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26 November 2018

The End Of The Line: Federal Circuit Dismisses The Veterans Contracting Group SDVOSB Appeal As Moot

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On Nov. 20, 2018, the U.S. Court of Appeals for the Federal Circuit seemingly ended the Veterans Contracting Group line of cases.
United States Government, Public Sector
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Mitchell Bashur and Amy L. Fuentes are attorneys in Holland & Knight's Tysons office

On Nov. 20, 2018, the U.S. Court of Appeals for the Federal Circuit seemingly ended the Veterans Contracting Group line of cases. As a refresher, in those cases, the contractor challenged the U.S. Small Business Administration's (SBA) determination that it was an ineligible Service Disabled Veteran Owned Small Business (SDVOSB) and the U.S. Department of Veterans Affairs' (VA) reciprocal removal from its SDVOSB database. The Federal Circuit dismissed the appeal as moot, noting that under the new SDVOSB regulations effective Oct. 1, 2018, the two sets of regulations are now uniform. While non-precedential in nature, the Federal Circuit's decision also raises questions of the consequential nature of the newly promulgated regulations for decisions currently pending before courts and administrative forums.

By way of background, the Veterans Contracting Group line of cases highlight some of the many conflicts that existed between the SBA and VA rules prior to the release of new rules by each respective agency in October 2018. The decisions are also demonstrative of the consequential results for contractors due to the previous split between the regulations. In these lines of cases, the contractor received several conflicting decisions, often over facially slight differences between the regulations on ownership and "unconditional ownership" requirements. The Federal Circuit's decision in Veterans Contracting Group v. United States et. al, No. 2018-1410 (Fed. Cir. Nov. 20, 2018) will likely become the final voice in the matter, and seemingly puts an end to appeals and differing opinions over these regulations—at least for the contractor.

The Federal Circuit determined that the appeal was moot as it related to the contractor's challenge to SBA Office of Hearings and Appeals' alleged improper reliance on, and improper application of, the standard for unconditional ownership pronounced in Wexford Grp. Int'l, Inc., SBA No. SDV-105, 2006 WL 4726737 (Jun. 29, 2006). The Federal Circuit reasoned that because the new SBA regulations govern the contractor's eligibility as an SDVOSB, its appeal and request for reestablishment of its SDVOSB status under previous SBA regulations is moot. As for Wexford, the Federal Circuit strongly suggests that its line of cases has been overturned as a result of the new regulations, finding that "[s]ince this appeal was taken, the SBA has promulgated new regulations that change the definition of the requisite unconditional ownership by a service-disabled veteran, effectively overturning Wexford."

The Federal Circuit further reiterated the mootness of VCG's argument by explaining that Veterans Contracting Group's (VCG) requests for declaratory relief were not sufficient to confer jurisdiction. The Federal Circuit explained that VCG's argument on appeal regarding whether the SBA had acted arbitrarily, capriciously, or contrary to law became obsolete once the new regulations were effective because the Wexford standard would not affect VCG in any future procurement. Thus, the Federal Circuit reasoned, no case or controversy existed to confer Article III jurisdiction.

The Federal Circuit's decision emphasizes the importance of the new SDVOSB regulations, which eliminate the historical differences between the VA and SBA SDVOSB programs for new contract awards. SDVOSBs need to review their compliance to ensure they are not relying on outdated regulations and case law, as the Federal Circuit's notes have been effectively overturned.

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