further, Petitioner fails to raise new substantive issues not previously advanced in the PFR. Accordingly, Appellant's motion for leave to reply is DENIED, and the proposed Reply is EXCLUDED from the record.

*5 A party seeking reconsideration of an OHA decision on an SDVOSB status protest must file its PFR within 20 calendar days after issuance of the decision. 13 C.F.R. § 134.1013(a). Here, OHA issued Freedom I on December 4, 2023, and Petitioner filed the instant PFR within 20 calendar days thereafter, so the PFR is timely.

*5 To prevail on a PFR, a petitioner “must clearly show an error of fact or law material to the decision.” Id. This is a rigorous standard. A PFR must be based upon manifest error of law or mistake of fact and is not intended to provide an additional opportunity for an unsuccessful party to argue its case before OHA. VSBC Protest of Arapaho Technical Services, LLC, SBA No. VSBC-316-P (2023) (PFR); CVE Protest of HamHed, LLC, SBA No. CVE-190-P (2021) (PFR); CVE Protest of Covenant Constr. Servs., SBA No. CVE-158-P (2020) (PFR); CVE Protest of Alpha4 Solutions LLC d/b/a Alpha Transcription, SBA No. CVE-137-P (2019) (PFR).

*5 Petitioner has not shown clear error of fact or law material to Freedom I, thus I must deny the instant PFR. SBA regulations unequivocally lay out the grounds for a SDVOSB status protest under 13 C.F.R. § 134.1003. A concern's status may be challenged based on (1) the veteran status of the principal(s), (2) ownership and control of the concern by a veteran, (3) whether the concern is in compliance with the ostensible subcontractor rule, or (4) if the concern is a JV, whether the concern meets the JV requirements of 13 C.F.R. § 128.402. See 13 C.F.R. § 134.1003(a)-(d); see also, VSBC Protest of Veterans Command, LLC, SBA No. VSBC-256-P (2023) (“The regulation provides that a concern's status as an SDVO SB or VOSB may be challenged in a protest to OHA, but only upon the grounds set out in the regulation. See 13 C.F.R. § 134.1003.”) Further, OHA regulations instruct that a proper SDVOSB status protest must include “[s]pecific allegations supported by credible evidence that the [challenged] concern (or JV) does not meet the VOSB or SDVOSB eligibility requirements listed in [13 C.F.R.] part 128”. 13 C.F.R. § 134.1005(a)(2). An insufficiently specific protest will be dismissed. 13 C.F.R. § 134.1007(b). See, e.g., VSBC Protest of Microtechnologies LLC, SBA No. VSBC-319-P (2023) (reasoning that protestor failed to advance any reason to believe that the protested concern was non-compliant with SDVOSB JV requirements set forth in 13 C.F.R. part 128).

*6 I find the instant PFR unpersuasive for several reasons. First, Petitioner failed to show clear error in OHA's determination that the petition in Freedom I lacked specificity. Petitioner contends absence from the VetCert database denotes a conclusion the protested JVs are ineligible for award. This contention is not grounds for a SDVOSB status protest under 13 C.F.R. § 134.1003(a)-(d). This case is analogous to OHA's decision in VSBC Protest of MicroTechnologies LLC, SBA No. VSBC-324-P (2023). In that case, OHA reasoned protester's allegation that the protested concern is not listed in SBA's database overlooks SBA regulations that a “JV itself need not be a certified VOSB or SDVOSB [only] the VOSB or SDVOSB JV partner must be certified”. 13 C.F.R. § 128.402(a). Thus, OHA determined “[t]he mere fact that a JV is not included in SBA's database of certified SDVOSBs is thus not sufficient to constitute a specific status protest.” MicroTechnologies LLC, SBA No. VSBC-324-P, at 2. Similarly, here, Petitioner's assertion alone is insufficient to proceed as a status protest with specific grounds to challenge the SDVOSB status of the JVs. Petitioner asserts the seven JVs are not in the VetCert database, and thereby are not SDVOSBs and ineligible for award; however, there is no requirement that JVs certify as SDVOSBs under 13 C.F.R. § 128.402(a) as argued by RP & Partners, et al. Thus, the mere fact the seven JVs are not listed on the VetCert database as SDVOSBs is insufficient to constitute a specific status protest. A request that OHA investigate a concern's SDVOSB status, without any specific facts or supporting evidence, is insufficient. 13 C.F.R. § 134.1005(a)(2).

*6 Second, Petitioner failed to show clear error in OHA's determination that Freedom I lacked specific allegations under the SBA regulations that govern SDVOSBs. Attempting to put the cart before the horse, Petitioner asserts VA regulations, specifically VAAR 819.7003(a)-(c), are incorporated into SBA regulations for VA procurements under 13 C.F.R. § 128.400(a). As argued by NxG, et al., Petitioner misinterprets the regulation. VA regulations govern contract requirements for VA procurements; however, to bring an OHA protest, a protest must adhere to OHA's procedural rules. More specifically, the requirement of specificity under 13 C.F.R. § 134.1005(a) and grounds for a protest under 13 C.F.R. § 134.1003(a)-(d). Here, as in MicroTechnologies LLC, SBA No. VSBC-324-P, Freedom I lacked specificity; also, allegations in Freedom I did not fall under grounds for an SDVOSB status protest. A blanket reference to SBA regulations 13 C.F.R. § 128.401(a), and reference by incorporation is insufficient. Without this foundation, OHA could not proceed on the merits.

*7 Accordingly, OHA did not err in dismissing the protest. OHA properly concluded that Freedom I failed to make a valid assertion that the seven JVs are non-compliant with any of the SDVOSB eligibility criteria set forth in 13 C.F.R. part 128, nor show how each business concern fails to meet SBA JV requirements under 13 C.F.R § 128.402. Freedom I at 2. Protestor has thus failed to meet the requirements of a PFR, that it establish a clear error of fact or law material to the original decision.

*7 To prevail on a PFR, a petitioner must “clearly show an error of fact or law material to the decision.” 13 C.F.R. § 134.1013(a). Here, Petitioner has not demonstrated any error in VSBC Protest of Freedom Technology Partners, LLC, SBA No. VSBC-321-P (2023). I therefore DENY the PFR and AFFIRM the earlier decision.