Government Contracts Monitor

OHA Appeals: Why Bother Appealing If You Aren’t Going to Review the Record?

December 15, 2015

Two recent decisions by the Small Business Administration (SBA)’s Office of Hearings and Appeals (OHA) raise the question of why parties file appeals concerning fact-based issues if they don’t want to review the record on which the challenged determinations were based. The decisions also vividly demonstrate the practical problems and litigation risks such parties run when they don’t timely review and use the record to make their case.

The first decision is the Size Appeal of Orion Constr. Corp., SBA No. SIZ-5694, Nov. 24, 2015. This case involved a challenge to an Area Office decision finding Orion to be other than small based upon an identity of interest between the 100% owner of Orion and his wife, who owned a separate company with which Orion sometimes joint ventured. On appeal, Orion did not challenge the identity of interest determination. Rather, Orion sought, among other things, to challenge the Area Office’s average annual receipts (AAR) calculations as to the respective companies. Specifically, Orion asserted that the Area Office may have double-counted certain joint venture receipts. Orion, however, did not examine the appeal file during the course of the appeal. Orion therefore had not reviewed, and was not in a position to point to specific errors in, the Area Office’s AAR calculations.

OHA noted initially that an appellant at OHA bears the burden of proving, by a preponderance of the evidence, that a challenged size determination is based on a clear error of fact or law. Turning to the specific challenge, OHA stated that what it characterized as Orion’s double-counting “suggestion” was “unconvincing because Appellant does not directly address the Area Office’s calculations, which are set forth in the appeal file.” (Emphasis added.) OHA stated that “[t]o make a robust argument … Appellant could have, and should have, availed itself of the opportunity to examine the appeal file and critique the Area Office’s calculations.” (Emphasis added.)

The second decision, issued the same day, is VetPride Services, Inc., SBA No. VET-250, Nov. 24, 2015. The appeal in this case challenged the SBA Director of Government Contracting (D/GC)’s determination denying two VetPride protests concerning the Service-Disabled Veteran-Owned Small Business Company (SDVO SBC) status of the awardee of two contracts that VetPride wanted. VetPride argued that the D/GC’s determination “does not use factual information to support its conclusions” that the acknowledged service-disabled veteran (i) held the highest officer position in the company, and (ii) controlled the company’s day-to-day operations. However, like Orion, VetPride neither timely requested access to nor reviewed the protest file. Therefore, and again like Orion, VetPride was not able to point to anything in the record that might have helped undermine the validity of the D/GC’s decision.

OHA honed right in on this failure, stating “that part of the reason Appellant’s arguments are so weak is that Appellant forewent the opportunity to gather more information to mount a more robust attack.” OHA noted that its docketing Notice and Order had specifically identified VetPride’s failure to request a protective order when filing the appeal. The Order stated that, in the absence of a protective order, VetPride would not be served with the record underlying the challenged D/GC determination. Nevertheless, VetPride did not request a protective order or otherwise seek to review the appeal file during the time the record remained open. OHA stated that “[h[ad Appellant done so [i.e., reviewed the record], it could have supplemented the appeal with more informed arguments, as 13 C.F.R. § 134.207 allows.” OHA concluded that “[t]he weakness of Appellant’s arguments, therefore is partly due to Appellant’s inaction.” (OHA did note that because the record did support the D/GC’s determination, “it is virtually certain that Appellant would not prevail” even if it had acted otherwise.)

Interestingly, the Appellant in VetPride did belatedly request a protective order after the record closed, and later sought to amend its appeal and filed a reply as to the merits. However, OHA (i) denied the motion to amend as being too late and outside the narrow scope of the pending dismissal issues, and (ii) excluded the reply. The Orion Appellant also sought to file a belated reply after the record close. OHA similarly denied that proposed reply as unauthorized and too late.

These decisions do not, however, explain why parties appeal fact-based decisions when they don’t want to review the record on which they are based. The record is particularly important in OHA appeals, especially where the appellant is the original protestor. This is because much of what happens during the initial protest review – whether dealing with a size protest or a status challenge – goes on behind closed doors and is not visible. As Orion demonstrates, this is true not only as to the protestor, but also with respect to the protested party as to certain issues, such as the calculation of AAR.

Obviously, if an appellant is proceeding pro se, a decision to forego record review is understandable, and indeed is inherent in going pro se, since access to confidential material at OHA is limited to outside counsel. 13 C.F.R. § 134.205(d). However, the appellants in both of the subject cases were represented by outside counsel.

One possible factor could be a desire to control and limit costs. However, as these decisions well demonstrate, any perceived cost-savings come at a substantial price and adverse risk to winning on the merits. Moreover, in both cases here, the appellants may well have spent more in the end, due to their various after-the-fact Motions to Amend and proposed Reply filings.

The bottom line is that, if you are going to go to the effort and expense of filing an appeal, you need to be willing to pony up the cost of reviewing the record. As in a GAO or court bid protest, if the record does not substantiate your size or status protest, you can withdraw the appeal and avoid wasting further time and costs. However, if the record does justify proceeding, you can do so with confidence and a strengthened hand based on real facts, as opposed to speculation and hope.