VSBC APPEAL OF: APPEAL OF HAWAII OCEAN & SUN TRAVEL LLC, APPELLANT
SBA No. VSBC-327, 20242024 WL 757037January 9, 2024
SBA No. VSBC-327, 2024 (S.B.A.), 2024 WL 757037
Small Business Administration (S.B.A.)
Office of Hearings and Appeals
[Veteran Small Business Certification]
*1 VSBC APPEAL OF: APPEAL OF HAWAII OCEAN & SUN TRAVEL LLC, APPELLANT
*1 SBA No. VSBC-327-A
*1 January 9, 2024
Appearances
*1 Cesar Ivan Martin del Campo Garcia
*1 Member
*1 Hawaii Ocean & Sun Travel LLC
*1 Haiku, Hawaii
DECISION
I. Introduction and Jurisdiction
*1 On September 29, 2023, Hawaii Ocean & Sun Travel LLC (Appellant) appealed a decision of the U.S. Small Business Administration (SBA), denying Appellant's application for certification as a Service-Disabled Veteran-Owned Small Business (SDVOSB). SBA found that Appellant did not demonstrate that one or more service-disabled veterans fully controls Appellant. On appeal, Appellant maintains that the denial decision was erroneous, and requests that SBA's Office of Hearings and Appeals (OHA) reverse. For the reasons discussed infra, the appeal is denied.
*1 OHA adjudicates SDVOSB status appeals pursuant to the Small Business Act of 1958, 15 U.S.C. §§ 631 et seq., and 13 C.F.R. parts 128 and 134 subpart K. Appellant timely filed the appeal within 10 business days after receiving the denial notice on September 26, 2023. 13 C.F.R. § 134.1104(a). Accordingly, this matter is properly before OHA for decision.
II. Background
A. The Case File
*1 Appellant is a limited liability company (LLC) based in the state of Hawaii and formed on June 10, 2021. (Case File (CF), Exh. 25.) In September 2023, Appellant applied for certification as an SDVOSB, and submitted various supporting documents to SBA. (CF, Exhs. 24-32.) Appellant is 100% owned by Mr. Cesar Ivan Martin del Campo Garcia, a service-disabled veteran. (CF, Exhs. 24, 30.)
*1 Appellant provided a copy of its current Operating Agreement, dated June 19, 2021. (CF, Exh. 27.) The Operating Agreement reflects that Mr. Martin del Campo Garcia is Appellant's sole Member. (Id. at 1.) The Member has “full and complete authority, power and discretion to manage and control the business, affairs, and properties of [Appellant], to make all decisions regarding the business and to perform any and all other acts or activities customary or incident[al] to the management of [Appellant].” (Id.)
*1 As part of its application for certification, Appellant informed SBA that Mr. Martin del Campo Garcia is a full-time employee of Verizon Communications, and is pursuing a second master's degree. (CF, Exh. 6.) Asked to explain how these outside obligations do not interfere with Mr. Martin del Campo Garcia's ability to devote the time and attention necessary to control Appellant's management and daily business operations, Appellant responded that Mr. Martin del Campo Garcia “depend[s] on subcontractors to run [Appellant's] day to day operations” while he “focus[es] on the finances, and marketing.” (CF, Exh. 36.)
B. Denial
*2 On September 26, 2023, SBA, acting through the Director of the Office of Government Contracting (D/GC), denied Appellant's application for certification as an SDVOSB. (CF, Exh. 22.) The D/GC found that, due to the other commitments of Mr. Martin del Campo Garcia, Appellant did not demonstrate that he maintains full managerial and supervisory control over Appellant's long-term decision-making and day-to-day management.
*2 The D/GC explained:
*2 13 CFR § 128.203(i) states “The qualifying veteran who holds the highest officer position of the business concern may not engage in outside employment that prevent[s] the qualifying veteran from devoting the time and attention to the concern necessary to control its management and daily business operations. A qualifying veteran generally must devote full-time during the business's normal hours of operations, unless the concern demonstrates that the qualifying veteran has ultimate managerial and supervisory control over both the long-term decision making and day-today management of the concern. Where a qualifying veteran claiming to control a business concern devotes fewer hours to the business than its normal hours of operation, SBA will assume that the qualifying veteran does not control the concern, unless the concern demonstrates that the qualifying veteran has ultimate managerial and supervisory control over both the long-term decision making and day-to-day management of the business.” A statement was provided which attests [Mr. Martin del Campo Garcia] depends on subcontractors to run the day-to-day operations and he focuses on the finances, and marketing. The statement also attests that [[Mr. Martin del Campo Garcia] is pursuing a second master's degree. Thus, [[Appellant] has not sufficiently explained how outside employment does not prevent [Mr. Martin del Campo Garcia] from devoting the time and attention necessary to control the management and daily business operations of [[Appellant].
*2 (Id. at 1.)
C. Appeal
*2 On September 29, 2023, Appellant appealed the D/GC's decision to OHA. Appellant acknowledges that Mr. Martin del Campo Garcia is a full-time employee of Verizon Communications. (Appeal at 1-2.) Appellant adds, however, that once Appellant “reaches $2 million per year in revenue”, Mr. Martin del Campo Garcia may resign from this position. (Id. at 2.) Furthermore, the time difference between Hawaii and the East Coast of the United States enables Mr. Martin del Campo Garcia to “focus on his job at Verizon during regular working hours from Monday to Friday, while managing [Appellant] during the early morning and weekends.” (Id. at 1.)
*2 Appellant argues that the D/GC misinterpreted Mr. Martin del Campo Garcia's “educational commitments as a hindrance to managing [Appellant]”. (Id.) While Mr. Martin del Campo Garcia is pursuing a second master's degree, this requires “only 4 hours per week” of his time. (Id.) Similarly, the D/GC overlooked that Appellant's “strategic use of contractors significantly contributes to the efficiency and cost-effectiveness of [Appellant's] business operations.” (Id. at 2.)
III. Discussion
A. Standard of Review
*3 When a concern seeks certification as a VOSB or SDVOSB, SBA regulations provide that:
*3 An Applicant's eligibility will be based on the totality of circumstances, including facts set forth in the application, supporting documentation, any information received in response to any SBA request for clarification, any independent research conducted by SBA, and any changed circumstances. The Applicant bears the burden of proof to demonstrate its eligibility as a VOSB or SDVOSB.
*3 13 C.F.R. § 128.302(d).
*3 On appeal to OHA, Appellant has the burden of proving, by a preponderance of the evidence, that the denial decision is clearly erroneous. 13 C.F.R. § 134.1111.
B. Analysis
*3 Appellant has not shown that the D/GC committed any error of fact or law in reaching his decision. This appeal must therefore be denied.
*3 As the D/GC observed in his decision, SBA regulations stipulate that, in order to qualify as an SDVOSB, one or more service-disabled veterans must control “both the long-term decision-making and the day-to-day operations of the Applicant”. 13 C.F.R. § 128.203(a). Normally, the service-disabled veteran upon whom a concern's eligibility is based “must devote full-time during the business's normal hours of operations, unless the concern demonstrates that the qualifying veteran has ultimate managerial and supervisory control over both the long-term decision making and day-to-day management of the concern.” Id. § 128.203(i). Furthermore, “[w]here a qualifying veteran claiming to control a business concern devotes fewer hours to the business than its normal hours of operation, SBA will assume that the qualifying veteran does not control the concern, unless the concern demonstrates that the qualifying veteran has ultimate managerial and supervisory control over both the long-term decision making and day-to-day management of the business.” Id.
*3 Here, as part of its application for SDVOSB certification, Appellant disclosed that Mr. Martin del Campo Garcia is a full-time employee of Verizon Communications, and also is pursuing a second master's degree. Section II.A, supra. Accordingly, because Mr. Martin del Campo Garcia has other full-time employment as well as educational commitments in addition to purportedly managing Appellant, the D/GC correctly “assume[d] that the qualifying veteran does not control the concern, unless the concern demonstrates that the qualifying veteran has ultimate managerial and supervisory control over both the long-term decision making and day-to-day management of the business.” 13 C.F.R. § 128.203(i). Appellant, though, did not attempt to show that Mr. Martin del Campo Garcia fully controls Appellant's decision-making, and indeed conceded that he “depend[s] on subcontractors to run [Appellant's] day to day operations”. Section II.A, supra. Given this record, then, the D/GC properly concluded that Appellant did not establish that Mr. Martin del Campo Garcia fully controls Appellant's decision-making under 13 C.F.R. § 128.203(a) and (i).
*4 On appeal to OHA, Appellant suggests that, due to the nature of Appellant's business and the time difference between Hawaii and the East Coast of the United States, Mr. Martin del Campo Garcia can successfully “focus on his job at Verizon during regular working hours from Monday to Friday, while managing [Appellant] during the early morning and weekends.” Section II.C, supra. Appellant adds that Mr. Martin del Campo Garcia devotes “only 4 hours per week” of his time to the second master's degree. Id. Appellant, however, made no such arguments to the D/GC, and as the applicant seeking SDVOSB certification, Appellant was responsible for proving its eligibility as an SDVOSB. Sections II.A and III.A, supra. OHA has recognized, furthermore, that the D/GC cannot have erred by failing to consider evidence or arguments that were not presented to him in the first instance. E.g., VSBC Appeal of The Old Breed Servs., LLC, SBA No. VSBC-305-A (2023). Appellant's new arguments on appeal thus do not demonstrate that the D/GC's decision was erroneous.
IV. Conclusion
*4 Appellant has not established that the D/GC committed any error of fact or law in denying Appellant's application for certification. The appeal therefore is DENIED. This is the final agency action of the U.S. Small Business Administration. 15 U.S.C. § 657f(f)(6)(A); 13 C.F.R. § 134.1112(d).
SBA No. VSBC-327, 2024 (S.B.A.), 2024 WL 757037
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